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Argentine banks see restrictive credit environment bleeding into Q1

Argentine banks expect a restrictive credit market for the first quarter, continuing the downward turn that started in 2018.

Private banks surveyed by Banco Central de la República Argentina expect a "significant restriction" of credit for both companies and households, a quarterly report published by the central bank showed. The expected tightening in lending would mark a continuation of the previous two quarters.

A peso devaluation of more than 100% to the dollar in the last year made housing and automobile lending virtually unviable, and had a considerable impact on the economy. Private bank loans collapsed in 2018 by 19.4% in real terms; personal loans dropped 18%, while credit card loans fell by 12.7%, according to a Cronista report based on the central bank report.

Among the reasons cited by banks surveyed for the continued scarcity of credit for households were Argentina's fragile economic situation, and increased risk perception in the credit portfolios for this segment.

The results of the fourth quarter of 2018 show that spreads have risen above funding costs in consumer loans, and to a lesser extent in secured loans. Credit card loans showed a slight increase in commissions, while no substantial changes were seen in credit limits, terms, or guarantees.

According to the Cronista report, yet another reason for the restrictive credit environment is that banks prefer to allot their funds to purchase Leliq government bonds, whose yield is more attractive than the interest they can collect from loans.