Banks: credit to the private sector decreased 31.9% annually

Despite these variations, “At the end of the first quarter, the financial system maintained high levels of liquidity and solvency, offering a stable environment”, according to the bank report executed by the Central Bank.

The financial system’s liquid assets decreased in March, although they remained above the historical average, indicating a solid financial position. Solvency indicators continued to improve, with an increase in capital integration and the leverage ratio, highlighting the robustness of the financial sector in terms of capitalization and risk management.

Credit dynamics

The balance of credit in pesos to the private sector decreased 2.7% in real terms in March (+8% nominal) and in annual terms it fell 31.9%. The monthly drop was reflected in all credit lines and in most groups of financial entities (with the exception of public ones).

However, the balance of credit in foreign currency at private sector recorded a notable increase, mainly driven by export prefinancing. In March, it increased 30%, accumulating a year-on-year increase of 26.3%. Growth in the period was driven by the performance of export prefinancing and, to a lesser extent, by documents.

Regarding credit to the private sector, the irregularity indicator remained stable in the third month of the year, without significant variations with respect to the previous month. Both loans to families and companies exhibited controlled default levels, while the forecasts of financial entities remained at high levels, underlining prudence in credit risk management.

Deposits

Regarding deposits, a decrease in real peso deposit balances from the private sector of 2.7% was observed, driven mainly by a reduction in demand accounts. In a context in that the BCRA reduced the monetary policy interest rate and deregulated the term deposits, the balance of private sector term placements in pesos increased 7.9% in real terms.

For their part, the Foreign currency deposits from the private sector increased 2.9% in the monthwith increases in demand accounts, as well as in time deposits.

In this context, the actual total credit balance (considering national and foreign currency) the private sector remained unchanged in magnitude in the month (+0.1% in real terms), accumulating a year-on-year drop of 26.3% in real terms. In a year-on-year comparison, the balance of deposits in pesos from the private sector decreased 37.3% in real terms.

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Depositphotos

However, Time deposits in pesos experienced a substantial increase, in line with the reduction in the monetary policy interest rate and the elimination of the minimum rate for fixed-term deposits in pesos announced by the BCRA.

Holding of titles vs. deposits

On the side of the applications of funds from the financial system, holdings of public sector securities (mostly in pesos with CER adjustment clause) and liquidity in the broad sense increased in the period, while the balance of private sector deposits decreased. . “Regarding the foreign currency segment, in March the main variations were associated with increases in the balances of deposits and credit to the private sector and a drop in liquidity“.