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Defaults on Argentina's UVA loans, mortgages to rise, says Moody's analyst

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Defaults on Argentina's UVA loans, mortgages to rise, says Moody's analyst

Moody's expects a rise in delinquencies for Argentina's mortgages and loans tied to UVA inflation-adjusted units, El Cronista reported, citing analyst Valeria Azconegui.

The anticipated increase in default rates is attributed to the discrepancy between the evolution of wages and UVA loans, as salaries are adjusted once or twice a year while UVA loans are adjusted every month, Azconegui said. As a result, borrowers could struggle to keep pace with repayment installments as high inflation persists.

Some defaults are already being observed in consumer lines, but not so much in mortgages yet, Azconegui said.

Banks are also seeing more expensive funding, especially for those with fixed rates, after the central bank increased its benchmark policy rate to 40% in May in an effort to deter the peso's depreciation and curb inflation.

However, Azconegui expects the banks' conservative stance to at least stem the delinquencies. "In any case, Argentina has the smallest financial system in the entire region. It loans very little beyond 90 days, and banks always go to the safest segments ... which preserves the possible deterioration of the portfolio," the analyst said.