This report analyzes the situation of the Argentine financial system on a monthly basis.
Summary of the month
In February, banks continued to increase financial intermediation operations, consolidating the trend of recent years. In the month, the increase in private sector deposits was the most prominent source of resources in the financial system[1], driving the increase in credit to companies and households. Despite facing the volatility of the international context, this pattern was verified with[1] the maintenance of adequate levels of liquidity and an improvement in the sector’s solvency levels.
The increase in total deposits was explained by the behavior of private placements. In particular, these deposits increased 1.3% (25.9% YoY) in the month, being mainly driven by fixed-term deposits (1.4%), and to a lesser extent, by demand accounts (0.9%).
Liquidity levels remained elevated. The liquidity indicator stood at 24.8% of total deposits in February, 0.2 p.p. less than in the previous month. In February, there was a drop in passes with the BCRA and an increase in the current account balance at the BCRA and in the cash held by financial institutions, partly because February was the last in the quarterly measurement of the minimum cash position.
Credit to the private sector continued to grow at a good pace. The most dynamic lines were personal (3.8%) and pledge (2.8%). In turn, bank financing to the corporate sector increased by more than 30% in the last 12 months. However, there is still a long way to go in terms of depth of lines for companies in at least two dimensions: greater maturity to stimulate investment and more penetration in the MSME segment. With reference to this segment, bank leasing is consolidated as a financing tool. On the other hand, although with a certain slowdown at the beginning of 2008, the obtaining of funding for MSMEs through the capital market continues.
In February, irregularity remained at 3.3% of private financing, accumulating a reduction of 0.9 p.p. in the last 12 months. The year-on-year decrease in non-performing loans was explained by the dynamics of financing to companies.
Despite the context of turbulence at the international level, in February a private bank placed ON in pesos at a variable interest rate for $90 million at 9 months[1]ses, being the first placement by a bank since June 2007. Another source of funding was the reception of lines from abroad ($300 million). In the last 12 months, these lines grew 18%, reversing the pattern of decline experienced since the end of the 2001-2002 crisis.
The sector continued to strengthen its solvency levels in the month. The net worth of the banks[1] grew by more than $500 million (1.4% or 11.9% YoY). Profits and capital contributions from two foreign private banks explained this increase[1]ment. Accounting profits fell in February mainly due to lower results from securities.
