Report on Banks

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

Summary

• At the end of the third quarter of 2012, the intermediation process of the financial system showed sustained dynamism, with increases in the balances of loans and deposits of the private sector denominated in pesos. All financial institutions maintained adequate levels of liquidity and solvency, with a low and stable NPL ratio in the financing portfolio and with total coverage with forecasts. Thus, compared to what has been evidenced in the past, the financial system tempered its pro-cyclical trait, in part due to the policies promoted by the BCRA.
• In September, financing to the private sector in domestic and foreign currency expanded 1.8% (27.6% year-on-year). This increase was boosted by loans in pesos (2.4% and 37.4% y.o.y.), which accounted for 91.3% of the total balance, while loans in foreign currency continued to decline in the context of some substitution by lines in local currency. The monthly growth in credit was driven by financing to the productive sector, which increased by 2.7% (23.5% YoY), while lines to households increased by 0.9% (34.2% YoY).
• Through the Bicentennial Productive Financing Program, the BCRA has held 18 auctions, accumulating a total amount awarded of $5,578 million. The participating banks have already credited companies with an equivalent of $3.627 billion, which was channeled mainly to the industrial sector. Likewise, between July and October of this year, financial institutions would have disbursed loans under the conditions provided for in the “Credit Line for Productive Investment” — implemented according to Communication “A” 5319 — for an amount equivalent to half of the credits to be placed ($14,900 million). Industry and commerce were the sectors that received the most loans through this new long-term credit line (30% and 23% of the total, respectively).
• The non-performing ratio of credit to the private sector remained at 1.7% of the total, remaining at that level for the fifth consecutive month. The coverage of the irregular portfolio of the private sector with accounting forecasts remained at high levels (145%).
• In September, the balance sheet of total deposits (in domestic and foreign currency) in the financial system expanded 1.3%, driven by private sector placements in pesos, which increased 2.3%. In the last 12 months, total deposits grew by 20.6%, highlighting the dynamism of the private sector’s term deposits in pesos (50.5% YoY). For its part, the broad liquidity indicator for the financial system (in domestic and foreign currency, including LEBAC and NOBAC holdings) decreased slightly in September to 39% of total deposits; meanwhile, the liquidity indicator that excludes the holding of LEBAC and NOBAC, stood at 25.3%.
• Electronic means of payment continue to perform well. In particular, the number of immediate transfers registered an increase of 76% YoY (141% YoY in terms of amounts), while the number of payment operations for services through direct debits increased 14.9% YoY (50.7% YoY considering the amounts). On the other hand, the number of cleared checks grew 5.4% YoY (22.1% YoY in volume terms) and the ratio of rejection of documents due to lack of funds continued to fall in terms of the total cleared to be in line with the records at the end of 2011.
• In September, the net worth of the consolidated financial system expanded 2.5%, driven by accounting profits. In year-on-year terms, net worth accumulated a 33.1% increase, 11.6 p.p. higher than a year ago. In the month, the capital integration ratio of the banks as a whole stood at 16.7% of assets weighted by credit risk (RWA), accumulating an increase of 0.9 p.p. compared to the end of 2011. The capital position of the financial system represented 62% of the regulatory requirement in September, falling by 7 p.p. in the first nine months of the year, mainly due to the entry into force of the capital requirement for operational risk.
• In the month, the accounting results of the banks as a whole reached 3.5% of total assets in annualized terms (a.—. Throughout the year, the financial system registered an ROA of 3%y, 0.6 p.p. more than in the same period last year. The year-on-year increase in profitability was mainly explained by the growth in the sector’s activity (intermediation services and means of payment) as well as by a widening of interest rate differentials. Both public and private entities improved their cumulative profitability compared to the same period last year.