This report analyzes the situation of the Argentine financial system on a monthly basis.
SUMMARY
Cost-effectiveness:
Private banks recorded results in March similar to those of the previous month, although with important changes with respect to the composition. The first quarter thus ended with an annualized loss of 2% of the AN, 1 p.p. lower than the loss of the same quarter of the previous year. Eliminating the effect of the amortization of injunctions and the valuation adjustments of public sector assets, an annualized and adjusted ROA was observed in the quarter with practically zero for private banks.
The results by assets of private banks registered an annualized gain of 1.1% of the AN unlike the previous month where the result for this concept was practically nil. On the other hand, the difference in the price generated an annualized loss of 0.6% of the National Income Tax in the month due to the effect of the appreciation of the peso on the active position in dollars of private banks.
The results for interest of private banks, generated from traditional banking operations, doubled to reach 0.8% annualized of the AN. The higher accrual of interest on loans and the lower interest paid on fixed terms explained the improvement in these results in recent months. As a result of this improvement, the ratio of coverage of expenses with income derived from traditional operations amounted to 87% in the first quarter, showing a clear improvement compared to the same quarter of 2003.
Application of funds:
The main destination of private bank funds in March was credit to the private sector. With more than $900 million granted in net terms, the largest increase in balances in recent years was recorded. The line of collateral loans showed a positive variation in the month, adding to the already consolidated growth of short-term loans.
Deposits in private banks grew 2% in the month, representing the main source of funds for this type of entities with a net amount of $1,800 million from the non-financial private sector. Growth continued in current accounts and savings banks, which more than offset the drop in fixed-term loans. Placements in dollars, on the other hand, registered the largest increase since the exit from convertibility. Portfolio Quality:
The irregularity of the financing portfolio to the non-financial private sector decreased by 3 p.p., reaching 24.6% in March (the lowest level since January 2003 for private banks). This performance was mainly due to the improvement in the commercial portfolio, led by the actions of domestic retail banks, due, in part, to the sale of portfolios by some entities. For the system as a whole, the percentage was 29.2% * The coverage ratio with forecasts for the portfolio to the non-financial private sector grew in March by 3.2 p.p. for private banks, reaching 84.4%.
