Informe Sobre Bancos

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

Summary of the month

• The financial system obtained a profit of $5 million in July, accumulating in the last three months a positive result of 1.5% annualized (y.) of assets, an improvement of almost 6 percentage points (p.p.) compared to the same period of the previous year.
• Excluding the amortization of injunctions and the valuation adjustments of public sector assets, the financial system accumulates profits of approximately $800 million in the first seven months of the year (compared to a cumulative loss of $3,200 million in the same period of the previous year). These levels of profitability (0.7% y/y of assets) are already comfortably above the average recorded during 1996-2001, a true reflection of a financial system on the path to normalization.
• During July, the net worth (NP) of private banks increased by $170 million as a result of capitalizations concentrated in foreign banks. The NP of these entities grew 0.7% compared to the same month of the previous year.
• Likewise, the process of reducing the external liabilities of private entities continued in July. The cumulative drop in the last 12 months reached 31%. This change in the structure of liabilities is the flip side of a significant increase in those adjusted by CER ($1,900 million since the end of 2003), which has allowed, in turn, a significant reduction in the interest rate mismatch of financial institutions.
• The process of recovering portfolio quality was maintained in July, with an additional cut of 0.5 p.p. in irregularity in the case of private banks, reaching 20.4% of total financing. The improvement since the end of 2003 reaches 10 p.p.. The change in irregularity indicators follows the pattern of previous months: increase in total financing and fall in financing in an irregular situation.
• The forecasts already cover more than 90% of the irregular portfolio and the uncovered portion represents only 3.6% of the assets for private banks, the best level for this solvency indicator since records began. This indicates that, in the face of possible additional losses due to uncollectibility of the private sector, the potential decrease in net worth is significantly limited.
• The level of activity continued to grow this month. The increase in the net assets of the system (6.5%y) was mainly explained by the growth in credit to the private sector. Private banks were the leaders of this growth, bringing the share of private credit in total assets to 23%, 3 p.p. more than at the end of 2003. These higher levels of intermediation made possible the first increase in the staffing of private banks (March-June) since September 2001.
• Private banks applied to private loans an amount equivalent to half of the funds raised by deposits. Loans with real collateral have stopped falling (pledges have registered 5 consecutive months of increases), a sign that long-term credit is also beginning to return.
• Deposits were the main source of funds for the month for private banks ($650 million). 50% of these funds corresponded to placements from the non-financial private sector, with fixed-term deposits adjustable by CER being the ones with the highest contribution (they grew 23% in the month and almost 300% so far this year).
• The level of liquid assets of private banks remained stable, and given the behavior of total deposits, this led to a slight decrease in the liquidity ratio (to 27.4%). The deepening of the LEBAC pass market resulted in an increase of almost $2,660 million in the balance of active passes of financial institutions with the BCRA. Of this total increase, almost $480 million correspond to private banks.