This report analyzes the situation of the Argentine financial system on a monthly basis.
SUMMARY
The positive trend for profitability observed in the last months of 2003 continued in February. Private banks posted losses of almost $135 million, 50% lower than in January. February’s losses are practically nil if the result is adjusted to isolate the main factors of a non-current nature: the amortization of injunctions and the effects of the correction in the valuation of public sector assets.
The coverage of expenses with operating income of private entities continued in February close to 80%, as the incipient recovery of net interest income in recent months continued. This allowed the operating result to improve, in terms of the quarterly average, almost 0.5 p.p. compared to the previous quarter.
Financing to the public sector fell 1.3% in the month for private banks, mainly as a result of the sale of dollar-denominated securities. These funds, together with the decrease in liquid assets ($260 million) and in the holding of LEBAC ($235 million) completed the origin of funds for private banks.
As has been the case since late 2003, credit to the private sector experienced further and higher growth in February. This asset was the main application of funds for private banks with $470 million placed in the month.
Total private bank deposits registered a 1% drop in real terms led by the decline in private sector placements. The increase in public sector deposits in private banks was almost 6% in February.
The net worth of private banks grew 1.1% due to the capitalization of foreign debt within the continuous process of cancellation of obligations that have been carried out mainly by foreign banks.
The irregularity of private banks’ portfolios fell 2 p.p. in the month (to a level of 27.7%), with a cumulative fall of 9 p.p. since the beginning of 2003. This improvement in the quality of debtors was reflected in lower losses due to uncollectibility.
For the month of March, the improvement in the results of private banks is expected to continue. An increase in net interest income is projected given the growth of short-term financing.
