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Moody’s rates outlook of 30 Argentine banks to negative

Thursday, September 27th 2012 - 22:07 UTC
Full article 75 comments
The risk rating agency also questioned the reliability of official statistics The risk rating agency also questioned the reliability of official statistics

Rating agency Moody's changed to negative the rating outlook on 30 rated Argentine financial institutions on Thursday. Moody's cut the outlook to negative from stable, as a reflection of the outlook change on the country announced last week.Moody's rates Argentina at B3, six levels into junk territory.

The ratings firm said that Argentina’s haphazard economic-policy decisions, as evidenced most recently by the nationalization without compensation of oil company YPF SA, as well as questions about the reliability of official statistics, make it difficult to know with certainty Argentina's real economic condition.

Moody's said the banks' outlook change incorporates risks stemming from increased government interventions, such as tighter foreign exchange controls and enforcement of interest rate caps on credit cards.

These policies, along with changes to the central bank's bylaws, raise questions about the predictability of the government's policies, and that uncertainty is causing foreign currency deposits to rapidly exit the country.

The affected financial institutions include Banco Comafi S.A., Banco de Galicia y Buenos Aires S.A. (GALI.BA) and Banco Macro S.A. (BMA, BMA.BA).

In April, Standard & Poor's Ratings Services lowered its outlook on Argentina to negative from stable, citing the country's decision to nationalize YPF as well as restrictions on international trade. S&P rates Argentina at B, five notches into junk territory.

Argentina’s financial institutions thrived during a nearly nine-year economic boom thanks to consumer lending that outpaced inflation of 20/25% a year.

But as the economy slowed sharply, the government of President Cristina Fernandez told banks in July to lend nearly 15 billion pesos (about 3.3 billion dollars) by year's end to finance investment in production. Half the loans must go to small- and medium-sized businesses, which have a harder time coming up with collateral.

The loans must span at least three years and carry a maximum annual interest rate of 15%, well below inflation. Private banks lent companies about 35.5 billion Pesos last year with small- and medium-sized firms getting only a 7% share, official data shows.

Many banks are renegotiating loans with their current clients at lower rates to meet the new requirements without taking a chance on new companies. And some may seek to raise other fees they charge to compensate for lending at a loss.

The Argentine government requirements target 5% of deposits at the country's 20 largest banks and 11 other institutions. But bankers' alarm bells sounded when Deputy Economy Minister Axel Kicillof, a close presidential aide and architect of the controversial state takeover of energy company YPF earlier this year, recently urged banks to offer mortgages at “half the rate and double the term” during a public speech.

Kicillof says banks serve a social function and should not only pursue financial gain.

Top Comments

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  • briton

    see someone does love you lackies after all,

    Argentina at B3, six levels into junk territory.

    Enjoy it while you can,
    it will soon drop further.

    they know not
    they see not
    they hear not,
    but they talk alot..

    Sep 27th, 2012 - 11:12 pm 0
  • mastershakejb

    LOL! this time USA didn't have to destabilize Argentina like it did in the 70's, this time Argentina's f*ckin itself over! Thanks for savin us the work/time/cost of ruining your nation, Cristina, good job!

    Sep 27th, 2012 - 11:17 pm 0
  • Truth_Telling_Troll

    How many Argentine banks have failed in the last 5-7 years, being five levels into junk status?


    How many banks have failed in investment grade, triple AAA-land (EU, USA, Japan, UK, etc?

    Northern Rock
    Bear Sterns
    Catholic Building
    Alliance & Leicester
    Roskilde Danmark
    Fannie Mae
    Freddie Mac
    Derbyshire Building So.
    Chesshire Building So.
    Merrill Lynch
    AIG Group
    Lehman Brothers
    Washington Mutual
    Bradford and Bringley
    Glitnir Iceland
    Bank West Australia
    Kaupthing Bank
    Caja Sur
    Phillipine American Life and Gen. Ins
    Chesham Building So.
    Caja de Ahorro Castilla-La Mancha
    Dunfermline Building So.
    Bank of Antigua
    Straumur Investment bank
    Alliance Bank
    BTA Bank
    Anglo Irish Bank
    Indymac Federal Bank
    Commerce Bankcorp
    National City Bank
    Sovereign Bank
    Royal Bank of Scotland

    Those are just the trans-capitalized banks.




    Even the bank of southern Chaco is a better, safer bank that that pile of failure that is Anglo-saxon and European banking.


    Sep 27th, 2012 - 11:23 pm 0
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