Argentina’s large banks are nearing a pivotal point in their business models due to the country’s rapidly falling inflation. The rate of increase in Argentina in July fell to 4% (month on month), and banks report that they are beginning to see the resurgence of credit demand in the country, particularly from the corporate sector, which offers the potential for banks to normalise their business models.
Today, most of bank revenues come from interest from government or central bank securities. Though these returns are negative in real terms, they are a relatively risk-free and stable source of income. But now, there is rising optimism among Argentina’s banks that they will be able to switch to generating net interest income (NII) if falling inflation continues to generate credit demand.
Participants from the main Argentine banks at a Citi banking conference in Buenos Aires earlier in August relayed this optimistic message about the return of credit demand.
BBVA Argentina and Galicia told attendees that real loan growth is expected to be about 30% this year, while Supervielle predicted 20%-plus and Banco Macro is aiming for between 15% and 20% for the full year 2024.
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