According to the rater, “The banking system will continue to present solid provisioning levels and a high exposure to the consolidated public sector”, indicated, even in a context of perspective of “macroeconomic instability”.
Thus, they estimated that “Economic growth will have a positive impact on the payment capacity of debtors, especially in the consumer sector, as well as in the corporate sector, which experienced difficulties in the 2018-2019 period”according to the text issued by the company.
However, they added, “The understanding with the IMF could lead to a reduction in the fiscal deficit and an increase in the rate of depreciation of the peso, which could delay and reduce the magnitude of the recovery. This scenario could be exacerbated in the event of an eventual jump in the exchange rate and/or an acceleration in inflation, negatively impacting asset quality”they warned.
However, they stressed that “These risks are mitigated by the solid provisioning levels that the financial system as a whole has on its current delinquent portfolio, around 108% of the irregular portfolio and, in the case of private banks, it reaches 147.2 %”.
Thus, the credit rating firm projects that “by 2022 the high levels of capitalization will continue given the slow recovery in credit demand, the restrictions to the distribution of profits, and the strengthening of the financial margins, if the rise in interest rates”.
Since 2018, banks have presented high and growing levels of liquiditywhich according to Moody’s, are “The other side of the fall in the participation of private credit in its portfolio”.
In the same period, the capitalization of these entities “has increased steadily, reaching historically high levels.”
As of November 2021, liquidity reached record values, amounting to 74.6% in the case of private banks and 60.3% for banks.
For their part, bank capitalization indicators also reached their highest levels in recent decades, with capital compliance of 27.2% and 23.3% for private and public banks, respectively.
Source: Ambito
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