Report on Banks, April 2023

• In April, the real stock of loans to the private sector increased, and electronic means of payment continued posting a positive performance. The financial system, at an aggregate level, posted high liquidity and solvency ratios along the period.

• The stock of financing in pesos to the private sector increased 1.5% in real terms (-9.1% y.o.y. in real terms), mainly driven by business lines (promissory notes and overdrafts). Such performance was assisted by the Credit Line for Productive Investment (Línea de Financiamiento para la Inversión Productiva, LFIP). The estimated stock of the LFIP stood at ARS1.6 trillion in the period. It explained 13.9% of the total stock of loans to the private sector (+0.5 p.p. y.o.y.), where public financial institutions accumulated a higher relative share.

• The non-performance ratio of loans to the private sector stood at 3.1% in April, remaining virtually unchanged against the previous month (-0.5 p.p. y.o.y.). The delinquency rate of financing to companies slightly decreased to 3% (-0.7 p.p. y.o.y.), and that of households stood at 3.3% (-0.3 p.p. y.o.y.). In the period under analysis, provisions amounted to 3.9% of total credit to the private sector and 127% of non-performing financing to the private sector.

• The stock of private-sector deposits in pesos exhibited no significant changes against the previous month (+3.1% y.o.y in real terms). Time deposits continued posting greater momentum in year-on-year terms.

• Electronic means of payment went on expanding. Instant transfers grew 112.3% y.o.y. in volume (22.9% y.o.y. in value, in real terms). This trend was observed both in instant transfers made from CBU (single banking code) to CBU (+60.3% y.o.y. in volume and +8.8% y.o.y. in value, in real terms), as well as those using a CVU (single virtual code) (+167% y.o.y. in volume and +81.9% y.o.y. in value, in real terms). Moreover, interoperable QR code payments increased almost fivefold over the last year, due to the measures implemented by the BCRA.

• In April, the broad liquidity indicator of the financial system decreased by 0.3 p.p. in terms of time deposits to 76.9% (-0.6 p.p. to74.4% for items denominated in pesos, and +1.2 p.p. to 90.4% for items denominated in foreign currency). The broad liquidity ratio of the ensemble of financial institutions increased 8.9 p.p. y.o.y.

• Solvency indicators of the sector started at high levels, albeit they posted a slight monthly decrease over the month. Financial institutions' regulatory capital (responsabilidad patrimonial computable, RPC) compliance stood at 30.2% of risk-weighted assets (RWAs), up 2.4 p.p. against April 2022. In the period, the capital position (RPC minus the minimum regulatory requirement) totaled 278% of the regulatory requirement at systemic level (+31.5 p.p. y.o.y.), and 44% of the stock of loans to the private sector net of provisions, over and above the figures observed in the last 10 years (18.7%).

• Profitability indicators of the financial system maintained positive levels in the period. In the past twelve months to April, the total comprehensive income in constant currency amounted to 2.2% of assets (return on assets (ROA)) and 12.2% of the net worth (return on equity (ROE)).

Report (full text)- in Spanish

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June 21, 2023