Informe Sobre Bancos

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

Summary of the month

• In February, several factors were evident that made up a context conducive to the progressive recovery of the financial system: positive profitability, expanding credit, improvements in portfolio quality, increase in deposit taking, cancellation of obligations with the BCRA and new capitalizations. The optimistic outlook therefore remains, with a view to a process of sustained improvement that is clearly developing gradually and not without volatility.
• The result in February was positive both for the system as a whole ($170 million or 1% yr. of assets) and for private banks ($71 million or 0.7% yr.), with marked improvements compared to the previous month and the same period in 2004. In 2005 the system accumulated $156 million (0.5% yr.) of profit; $480 million (1.4%y) if the amortization of injunctions and the valuation adjustments of public sector assets are excluded. For private banks, the cumulative amount is $20 million (0.1% yr.), rising to $220 million (1.1% y.a.) when corrected for injunctions and valuation adjustments. 39 private banks had positive results in February: 9 more than in January.
• The monthly advance in private banks’ earnings was due to an increase in the financial margin, which reached its highest level in eight months thanks to higher CER accruals and positive share price differences. Interest earnings were stable, but with a favorable year-on-year evolution. There were also slight drops in charges for uncollectibility and the amortization of amparos. These developments offset adverse movements in earnings per asset, earnings per services, unaffected forecasts and valuation adjustments for public sector assets.
• A large private entity capitalized debts abroad in February for approximately $400 million, while another had a capitalization of $10 million. On the public banking side, a large bank registered in its assets a commitment of capital contributions close to $1,400 million by the public sector. Capitalizations carried out in private entities generated an increase in capital integration, reaching 15.8% of their risk-weighted assets.
• The assets of the financial system increased 7.8% y/y in February, with a year-on-year variation of 11%. Credit from the financial system to the private sector continued to grow, with special expansion in consumer loans (up 35%y) and in commercial loans linked to export financing and pre-financing (up 9.2%, equivalent to 186%y).
• The financial system’s exposure to the public sector now represents 41% of its assets, with a decrease of 5 p.p. since the beginning of 2004. This occurs in a context of sustained progress in the participation of financing to the private sector in the banks’ portfolio.
• The improvement in the quality of the financing portfolio to the private sector continues to be underway, with a fall of 0.4 p.p. in irregularity (to 17.4%) for the system as a whole in February. Irregularity in private banks fell 0.6 p.p. to almost 14%, a movement led by the commercial financing portfolio. Coverage with forecasts grew slightly (to 98%) for private banks, which translated into a fall in the ratio of financing in an irregular situation not covered with forecasts in terms of equity (to 0.6%).
• The balance sheet of total deposits in the financial system grew 0.9% (11.3%y) in February, led by the 1.4% (18.2%y) increase in private sector loans. Public sector taxes fell 0.4% (-5.2%y). The increase in total deposits was mainly channeled to private banks (with an increase of 1.7% or 23%y), while public banks showed a slight drop in total deposits.
• Private banks directed the largest amount of funds raised in the month to the reduction of their obligations with the BCRA. In addition to the monthly payments within the so-called matching scheme for $92 million, installment advances were added within the framework of the tender held in January (with accounting effect in February) for $440 million, and early cancellations for $480 million. Private financial institutions have made repayments of assistance for about $2,070 million since March 2004.