This report analyzes the situation of the Argentine financial system on a monthly basis.
Summary of the month
Bank profitability continued to improve in April. The context of progressive recovery of credit, lower delinquencies, sustained progress in efficiency and low funding costs helped.
The end result for the financial system was a monthly loss of $200 million. Measured in terms of assets, it is the lowest so far in 2004. The result of the system is transformed into a profit of $5 million if the amortization of injunctions and the valuation adjustment of public sector assets are excluded from the calculation.
Losses were sharply reduced compared to March: they fell 50% for the total system and 30% for private banks. Almost 70% of private banks recorded better results in April.
Operating results were nil for the second consecutive month. This is a clear development after a period of heavy losses in the traditional business.
For the sixth consecutive month, private banks achieved positive interest results. In annualized terms (a.), this margin remained above 0.5% of net assets. For public banks, this is the third month that a positive balance has been achieved in this area.
Operational expenditures continue to be cut. Private banks’ administrative expenses fell again in April to 4.5% of assets. Losses due to non-performing loans reached one of the lowest levels in recent years.
Private banks continued to capitalize debt. His assets were then able to remain stable despite the losses of the month. Solvency indicators did not show major changes: they continue to far exceed regulatory requirements.
The level of intermediation by private banks continued to grow in April, with private deposits and loans increasing.
Private entities raised funds for $1,600 million. The net increase in deposits ($1,200 million) explains 75% of this amount. After two months of decline, fixed terms in pesos grew by $100 million in April thanks to an increase of $190 million in those adjustable by CER.
Private banks placed $230 million in loans to the private sector, most of it in the commercial segment ($170 million). The fall in loans with real collateral was significantly reduced: it accumulated 3% in the first 4 months of the year, compared to 10% for the same period in 2003.
The holding of liquid assets was the main destination of funds, with an increase of $750 million. The ratio of liquidity to total deposits reached 30%, the highest level in recent years for private banks.
The non-performing loan ratio of private financing for consumption maintained the downward trend of recent months, falling 0.5 p.p. in April to reach 16.4% (the irregularity of total private financing was 24.6%).
The private portfolio in an irregular situation not covered with forecasts as a proportion of assets fell to 6.6% for private banks, a historically low level. So far in 2004, this indicator has already accumulated a decrease of 3 p.p..
