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Illustration: Pete Ellis |
The view from the top of Banco Galicia’s tower is changing, but only slowly. Much of what can be seen has been the same for decades, but there are pockets of obviously recent development.
The tower where Galicia’s chairman Sergio Grinenco sits dates from the turn of the millennium, when stringent dividend regulation favoured capital investment strategies. Now the forecast is for more orthodox investment that will drive new economic growth. Some investment has begun, but game-changing levels of it have yet to materialize.
The new administration inspired a recession. It had to, given the need to dismantle the many distortions and imbalances it inherited. Economic growth may be coming, but the country is still waiting for unambiguous signs of a breakthrough.
While it waits, the banks face a difficult path to normalization. The macroeconomic situation has created an environment of negative real loan growth, rising unemployment and pressure on (admittedly high) net interest margins (NIMs). More surprising is the persistent negative impact of regulatory risk. President Mauricio Macri has dismantled some of the core regulatory frustrations of the banking sector but maintained – and in some cases even increased – others.
