January 26, 2021

Moody's warns of falling credit growth in Argentine banks

Moody's warns of falling credit growth in Argentine banks



The US agency Moody's considered today that the increase in inflation, high interest rates and the consequent fall in economic activity in Argentina are reducing the growth of credit in the banks established in the country.

In a report, the rating agency analyzes how the banking system of Argentina is addressing the current "economic and financial crisis" that the country is going through, marked mainly by the strong exchange volatility that began last April, which has abruptly devalued the peso and that still continues .

"The increase in inflation and interest rates, together with the resulting recession in Argentina, have weakened the demand for loans from both companies and consumers," Moody's Vice President Valeria Azconegui said in the document.

At the same time, he affirms that banks have reduced their "appetite for risk", delinquency levels have begun to increase and "are likely to continue increasing in the coming months".

Moody's warns of a fall in the credit portfolio denominated in pesos of the 9% system in real terms since the beginning of May, after having grown by 2% in the first four months of the year.

"Although the slowdown has affected most types of credit, the most significant reductions have been in personal loans, check discounts and overdrafts," the agency added.

After the fall of the peso from 18 units per dollar at the beginning of the year to almost 39 that the market closed today and the reference rate increase to 60% at the beginning of September, deposits in local currency have also begun to fall later. to adjust them for inflation.

"However, the drop in deposits is still limited and does not indicate a significant deterioration in investor confidence in the banking system," Moody's said.

The rating agency recognizes that due to the new agreement between the Government and the International Monetary Fund, it does not expect the confidence to "erode abruptly" or that deposits will decrease "substantially during the next months".

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