This report analyzes the situation of the Argentine financial system on a monthly basis.
Summary of the month
Within the framework provided by the countercyclical policies implemented by the BCRA, aimed at strengthening the demand for money and promoting financial stability, the intermediation activity of banks with the private sector continued to grow during September. In addition, adequate levels of liquidity and solvency persist and the reduction of equity mismatches. The credibility of the managed floating exchange rate scheme has contributed to the reduction of foreign currency risk. The debt swaps with CER adjustment carried out by the National Government at the beginning of the year and last September made it possible to reduce the equity mismatch of adjustable items, reducing the exposure of financial institutions to real interest rate risk.
Total deposits in the financial system increased by 2.2% in September (15% y/y in 2009). In particular, private sector deposits grew by more than $1,000 million (0.6% or 15.2%y/y in 2009) in the month, mainly due to the increase in term deposits in pesos in the retail segment.
The liquid assets of all financial institutions (including items in domestic and foreign currency) reached almost 30% of total deposits in September, after showing a slight monthly reduction of 0.9 p.p. For its part, the broad liquidity indicator (which incorporates the Lebac and Nobac portfolio not linked to passes with the BCRA) stands at 42.3% of total deposits.
Credit to the private sector increased 0.2% in September (5.4% YoY), driven by financing in pesos for consumption, which has recovered in recent months. Official financial institutions continue to gain share in the credit market.
The irregularity of credit to the private sector has remained stable in the last 6 months, standing at 3.7% in September. Coverage with forecasts continues to be above 100% of irregular financing from the private sector (122% in September). At the same time, the number of rejected documents continues to decline in recent months.
The consolidated net worth of the financial system expanded in the month mainly driven by accounting profits. The capital integration of the financial institutions as a whole stands at 18% of risk-weighted assets, showing a slight improvement so far in 2009. The excess of capital integration in terms of the requirement stands at 96% at the systemic level.
Accounting earnings increased in the month mainly due to higher results for securities, in a context of general improvement in the prices of public securities. So far this year, the financial institutions as a whole show an accounting return in terms of assets slightly higher than that observed in the same period of 2008, a situation that is maintained if the income lines directly related to the variation in the nominal exchange rate are excluded.
