Report on Banks

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

Summary

December

• In the last month of 2010, the dynamics of financial intermediation with the private sector continued to improve. Financial institutions also verified greater dynamism in their function of providing payment services for the economy. This performance occurred in tandem with an improvement in the equity composition of the financial system and broad-based progress in terms of key soundness indicators.
• The balance sheet of total deposits in the financial system increased by 3.5% in December, mainly due to the increase in private sector loans (+5%), which was driven mainly by demand accounts (+8.4%), in line with some seasonal behavior. The liquidity indicator of the financial system, which includes items denominated in domestic and foreign currency, fell 1.1 p.p. of deposits to 28%. The broad liquidity indicator of the banks as a whole closed the year at 44.5% of deposits.
• During December, credit to the private sector grew 4.9%. Except for advances, all lines increased in the month, with an outstanding performance of documents, cards and export financing.
• The broad mismatch of foreign currency (which includes forward operations) of the financial system fell 2.4 p.p. of net worth in December to 32.1%, mainly due to lower net purchases of foreign currency at the future.
• The net worth of the consolidated financial system grew 2.5% in December, while accounting profits totaled 3.2% annualized (y.) of assets, slightly below the previous month. Banks’ financial margin grew in December, driven by higher net interest income and equity earnings, movements that were partially offset by lower income from CER adjustments and falls in share price differences. On the other hand, both uncollectibility charges and administrative expenses grew in the month, partly due to seasonal factors at the end of the year.

.. 2010

• Financing to the private sector increased by 37.5% throughout 2010, 29 p.p. more than in 2009, increasing its share of total assets to 41% (equivalent to almost 13% of GDP). The lines granted to the corporate sector were the most dynamic throughout the year. In this context, the BCRA is promoting a greater scope of credit among the different productive segments. To this end, the Bicentennial Productive Financing Program was implemented, which has already had 3 auctions of funds for a total amount awarded of $1,025 million.
• The BCRA implemented a series of measures to promote universal access to banking services, including: (i) the Universal Free Account (40,900 accounts have been requested to be opened since its implementation); (ii) the Cancellation Check (2,400 checks have been issued, an amount divided equally between those denominated in national currency -$75 million- and in foreign currency -US$63 million-); (iii) the reduction of the costs of bank transfers and (iv) the approval of new guidelines to authorize the opening of branches.
• Throughout 2010, there was a slight drop in the share of credit from the financial system to the public sector, reaching a level of 12.2% of total assets by December in the banks as a whole. At the end of 2010, the balance of public sector deposits continued to exceed the combined financing granted to this sector by an amount equivalent to 10.5% of assets, thus sustaining its creditor position with respect to the aggregate of banks.
• Banks’ net worth ended 2010 with an annual increase of 18.3%, while the capital integration ratio stood at 17.7% of risk-weighted assets (RWA) at the end of the year. Banks ended the year with profits equivalent to 2.8% of assets, with an improvement in the profitability of all groups of financial institutions, with a notable increase in public banks.