This report analyzes the situation of the Argentine financial system on a monthly basis.
SUMMARY
January was the fourth month in which interest results showed a positive sign, standing at 0.4% of the AN. The improvement partly reflected the decreasing effect of passive interest rates.
The total accounting result of private banks was -$300 million, equivalent to –0.3% of the National Income Tax and –2.1% of the National Income Tax. In annualized terms, this implied an ROA of -3.2% and an ROE of -25.3%. However, the low profitability was marked by non-current factors related to the correction in the value of public sector assets within the advance imposed by the BCRA to value these instruments at market prices. Without these effects, annualized ROA would have reached –0.5%.
The level of activity (as measured by the NA) remained stable for private banks. The growth in deposits (3% in real terms) contributed a flow of funds of almost $2,000 million, which was applied to a greater extent to the constitution of liquid assets ($1,100 million). Private loans continued to represent a destination of funds ($60 million), continuing the trend that began in October 2003.
The increase in demand placements led the growth in deposits in the last two months, far outpacing the decline in fixed-term loans. In the latter, there was an increase in longer-term placements as a result of growing confidence in the banking sector.
Financing to the private sector showed a drop in the level of irregularity commanded by the consumer and housing portfolio in a context marked by the growth of this type of loans.
In the first month of application of the regulations on minimum capital, the financial system showed a capital integration ratio of 14% with respect to risk-weighted assets, comfortably complying with the requirements of prudential regulations and international standards.
For February, an improvement in profitability compared to January is expected as a result of the lower negative adjustments related to the valuation of public sector assets and the better interest margins due to higher short-term financing and the decrease in passive interest rates.
