S&P Global Ratings placed Argentine banks on negative credit watch given the expected impact of the so called re-profiling of short-term debt and foreign exchange controls applied by Mauricio Macri's government on financial institutions.
Despite revising the outlook, the agency kept a B- long-term rating for issuers Banco de Galicia y Buenos Aires SAU, Banco Patagonia SA, Banco de la Provincia de Buenos Aires and Banco Hipotecario SA.
At the same time, Ratings placed B short-term issuer credit rating on Banco Patagonia, CCC subordinated debt rating on Banco Galicia, and B- senior unsecured rating on Banco Hipotecario.
Ratings underscored "rising economic risks for banks" resulting from the weakening of the sovereign's financial conditions, noting that banks will continue to operate under a "very challenging" economy in the upcoming quarters. According to Ratings, there will be additional obstacles for credit growth in real terms, plus an expected deterioration in asset quality and potential credit losses down the line.
"The banking system remains profitable, but with a greater share of revenue coming from holdings of central bank securities, which should help offset higher charges for provisions in response to rising delinquency," the agency said.
S&P Global Ratings had downgraded Argentina's credit rating Aug. 15 further into junk territory, citing the market turmoil caused by President Macri's defeat in the Aug. 11 primary elections. On Aug. 29, it downgraded the rating again toward selective default after the unilateral extension of maturities was announced, though it later reversed the decision.
In a decree published in the government's Sept. 1 official bulletin, Macri's administration said companies will need approval from Banco Central de la República Argentina to sell pesos for foreign currency purchases or international transfers. Individuals who wish to buy more than $10,000 in a month also now require the central bank's permission.
