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Argentina in transition, and some stake matters

S&P Global MarketIntelligence presents the week's latest news and trends in Latin Americanbanking.

Argentina intransition

* Argentina's GDP shrank 3.4% in the second quarter of 2016 from the samequarter a year ago, which is the highest year-over-year contraction in nearlytwo years. Seasonally adjusted data shows that this is Argentina's thirdconsecutive quarterly economic contraction, which means the economy remainstechnically mired in a recession. However, some economic indicators, such ascement sales and new building permits, suggest a recovery is underway in thethird quarter, Cronista reported. Inaddition, Argentina's Finance Minister, Alfonso Prat Gay, reportedly said it is"very likely" that the economy will grow in the third quarter andbeyond.

* BancoCentral de la República Argentina on Sept. 20 decided to cut its35-day benchmark Lebac interest rate by another 50 basis points to 26.75%. Thecentral bank said new consumer price index figures show that inflationcontinued to decline in August compared to the previous month.

* Meanwhile, President Mauricio Macri has forced Juan MiguelCuattromo to stepdown as a central bank director. Cuattromo was appointed by theprevious government in September 2015 to replace Waldo José Farías. His initialappointment was for six years but Macri said the decision was "illegal."

* Argentina's proposed 2017 budget should lead to betterfiscal planning credibility without hindering the country's ongoingfiscal consolidation process, Fitch Ratings said, though pointed to challengesin maintaining that progress. The rating agency noted that while anunderwhelming macroeconomic performance would not hamper the ongoing fiscalconsolidation process, it could create a challenging political environment inthe 2017 midterm elections.

Stake matters

* Itaú UnibancoHolding SA confirmed that it is in to possibly purchase 's retailoperations in Brazil. In a statement, the Brazilian bank stressed that it hasyet to sign an agreement for a deal, adding that it would announce the resultof negotiations when they are concluded. Despite the sale, Citi still views thecountry as an attractive growth-market in the corporate businesssegment.

* Itaú said it also entered into an to sell the entirety of itsgroup life insurance business to Prudential do Brasil Seguros de Vida SA.

* GrupoFinanciero Inbursa SAB de CV reportedly €100 million worth of shares ofSpain's CaixaBank SA,equivalent to a roughly 0.75% stake. The purchase was part of a €1.3 billionshare auction which Caixabank launched to bolster its capital reserves for atakeover bid of Portugal-based Banco BPI SA.

* The shareholders of Bancolombia SA and unit approved a merger process under which Bancolombia will absorb thesubsidiary. The companies now have 45 days to notarize and register the merger,which recently obtained regulatory approval.

* Argentine banks with stakes in credit card issuer VisaArgentina and ATM network operator Banelco SA are considering the companies amid growingpressure from local authorities to lower commissions and improve transparency, La Nación reported. Electronic paymentsfirm Prisma Medios de PagoSA, which is owned by the banks through a strategic alliancebetween Visa Argentina and Banelco, is facing an investigation on allegedanti-competitive practices and faces a possible fine of up to 150 million pesos.

By the numbers

* Colombian banks posted an overall of 7.91 trillion pesos in thefirst seven months of 2016, up 35.7% from 5.83 trillion pesos a year ago.Overall, Colombian credit institutions, including banks and other financialcompanies, posted 8.41 trillion pesos in total profit, up 29.8% from a yearearlier.

* In Panama, total private banking profits rose 1.32% to230.3 million balboas compared to the same period a year ago, which isdown from 7.08%growth in January-June 2015 year over year.

* In Brazil, consumer credit demand 9.4% in August from the priormonth, though it is still down 6.8% from year-ago levels, credit research firmBoa Vista SCPC said. The firm said that it expects consumer credit demand toremain muted for the months to come, though it does expect a positive uptick in2017.

* Meanwhile, after hitting a six-year low in 2015, theaggregate value of Brazil's M&A deals jumped 128% in the first half of 2016 to 57 billionBrazilian reais compared to the year-ago period. The number of deals as ofJune, however, fell to 38 from 50 in 2015.

* The number of companies in Brazil that are with delinquencyreached 4.45 million as of the end of June, or 55.63% of the country's companycount, the highest level in history. The number of enterprises with overdue paymentsis 16% higher than June 2015.

In other news

* BancoBradesco SA signed an agreement with a Brazilian federal court through whichthe bank offered guarantees worth up to 104 million reais amid an ongoinginvestigation into alleged frauds involving the country's four largeststate-run pension funds.

* Brazil's ongoing banking labor strike has shuttered 13,071branches as of Sept. 19, the largest shutdown in the country's history.

Featured this week onS&P Global Market Intelligence

* Peruvianbanks see continued rise in NPLs: Major Peruvian banks postedearnings little changed from a year earlier, though showed some deteriorationin credit quality.

* Most LatAmcountries see CDS spreads, exchange rates rebound YTD: Having hitmultiyear highs in late 2015 and early 2016, credit default swap spreads formajor Latin American currencies have fallen back substantially over the pastseveral months.

* Best of theWeb: Brazil's Michel Temer vows to take tougher stances in revivinga struggling economy; opportunities in Argentina are as immense as its risks;and a look at Paraguay, an unassuming country outperforming its peers in theregion.

* Hires andFires: Director moves at Banco Agropecuario, First Citizens Bank Ltd. and ; while Banco de laNación gets a new CEO.

* RatingsRoundup: Moody's downgraded Banco do Estado do Rio Grande do Sul SA, while Fitchmaintained its Rating Watch Negative observation on Banco Citibank de Guatemala SA.