Informe Sobre Bancos

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

Summary of the month

• The financial policy implemented by the BCRA continues to favor the recovery of the banks’ traditional financial intermediation activity, promoting their accelerated asset normalization: an increase in loans to the private sector, a reduction in exposure to the public sector, a significant growth in time deposits, an accelerated cancellation of rediscounts with the BCRA and the consolidation of profitability and solvency.
• In line with the BCRA’s financial policy, the financial system continues to increase the maturity of its funding: in March, fixed-term deposits in the private sector grew 4.3% (31% YoY), above the demand deposits: 3.4% (23% YoY). Private banks led the dynamics of time deposits in the month.
• Rediscounts for illiquidity, one of the legacies of the 2001-2002 crisis, are close to disappearing. Matching payments in March totaled $1,002 million, driven by the total cancellation of the obligations of a private bank, leaving only one financial institution with debts within this scheme. Rediscounts due to illiquidity accounted for 1.5% of the financial system’s liabilities in March, 8.7 p.p. less than at the end of 2004.
• Credit to the private sector maintained its growth in March, increasing 2.2% (41% YoY), in line with the growth rate evidenced in the last year. The length of credit terms increases: new mortgage loans extended their duration by 46 months in the last year, to 11.7 years, while lines to companies gradually increase their maturity.
• In the first quarter of 2007, all sizes of financing to companies grew, with a notable dynamism of the lines particularly aimed at microenterprises. This movement is favored by the pro-SME measures implemented by the BCRA. The decreasing credit risk of households and companies is driving the reduction in portfolio non-performing loans: it has accumulated a fall of 2.7 p.p. in the last year, to a historically low level of 4.1% in private financing.
• The set of financial institutions continues to deepen their independence from the financing needs of the non-financial public sector. Thus, the risk exposure of the non-financial public sector fell by 2 p.p. in the first quarter of 2007 to 19.7% of total assets, a movement led by private entities. Passive passes and Lebac and Nobac are monetary regulation operations with the aim of maintaining a balance in the market and do not constitute financing to the public sector by the banking sector.
• In March, the growth of non-financial private sector deposits ($4,300 million) and the contraction of credit to the public sector (approximately $900 million) were the main sources of funding for the financial system. The most outstanding applications of resources were the increase in credit to the private sector ($1,950 million), the reduction of public sector deposits, the greater holding of BCRA securities and the payment of obligations with the BCRA within the framework of matching.
• The financial system obtained accounting profits for the eighth consecutive quarter. Especially driven by the growth of traditional financial activity and the recovery of sovereign debt securities prices, in March banks accrued profits of 1.9% y/y of net assets (13.8% y/y. of equity). Thus, the first quarter of the year closed with profits close to 2.1% y/y of assets (15.7% y/y. of equity), higher than those recorded in the first quarter of 2006.
• The higher profits of the banks continue to boost the solvency of the sector: net worth grew 1.5% in March, accumulating 22% in the last twelve months. Capital integration in terms of risk assets in the financial system grew 1.1 p.p. in the first quarter, to a level of 18.1%, above the international recommendation.