Report on Banks

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

Summary

• In September, the balance of financing in pesos to the private sector increased 2.6% compared to August, accumulating a nominal growth of 21% in the last 12 months. The monthly variation was driven by the behaviors of document lines and those destined for consumption (cards and personal). As a result of this performance and the reduction in loans in foreign currency, the total credit balance (including domestic and foreign currency) increased by 2.2% in the period (22% YoY). In the month, total loans to households grew by 2.7% (20.8% YoY), while loans to companies grew by 1.8% (23.1% YoY).
• So far this year, the BCRA has continued to promote financing for productive purposes. Thus, through the Credit Line for Productive Investment between July 2012 and August 2014, loans for approximately $103,000 million were agreed, of which more than two-thirds was agreed with MSMEs.
• In the month, the irregularity ratio of credit to the private sector decreased slightly to 2%, a variation explained by both loans to households and those to companies. The coverage of the non-performing loan portfolio with accounting forecasts increased to 139.3% in the period, with all bank groups maintaining comfortable levels for this indicator.
• In September, the balance sheet of private sector deposits in local currency increased by 2.2% (28.8% YoY). This performance was driven by demand accounts (3.7% in the month and 30.1% YoY) and by time deposits (1.6% in September and 28.6% YoY). Total deposits in the financial system (in the private and public sectors, considering national and foreign currency) increased 1% compared to last August and accumulated a nominal increase of 24.1% compared to September 2013.
• The liquidity of the financial system (including items in domestic and foreign currency) fell 1.7 p.p. of total deposits in September, to 23.4%. As LEBAC holdings increased in the month, the liquidity indicator that includes these instruments did not present changes in magnitude in the period, standing at 43.6% of total deposits.
• The net worth of the consolidated financial system expanded 2.4% in the month (43.4% YoY), driven by accounting earnings. The integration of regulatory capital in the financial system totaled 14.4% of total risk-weighted assets (RWA) in September (13.4% in the case of Tier 1). The excess of capital integration for the group of entities stood at 86% of the regulatory requirement in the period, 14 p.p. more than in the same period of 2013.
• In the month, the profitability of the financial system totaled 3.7% annualized (y.) of assets, falling slightly compared to last August, mainly due to lower income due to the difference in contributions. In the third quarter of 2014, ROA reached 4.2%y, 0.9 p.p. more than last quarter and 0.5 p.p. above the same period in 2013.
• As of September, the BCRA ordered a reduction in the limit on the positive net global foreign currency position of financial institutions, from 30% to 20% of the previous month’s PRC or of the liquid capital of each entity – whichever is lower. In this context, the foreign currency mismatch of the banks as a whole stood at 27.3% of the PRC, 4.3 p.p. below the value of August and 44 p.p. less than the figure at the end of 2013.