Report on Banks

Thisreport analyzes the situation of the Argentine financial system on a monthly basis.

Summary

• In October, the balance of bank financing to the private sector increased 3.7% (33.2% YoY), driven
  by an improvement of 4.3% (34.6% YoY) in the segment in local currency. Loans
  channeled by public banks and national private banks saw the largest increase
  in the period. In both a monthly and year-on-year comparison, the nominal
  growth rate of loans to companies exceeded that corresponding to households.
• In October, the ratio of irregularity of financing to the private sector fell slightly
  to 1.7%, the lowest recorded since the end of 2012. This monthly drop was mainly explained by the performance of loans to households, whose NPL ratio stood
  at 2.4%, while that corresponding to loans to companies remained at 1.2%. The balance of accounting forecasts
  of the financial system represented 149% of loans to the private sector in an irregular situation in the month.
   The balance of deposits in pesos of the private sector grew in nominal terms by 1.9% (40.5% y.o.y.)
  in the month, showing an increase of 2.1% (48.1% YoY) in term loans and 1.5%
  (33.5%) in demand accounts. In October, private sector foreign currency deposits increased 9.2% (25.6% YoY), a behavior that was mainly influenced by the payment of
  BODEN 2015 services. Given the increase in public sector placements (5.5%) in the period, total deposits in the financial system grew by 3.3% (33.8% YoY).
• In October, the liquidity ratio of the financial system – including domestic and foreign currency, excluding
  holdings of LEBACs – stood at 23% of total deposits, 0.6 p.p. more than last month
  . This monthly variation was mainly due to the increase in the balance of the current accounts of
  financial institutions at the BCRA (in foreign currency to a greater extent), an effect that was partially offset by the reduction in passes with this Institution. For its part, the broad
  liquidity ratio – including holdings of LEBAC – fell by 1 p.p. of total deposits in October, reaching 42.4%, given the fall in the balance of holdings of monetary regulation instruments. The current level
  of this broad liquidity indicator was slightly below the October 2014 figure
  , although it remained above the average of the last 5 years.
• The net worth of the consolidated financial system increased 3.1% in the month (32.2% YoY), driven by earned earnings. In the period, regulatory capital integration represented 14.1%
  of total risk-weighted assets (RWA), while Tier 1 capital integration stood at 13.2% of RWA. On the other hand, the excess of capital integration in relation to the regulatory requirement
  reached 88%.
• The accounting result of the financial system in terms of its assets (ROA) reached 4.8%
  annualized in October, increasing compared to last month mainly due to the increase in the
  financial margin. Private banks, both domestic and foreign, explained the behavior of the sector’s profits in the period. In the last twelve months, the aggregate of financial institutions
  obtained an ROA of 3.8%.
• The financial system continued to expand its operational infrastructure at the aggregate level
  and to show some progress in terms of its geographical distribution, in a context in
  which a significant degree of heterogeneity still prevails between the different areas of the country. The number
  of ATMs and self-service terminals increased 4.9% between September 2015 – the latest
  data available – and the same month in 2014, while the availability of branches increased 1.6% in the
  same period. On the other hand, the number of personnel in the sector reached 107,394 at the end of the third quarter
  of 2015, representing a year-on-year variation of 1.5%.
• Since December 17, the BCRA introduced a set of measures that accompanied the regulatory modifications related to the foreign exchange market. Other provisions include the change to
  the limits of the Global Net and Term Foreign Currency Position of financial institutions; the
  obligation of banks to sell to the BCRA their positive foreign currency position in force at the end
  of December 16, 2015 and to repurchase it in full on December 17, 2015; December 18 or 21; the modification of the bidding processes and the availability of instruments issued by the BCRA (LEBAC
  and NOBAC); and the elimination of interest rate limits on both credit
  operations and those of deposits and time investments.