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Moody's: Argentina's new UVA-adjusted loans credit positive for banks

The latest mortgage loan program launched by the Argentine government and three state-run banks, which is based on the new UVA inflation index, should help Argentina's banking sector meet an increased mortgage demand, Moody's said in a credit outlook report.

"The facility is credit positive for banks because it will foster growth in an underdeveloped market segment and increase banks’ exposure to a secured asset class, supporting asset quality, earnings and portfolio diversity," Moody's said.

The new inflation-linked funding facility, that is partly financed by deposits from public pension fund ANSES, "will help contain asset-liability mismatches for banks, given that the mortgages it funds will be long-term assets that are also indexed to inflation," the rating agency noted.

Moody's predicts that the mortgages, which initially will only be offered by state-owned Banco de la Nación Argentina, Banco de la Provincia de Buenos Aires and Banco de la Ciudad de Buenos Aires, will eventually be extended to the private banking sector.

The rating agency said that mortgage loans currently account for only 1% of the GDP in Argentina, compared to 20% in Chile and 5% in Uruguay, a fact that illustrates the "significant growth opportunities in this market."

In 2016, only 13.5% of real estate transactions in Argentina were financed by mortgages, according to Moody's.