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.