Banking sector performance.
Banks were one of the few sectors that performed well in 2018, aided by monetary tightening and the subsequent high interest rate on Central Bank (BCRA) securities. Peso depreciation also yielded windfall gains, owing to banks’ holdings of foreign currency-denominated assets. By contrast, credit to the private sector declined in real terms, as high interest rates, falling real incomes, rising unemployment and a poor economic outlook discouraged borrowing.
Monetary tightening and IMF-agreed fiscal targets agreed will delay economic recovery.
The persistence of the recession could drive a further deterioration of banks’ balance sheets.
Given banks’ growing exposure to the public sector, fears of a debt restructuring could drive widespread withdrawals of deposits.
