Report on Banks

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

Summary of the month

• The incentives designed by the BCRA in recent months have allowed financial intermediation activity to regain dynamism over the end of 2009 in a context in which the conditions of monetary and financial stability are preserved. Among them are the reduction of interest rates on active and passive passes on four occasions, the further development of the interest rate futures market by participating through the “draft function”, the recent incorporation of the “draft function” for interest rate swap operations, as well as the increase in the limit for companies to be evaluated with the criterion of consumption and simplification in the information required in the credit activity. Along with the increase in deposits and loans to the private sector, the precautionary liquidity of financial institutions fell slightly, from high levels. It should be noted that the foreign currency mismatch of banks continues to reduce, while solvency indicators improve across the board among financial institutions.
• In order to help banks extend the terms of granting fixed-rate loans, the BCRA continues to develop the interest rate futures market, participating with the “giro function” (originally in operations up to 1 year term and since last November up to 2 years) and also tendering fixed-rate swaps for variables.
• Total deposits in the financial system grew by $1.45 billion in October (0.6% or 11.3% YoY), driven mainly by placements in pesos by the private sector, which increased by more than $5,000 million in the month, mainly due to term deposits and despite lower passive interest rates.
• The liquid assets of all financial institutions fell (including items in domestic and foreign currency), reaching 29.2% of total deposits in October. The broad liquidity indicator, which incorporates the holding of Lebac and Nobac not linked to passes with the BCRA, stood at 42.4% of total deposits.
• Credit to the private sector increased by $1.65 billion (1.2% or 4.2% YoY) in October, the highest monthly expansion in the last year, with lower interest rates. Consumer lines and documents were the most dynamic in the month, while private banks explain the monthly increase. In addition, the average maturity of loans to the private sector continued to increase.
• The credit risk faced by banks remains at limited levels. The irregularity ratio remained at 3.7% of financing to the private sector. The level of delinquency of families fell slightly in recent months to 5.1%, while that of companies stood at 2.6%. The degree of coverage of the irregular portfolio with forecasts is 122%.
• The consolidated net worth of the financial system expanded 1.7% in October (18.6% YoY), mainly due to the accounting gains accrued. The capital integration of the financial system increased in the month to reach 18.6% of risk-weighted assets. The excess of capital integration was practically 100% above the requirement at the systemic level, being generalized among financial institutions.
• The monthly accounting earnings of the financial institutions as a whole fell in the month, mainly due to lower results from securities, after the high levels recorded in September. So far in 2009, the profitability of the financial system exceeds that of the same period in 2008 for all homogeneous groups of financial institutions.