Report on Banks

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

Summary

• At the beginning of 2015, financial intermediation with the private sector slowed down, partly reflecting the effect of seasonal factors such as the summer recess. In the month, total loans to households increased 1.6%, mainly due to consumption lines, while financing to companies did not present changes in magnitude in the period. Thus, total credit to the private sector (in domestic and foreign currency) accumulated an increase of 17.7% YoY as of January 2015.
• In January, a new tranche of the Credit Line for Productive Investment (LCIP) began, which will be developed throughout the first half of 2015. On this occasion, the total amount to be allocated mainly to MSMEs will reach about $37,400 million, 34% more than in the previous stage. Unlike the previous tranches, this time a special mechanism is included aimed at privileging financing to relatively smaller companies among MSMEs and promoting the dissemination of bank credit to areas with less economic development. The loan will be agreed at a fixed interest rate of up to 19% – 0.5 p.p. below that used in the previous tranche – for the first three years.
• The irregularity of credit to the private sector remained stable at 2% of the total portfolio in the month, in line with the records of the second half of last year. Both households and companies maintained their NPL ratios in January (3% and 1.2% respectively). At the beginning of the year, the gap in the coverage of the irregular portfolio with accounting forecasts was maintained, representing 138.5% for the financial system and exceeding 100% in all groups of banks.
• The balance of private sector deposits in pesos increased 1.4% in January, a variation explained by the 5.4% increase in term deposits that was partially offset by the 1.3% reduction in demand accounts, performances that are in line with the seasonal pattern. In a year-on-year comparison, deposits in pesos of households and companies grew nominally 31.2%, with improvements in demand accounts (33% YoY) and time accounts (29.3% YoY). In this context, as of January, the balance of total deposits increased 26.8% YoY.
• The liquidity indicator (national and foreign currency) for the aggregate of the financial system fell by 2.2 p.p. of total deposits in the month, to 24%, which was explained by a decrease in the balance of the current accounts of financial institutions at the BCRA and, to a lesser extent, by fewer passes with this Institution. This was verified in the context of a certain slack at the beginning of the period in terms of integration of the quarterly requirement – December to February – of minimum cash. For their part, in the month banks increased their holdings of LEBAC, leading to the broad liquidity indicator (which includes holdings of monetary regulation instruments) not presenting changes in magnitude with respect to last December, standing at 45.3% of deposits. Thus, the broad liquidity ratio accumulated a 4.2 p.p. year-on-year increase in deposits.
• The net worth of the consolidated financial system grew 3% in the first month of the year, accumulating an increase of 30.9% YoY, with these variations driven by accounting gains. In January, the regulatory capital integration ratio of the banks as a whole increased slightly in terms of total risk-weighted assets (RWA) compared to the end of 2014, reaching 14.9%. On the other hand, the excess integration of regulatory capital (capital position) for the financial system stood at 93% in January 2015.
• In the first month of the year, the accounting profits of the financial system were equivalent to 4.5% of assets, increasing compared to the level of the previous month mainly due to the higher results of public securities. Public and private foreign banks accounted for the monthly increase in profits to a greater extent. In the last twelve months, the profits accrued by the banks as a whole represented 3.6% of assets.
• In order to stimulate banking penetration and the use of electronic means of payment, the BCRA recently decided to give a new impetus to transfers, expanding the range of free transactions. Since the end of February 2015, all transfers of funds up to $50,000 per day and per account – this value previously reached $20,000 – became free, including not only operations carried out electronically but also incorporating those made over the counter. Additionally, the maximum fee scale for transfers greater than $50,000 per day was modified.