Report on Banks

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

Summary

• The BCRA continued to promote measures to facilitate economic transactions and, at the same time,
reduce the operating costs of the financial system. In line with this, at the end of October the $200 bill was put into
circulation, an initiative that adds to those already adopted in recent months, such as
the issuance of the $500 bill, the facility for recharging ATMs, the flexibilities in
the opening of treasures, the regulations on opening and closing accounts, among others. In addition, to continue promoting the use of electronic means of payment, the BCRA recently
ordered the creation of the Immediate Debit (DEBIN) means of payment, which through specific
functionalities will allow transactions between parties to be carried out through debit and credit “online”. The operation of exchange houses was also made more flexible
, generating greater competition in the sector, favoring the
channeling of formal transactions and expanding the offer of “windows” to operate. For its part, the Financing Line for Production and Financial Inclusion
(LFPIF) was
extended for the first half of 2017, increasing the balance of financing that the entities reached must
maintain (from 15.5% to 18% of the balance of private sector deposits in pesos).
• In September, foreign currency financing to the private sector increased by 8.3% (112%
y.o.y.) – in the currency of origin – mainly driven by private banks. For its part, the segment
in pesos continued to show a moderate performance, growing nominally 2% in the month and 19.7% y.o.y.
(decreasing in real terms compared to the same month of the previous year). In a context of
reduced inflation, total credit to the private sector showed a positive real variation in the third quarter1
. This increase was boosted by loans to companies mostly in foreign currency and
by financing to families through individuals.
• The irregularity of financing to the private sector remained at low levels, and without significant changes
in the month, in the order of 1.9% of the total portfolio (0.1 p.p. more in a year-on-year comparison). The NPL ratio for loans to households and companies stood at 2.7% and 1.3% respectively. The financial system continued to present comfortable levels of forecasting.
• Deposits in foreign currency of the private sector grew 4% in the month (62% y.o.y.) – in
foreign currency – partly driven by the externalization of funds within the framework of
the Fiscal Sincerity Regime (Law 27,260). The balance of private sector peso placements increased 2.7% in
September and 25.8% YoY (-10.9% YoY in real terms). Considering the evolution in real terms of total private sector deposits, a better performance was observed in the last three months, in relation to the variation evidenced between March and June. This was reflected in all bank groups.
• Systemic liquidity indicators remained elevated in September. Liquid assets –
in pesos and dollars, excluding LEBAC – totaled 29.9% of deposits, a record similar to that evidenced
last month and 7.5 p.p. higher than that corresponding to September 2015. For its part, considering the
holdings of monetary regulation instruments, the liquidity indicator stood at 47.1% of deposits in the period, 3.7 p.p. above the level of the same month last year.
• In the month, there were no changes in magnitude in the aggregate solvency ratios, with the capital slack prevailing. The capital integration of the banks as a whole represented 16.5%
of the risk-weighted assets (RWA) and the excess of capital integration (position) of the financial system stood at 92% of the regulatory requirement.
• The results recorded by the banks as a whole in terms of their assets (ROA) reached
3.8%y. in the month. Considering the third quarter of 2016, the ROA of the sector totaled 3.7%y. (ROE
of 28.9%y), being lower than that evidenced in the previous quarter and in the same period of
2015. Private banks and EFNBs drove this reduction with a fall in the financial margin.
• In the third quarter, the estimated spread obtained by the financial system between
implicit returns in national currency derived from financial assets and deposits was reduced. In
the context of interest rate reduction, the fall in the implicit aggregate return on loans, government securities
, and LEBACs was greater than the decrease in the implicit funding cost on deposits.