Report on Banks

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

Summary

• With the aim of continuing to promote banking penetration through the use of electronic means of payment, at the end of November the BCRA authorized the creation of savings banks for minors
. Older people may open savings accounts in pesos free of charge to be used by a minor in an authorized capacity. Meanwhile, in November, the
destinations of foreign currency lending capacity continued to expand within a framework of prudential
regulation that limits currency mismatches. Recently, the BCRA adopted the internationally
accepted definition of intraday liquidity (and intraday liquidity risk) and specified the tools for
its monitoring; in addition, the criteria that must be observed for convergence
to International Financial Reporting Standards (IFRS) were disseminated.
• The total balance of credit to the private sector completed the third consecutive month of growth in real terms in October, reaching a cumulative variation of 4.5% compared to July1
. In
particular, in the month, total financing (domestic and foreign currency) to the private sector increased by 3.3% nominal and 30.5% YoY (-8.4% YoY in real terms), with a greater relative increase in loans in
foreign currency (6.8% compared to September and 147% YoY in the currency of origin). Although more moderately
, the credit segment in local currency also increased in real terms in the
last three months.
• In the month, the irregularity ratio of financing to the private sector remained at low levels
, around 1.9%. In year-on-year terms, this indicator accumulated a slight increase of 0.2
p.p. The NPL ratio for loans to households stood at 2.7% in October, while that
for credit to firms stood at 1.3% (both without monthly changes in magnitude). Accounting
forecasts accounted for 137% of the non-performing portfolio.
• The balance of total deposits increased 11.5% in October (43.5% YoY, practically unchanged
in real terms). This monthly performance was mainly explained by deposits in foreign currency from both the public sector – the effect of debt placements by the National Treasury
and provincial governments – and the private sector – linked to the Fiscal Sincerity Regime. For its part, in the month the balance of deposits in pesos of the private sector grew 1.9%
(25.8% nominal y.o.y. or -11.7% y.o.y. adjusted for inflation), a variation driven by demand accounts.
• In the month, liquid assets in foreign currency reflected the effect of the
increase in deposits in that denomination. The liquidity indicator – in pesos and dollars, with LEBAC – totaled
52.1% of deposits in the financial system, 5.1 p.p. more than in September and 9.7 p.p. higher than in
October 2015. For its part, the liquidity ratio – without LEBAC holdings – stood at around 34.7%
of deposits (+4.8 p.p. compared to September and +11.7 p.p. y.o.y.). Liquidity ratios increased in both public and private banks, with the rise somewhat higher in the first group.
• The dynamism of the foreign currency components is reflected in the composition of the balance sheet of the
financial system. As of October, assets in dollars represented 22.6% of total assets (7.1 p.p. more than
at the end of 2015). On the other hand, foreign exchange liabilities accounted for about 21.3% of total funding (7.9
p.p. above the level of December 2015). In this context, in the month the mismatch of foreign currency in the financial system remained stable at low levels, around 15% of the Computable Patrimonial Liability (12 p.p. less than twelve months ago).
• The solvency ratios of the financial system remained at high levels. In October, the capital integration of the banks as a whole totaled 16.5% of risk-weighted assets (RWA).
Tier 1 equity accounted for 15.5% of RWAs. The excess of capital integration of the sector with respect
to regulatory requirements was equivalent to 92% of the latter, 2 p.p. more than in October 2015.
• In line with what has been happening in recent months, the profitability of the financial system fell
in October, mainly due to the decrease in the financial margin. In terms of assets
(ROA), monthly gains were 1 p.p. lower than in the previous month, reaching 2.8% annualized
—y.—. On the other hand, with respect to net worth (ROE), profitability stood at 23.6%y, reducing 6 p.p. compared to September. The ROA for the cumulative period in ten months of 2016 was 3.9%a.
(ROE of 30.7%y), similar to that evidenced in the same period of 2015.