Report on Banks

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

Summary

• The balance of total financing to the private sector increased 2.2% in September, driven by
  lines in national currency. In a year-on-year comparison, total credit to the private sector accumulated
  a nominal increase of 30.6% in the period. The balance of loans to households increased
  by 3.3% (32.7% YoY) in the month, while that corresponding to financing to companies increased by 2%
  (28.6% YoY).
• Within the framework of the seventh stage of the Credit Line for Productive Investment (LCIP), by the end
  of September all participating entities had reached at least 30% of the total
  amount to be agreed corresponding to this tranche – the target amount for the second half of 2015 exceeds
  $51,000 million – thus complying with the intermediate requirement established in the current regulations.
• In September, the non-performing ratio of credit to the private sector remained unchanged
  , standing at 1.8%. In a year-on-year comparison, the NPL indicator for loans to
  households fell by 0.7 p.p., while that of loans to companies did not show significant variations. The ratio between total forecasts accounted for by the financial system and financing
  in an irregular situation stood at 146% in the period.
• In September, the balance of private sector deposits in pesos grew 3.2% (39.9% YoY), mainly due to the performance of time placements (4.1% and 47% YoY) and, to a lesser extent, demand
  accounts (2.7% and 33.9% YoY). Deposits in foreign currency from the private sector did not register relevant changes in the month, accumulating an increase of 17% YoY in currency of origin. The balance
  of total deposits increased 1.8% in the month and accumulated an expansion of 33.7% YoY.
• With the aim of stimulating savings in national currency, at the end of October the BCRA ordered an
  increase of 300 basis points in the interest rate of the LEBACs predetermined in pesos,
  which translated into an increase in the minimum remuneration received by savers for their
  fixed-term deposits. Since November, the minimum rates stood at 26.3% for placements of
  30 to 44 days and above 29.1% for those made with 180 days or more. At the same time, the BCRA ordered
  an increase in interest rates for its passive pass operations, which reached 21% at 1 day and 23%
  at 7 days, and for active passes that stood at 26% at 1 day, 27% at 7 days and 29% at 60 days.
• In the month, the liquidity ratio – with items in domestic and foreign currency – increased 0.5 p.p. of
  total deposits to 22.4%. Given the reduction in LEBAC holdings in September, the level
  of the broad liquidity indicator – which includes such instruments – decreased slightly compared to August to 43.4% of deposits, maintaining a high level compared to the
  average of recent years.
• The net worth of the consolidated financial system increased 2.9% in the month (30.6% YoY), driven by earned earnings. In the period, regulatory capital integration represented 14.6%
  of total risk-weighted assets (RWA), while Tier 1 capital integration stood at 13.6% of RWAs. On the other hand, the excess of capital integration in relation to the regulatory requirement
  reached 91% in September 2015.
• In order to continue strengthening the financial system and adapt local regulation to international standards, the BCRA decided to readjust the minimum capital and profit distribution regimes. In the first case, the calculation of the capital requirement for credit risk was adjusted, the amount for the maximum exposure to the same debtor – whether individuals or MSMEs –
  was increased
  , and the treatment to be given to credit derivatives in terms of admitted guarantees was specified. In
  relation to the rules on the distribution of profits, it was established that institutions must constitute a
  capital conservation buffer (in addition to the minimum capital requirement) equivalent to
  2.5% of their RWAs (3.5% for systemically important institutions). Since the current solvency verification requirement
  will remain in force, institutions will be able to distribute results after compliance with both regulations. This measure will be phased in between January
  2016 and the end of 2018, to come into full force in January 2019. The capital conservation
  margin may be increased by up to an additional 2.5% of the RWAs for another component (countercyclical margin), when, in the opinion of the BCRA, the growth of the entity’s credit is excessive, causing an
  increase in systemic risk.
• Accounting results in terms of assets (ROA) for the financial system totaled
  4.3%y/y in the month, 0.6 p.p. more than in August, mainly due to the increase in gains from securities. The accumulated ROA in the third quarter of 2015 stood at 4% y/y of assets.