Argentina's largest listed banks continued to post positive results in the fourth quarter of 2017, as the country's high-rate environment buoyed net interest income and helped offset a surge in operating expenses.
Aggregate net income for three of Argentina's biggest lenders — Grupo Financiero Galicia SA, Banco Santander Río SA and BBVA Banco Francés SA — came to 5.68 billion Argentine pesos in the three-month period, improving almost 42% from 4.01 billion pesos recorded in the prior-year quarter.
Robust improvements at Galicia and Banco Francés helped in propping up the banks' overall profitability as Santander Río's results underwhelmed. Galicia booked quarterly net income of 2.68 billion pesos, advancing 51.4% year over year, while the bottom line at Banco Francés more than doubled to 1.42 billion pesos. Santander Río's net income, on the other hand, slid 4.8% to 1.58 billion pesos.
Combined net interest income for the three banks increased 43.3% annually to reach 12.45 billion pesos. The lenders benefitted from a hike of 100 basis points in the central bank's benchmark rate in November 2017 as the monetary authority sought to keep inflation expectations under control.
Annual inflation in the country reached 24.8% in 2017, much higher than the central bank's target of between 12% and 17%, thereby raising costs for businesses. Total operating expenses for the three banks hit 16.73 billion pesos in the period, rising 38.2% from a year earlier. A surge in Santander Río's administrative expenses was one of the main driving factors behind the bank's decline in fourth-quarter profitability. Santander Río also saw the sharpest rise in its nonperforming loan ratio among the three banks, with the asset-quality indicator jumping to 2.40% in the fourth quarter from 1.25% a year earlier.
Recent data from Argentina's central bank pointed toward a general decline in the local financial system's profitability indicators last year. Banco Francés, however, managed to buck that trend with a return on average equity of 21.90% for the fourth quarter, up from 13.97% a year ago.


As of Feb. 28, US$1 was equivalent to 20.13 Argentine pesos.
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