This report analyzes the situation of the Argentine financial system on a monthly basis.
SUMMARY
For the second consecutive month, the profitability of private banks was positive in December, with a profit of $240 million, which allowed them to end the last quarter of the year with a return of 0.6% in terms of net assets (NA). In 2003, profitability improved by 8.8 percentage points (p.p.) of the AN, compared to the previous year, thanks to a change in trend in the second half of the year. The total result on assets was –2.5%, with 90% of the total amount of losses recorded in the first half.
The higher accrual of CER and CVS, the better net interest income (which reached a positive value in the month) and the debt restructuring of a particular entity explain the positive result in December.
On the expenditure side, administrative expenses increased 18% as expected in the last month of the year. Uncollectibility charges did not register considerable increases and stood at 1.2% per year of the AN. In several banks, charges continued to be adjusted downwards, given the overreaction of the forecast of the previous months.
Deposits in the system as a whole fell 0.1% in December in real terms but ended the year with a growth of 19%. The real annual increase was 24% for public banks and 17% for private banks.
The funds raised by private banks in December came basically from higher deposits (demand placements that offset the seasonal fall in fixed-term loans) and the fall in liquid assets. The cancellation of CEDRO, OS and ON and the granting of loans were, in that order, the main applications.
In the funding structure of private entities, there was a drop in the participation of non-commissioned companies, SOs and lines of credit abroad (of 2 p.p. in the month and 8 p.p. in the year) as a result of the capitalization of debt and cancellations with public securities. In the fourth quarter, the reduction of these financing lines was US$ 1,300 million.
In December, a month before the entry into force of the Minimum Capital regime, private entities showed a ratio between capital integration and risk-weighted assets of 14%.
Following the improvement in the irregularity index and the increase in Net Worth, the private sector’s equity exposure to credit risk fell by 2 p.p. in December, falling to almost half of that observed at the beginning of the year.
For 2004, the positive trend in profitability recorded in recent months is expected to continue to consolidate, with more activity on the revenue side than on the expenditure side, unlike in 2003.
