Report on Banks, May 2023

• In May, the financial system carried out the intermediation process while preserving comfortable liquidity and solvency levels. Electronic means of payment continued expanding in May, with instant transfers and ECHEQs posting the most relevant monthly performance. When compared to other types of transactions, these means of payment have improved: in the last three months, instant transfers accounted for 52.5% of GDP (+12.6 p.p. y.o.y.), and ECHEQs stood around 25.4% of GDP (+0.6 p.p. y.o.y.).

• The stock of loans to the private sector in domestic currency decreased 1.2% (-10.7% y.o.y. in real terms) in May. Loans for consumption posted a monthly increase, loans with real property collateral remained practically unchanged and business credit lines recorded a drop. The average stock of loans granted through the Credit Line for Productive Investment (Línea de Financiamiento para la Inversión Productiva, LFIP) reached about ARS1.7 trillion in the month, accounting for 13.8% of the total stock of loans to the private sector (+0,9 p.p. y.o.y.) and 24.6% of business credit lines.

• In May, the non-performance ratio of loans to the private sector amounted to 3%, remaining virtually unchanged against April, and down 0.3 p.p. vis-à-vis May 2022. The delinquency rate of financing to households stood at 3.2% (-0.1 p.p. y.o.y.), and that of companies was 3% (-0.5 p.p. y.o.y.). Financial institutions as a whole posted high levels of provisioning in May: 3.9% of the total portfolio and 128% of the non-performing loan portfolio.

• In May, the stock of private sector deposits in pesos decreased 0.6% in real terms (+3.1% y.o.y. in real terms). The monthly fall was observed in sight accounts and in time deposits. In year-on-year terms, time deposits in pesos recorded a higher relative growth in real terms (+6.9% y.o.y.), in line with several increases in minimum interest rates set by the BCRA.

• In the month, broad liquid assets in the financial system reached 78.7% of total deposits, up 1.9 p.p. against April and 11.2 p.p. in year-on-year terms. The current levels of the broad liquidity indicator exceeded the average of the last 10 years (54.4%).

• In May, the financial system's regulatory capital compliance stood at 31.3% of risk-weighted assets (RWAs) (+0.1 p.p. monthly and +2.4 p.p. y.o.y.). The capital position (regulatory capital minus the minimum regulatory requirement) for the ensemble of financial institutions totaled 278.8% of the regulatory requirement (+1.1 p.p. monthly and +31.2 p.p. y.o.y.), and 44.6% of the stock of loans to the private sector net of provisions (exceeding the average record of the last 10 years, 19.6%).

• In the past 12 months to May, the total comprehensive income in constant currency was equal to 2.4% of assets (return on assets, ROA) and 13.7% of the net worth (return on equity, ROE).

Report (full text)

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July 19, 2023

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