In a further step in the process of recovering their traditional role of financial intermediation, more than 50% of private entities increased their balances of loans to the private sector during October, allocating half of the funds obtained in the period for this purpose.
The main source of funds for private entities was private sector deposits, representing $1,600 million this month.
Most of these deposits were made in demand accounts, influencing the way these resources are applied towards the integration of liquid assets and LEBACs.
The equity structure of private banks showed an improvement in terms of the risk/return profile. A decrease in exposure to the public sector was observed by 1 p.p. of net assets – and a gain in the share of liquid assets, of the holding of LEBACs and of loans to the private sector.
The quality of the loan portfolio of private entities continues on an upward path. In October, financing to the private sector in an irregular situation represented 34% of the total, 4p.p. less than at the beginning of 2003.
The level of capitalization of the financial system is in line with the capital requirements applicable as of January 2004. Capital integration in terms of risk assets was around 13%, while capital integration more than doubled the requirement for the system as a whole.
In October, about 50% of private banks made a profit. In annualized terms, the results of private banks in the second half of 2003 represented an increase of 2.9 p.p. of net assets compared to those of the first half of the year.
The stability of the results for intermediation and services, the price level and the exchange rate, added to the notable fall in charges for uncollectibility, were the driving factors of this advance.
Based on the behavior of the main variables affecting the banks’ results, it is estimated that November’s contribution will contribute to increasing the improvement observed in profitability in the second half of the year, with an estimated loss of less than 1.5% of net assets, compared to a negative ROA of 4.5% recorded in the first half of the year.
