Aside from the slowdown that occurred before the legislative elections last October, Private credit in Argentina has doubled in the past two years. Not only did mortgage loans make a comeback, but Argentines also borrowed from the bank to buy cars, appliances or tools for their businesses. but, The country still has one of the lowest values in the entire region.
In Argentina, since Javier Miley assumed the presidency in December 2023, Private credit expanded from 5.2% of GDP to the current 12%. This phenomenon is mainly due to the fact that the state became the main demander of money and the macroeconomy showed signs of stabilization, so banks resumed their usual business and stopped turning their backs on companies and families.
This allowed us to exceed the historical minimum recorded in 2023, and even managed to exceed the average of 10.1% of GDP that existed between 2010 and 2019, according to Central Bank information (BCRA). But the journey ahead is still long. This is a far cry from the 24% of GDP achieved in Argentina during its peak in the 1990s. According to the latest report of the economic consulting company 1816.It would need to double current levels to get back to where we were just over 25 years ago“, compared to the report.
It is precisely because of these values that the brokerage company Delphos Investment considers it so The true value of the banking sector lies in its expansion potential. More than her last performance. “Argentine banks operate with leverage levels much lower than those observed in the past decade and their regional peers, reflecting an idle capacity to expand the business. “With the normalization of real interest rates, lower reserve requirements, lower country risks, and a more stable post-election political environment, conditions are aligned for a strong credit recovery.”
The growth opportunity becomes clearer when compared to what is happening in other Latin American countries. For example, private credit represents 31% of GDP Uruguayby 35% Mexico40% in Colombiaup to 56% Ecuadorup to 57% Paraguay, Up to 76% in Brazil and Covers up to 103% in Chile, According to 1816.
He added: “We are far behind in terms of credit in the region because of our culture of instability. So that credit can grow, It is necessary to restore the deadlineBecause our loans are very short term. In July, as elections approached, everything turned upside down. The Tamar rate rose from 33% to 66% TNA and within a few days new credit opportunities disappeared and terms became shorter. We were coming from a rhythm of credit growth in real terms, and suddenly there was a recession in recent monthsexplained Guillermo Barbero, Partner at First Capital Group.
The increase in interest rates was a strategy to contain the exchange rate before Argentines went to the polls. But after the elections, the government intends to resume the growth of all credit lines. The BCRA gave an indication to this effect last Thursday, when Reduced the concurrent operations rate by 200 basis points, from 22% to 20% nominal annual (TNA). The decision was made one week before the next tender that the Treasury will have to face and had an impact on other short-term instruments, such as guarantees, while Tamar returned to 33% levels.
The aim is to disarm the monetary pressure experienced over the past three months. Normalizing economic rates and thus supporting economic activity through credit. In fact, on the same Thursday, the monetary entity published a report on banks and stated that loans in September grew by only 0.5% compared to the previous month. In October, it could have been lower, and First Capital Group calculates an increase of just 0.3% per month.
next to, One of the market’s biggest concerns is an increase in defaults. As a result of rising interest rates. This number has been increasing for several months, and September was no exception: The rate of credit violations in the private sector reached 4.2% system-wide, an increase of 0.4 percentage points compared to the previous month.
When looking at different sectors, the situation is not homogeneous. Total defaults on loans to families amounted to 7.3% of the portfolio allocated to this sector, which is well above the recent historical average. Meanwhile, the corresponding index for companies reached 1.7% during the same period.
“The significant increase in credit extended to families explains part of the increase in violations, but the upward trend is worth monitoring. However, A sharp decline in real interest rates and an improvement in economic sentiment after the election should moderate this dynamic going forward.“, added from Delphos Investment.
for barber, The key will be for banks to provide long-term lines of credit, Because in order to pay off a larger debt you need more months in sight. Concrete example: It is more difficult for a family to pay for a refrigerator in three installments rather than having 36 months to do so.
“This applies to all sectors of the economy. It takes more time, but for us to do that, it requires more macroeconomic stability and more coherence in monetary and fiscal policies.. “Also, lower interest rates and lower taxes, because it gives certainty and stability.”