The banking system, increasingly exposed to the state and less to the private sector

Between November 2019 and November 2022, there were very large changes in the funding structure and exposure of the Argentine banking system to the public sector, a report by Quantum specified.

The consulting firm founded by Daniel Marx, the former finance secretary and current adviser ad honorem to the economic team on debt and financing issues, specified in his last weekly report that during this period the total resources of the banks increased by 18% in real terms (i.e. taking inflation into account), but there has been a change in its composition. Resources in real Argentine pesos increased by 24% and resources in dollars fell by 16.5%.

As you know, this mayor disponibilidad de pesos is canalizó mainly al sector public, cuya participation en el total del activo pasó del 36% al 50% en el período, mientras que la exposición al sector privado pasó de 42% al 28%, dice The report.

The change in public sector exposure accelerated in mid-2022, but has been continuous since late 2019. The decline in private sector loan growth has been weighed by both demand factors and offer. The Central Bank’s monetary policy of setting passive interest rates that encourage demand for money and monetary policy rates that sterilize banks’ excess liquidity through Leliqs, Notaliqs and Pases, has increased the participation of these instruments in the total consolidated assets, explained Quantum.

The share of dollar loans in total banking assets measured in pesos fell from 8% to 2% of the total

More recently, the objective of limiting the monetary financing of the BCRA, in a more complex context in terms of renewal of the maturities of national public securities, has led to actions that have led to an increase in the participation of the latter in the balance sheets. banks. business, the report continues.

Based on the analysis of the evolution of the composition of the assets and liabilities of the Argentine banks and the variations of the main components, updated at the prices and the official exchange rate of last November, the report specifies that in last November the items Banking assets in dollars consisted of minimum cash held at the Central, cash in dollars and loans to the private sector, for a total of 22,448 million dollars, mainly private deposits in bank accounts. savings and term deposits. And of a 27% increase in assets, Quantum highlighted several aspects:

– Availablity: they fell by 21%, to a greater extent due to the regulatory changes initiated in 2021 which make it possible to integrate part of the liquidity needs into Treasury bonds (today, Bonad 27 in pesos and dual bonds).

– Loans to the private sector: they fell by 15% over the period and last November represented 28% of total assets. The fall was mainly led by dollar loans, which fell 64%, compared to just 3% (real) for peso loans. At the end of November 2022, loans amounted to 4,066 million USD. Since, moreover, over the past three years, the official exchange rate has appreciated by 30% in real terms (i.e. the official dollar has lagged behind inflation and lost purchasing power), this affected the share of dollar loans in total bank assets measured in pesos, which fell from 8% to 2% of the total.

– Exposure to the public sector: the most salient aspect, with a 127% increase in the holding of Treasury securities, very close to the 131% increase in the remunerated liabilities of the BCRA, which last November was equivalent to 9.7% of GDP. The two elements (exposure to the public sector and holding of Treasury securities), Quantum specifies, represent 47% of the banks’ consolidated assets, and if the definition is widened to include the minimum liquidity in pesos that the banks have as unremunerated liabilities in the BCRA exposure climbs to 50.6% of total assets.

– Pesos from private sector deposits: they increased by 44% in real terms at the maturity considered and amounted to 61% of total liabilities last November, with a change in composition which affects the cost of financing for banks: time deposits increased by 55%, more than savings and current account cash deposits.

– Private sector deposits in dollars: they fell by 41% (still real) over the period, less than loans in pesos, and three months ago they amounted to 15,434 million USD. The decline in its stake in assets measured in pesos was also affected by the 30% appreciation of the peso according to the official exchange rate.

– Public sector deposits in pesos: they increased by 31% and last November they represented 13% of liabilities.

Thus, over the last 3 years, the financial system has increased its lending capacity in pesos against the dollar and has increasingly been a financier of the public sector: Central Bank, National Treasury and Provinces.

“It would be desirable – concludes the report – that this tendency is reversed within the framework and the consequence of a global program which induces it.”

Although in a dry style and devoid of alarmist adjectives, the report describes a kind of “nationalization” of the banking sector and contrasts with the recent praise of Marx, the founder of Quantum, with regard to the economic management of Massa which shows, he says, “fiscal numbers that they’re doing better”.

During the week, Marx also said he still believed it was possible for the 2023 inflation rate to be 60%, as stated in the budget, and said there was no conditions for an “economic shock”. But the positive words were up to this point. The financier also said the country will go “from emergency to emergency” and that it “is very difficult” to reduce inflation. Massa’s management, he pointed out, avoided “shocking” the economy, “but from there to having the car run well and move forward, there is still a long way to go.”

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