Over the past two months, the domestic credit and deposits’ market dynamic has remained mostly unaltered. Dollar loans as well as mortgages are still growing at a brisk pace, whereas time deposits have remained idle in real terms.
The resurgence of Argentina’s domestic credit market has made further progress over the past few months, with total loans given out by financial entities growing at annual rates of about 35% to 38% in nominal terms. With prices advancing at a significantly slower pace over the last year according to official estimates, there is ample room for nominal growth to translate to an increase in real terms. As has been since 2016, the increment in dollar loans (which have added 3 percentage points to their share in total credit since the beginning of 2017), has been a significant driver.
Despite currently amounting to only 17% of total loans, dollar denominated debts have contributed to over 35% of total credit growth in the past year. However, its annual growth rate, which still stands at a staggering 100% as of mid-July, has promptly decelerated since peaking in December 2016.
If we break down domestic credit into its components, we can attest to an unequal growth pattern. Signature loans (+4.5 percentage points YOY) and personal loans (+2.3 percentage points YOY) have significantly increased their share of total credit, accounting for over 50% when taken together. On the other hand, current account overdrafts and credit cards have receded 2.7 and 2.3 percentage points respectively.
Mortgage credit’s rise has continued to accelerate, nearing annual growth rates of almost 45% in nominal terms. However, since other segments (such as signature and personal loans) have risen at a faster pace, its participation has barely increased by 0.2 percentage points, as it now stands around 6%.
After hovering around 50% throughout the first half of the year, cash deposits’ annual growth rate has fallen below 40% in order to advance at a similar pace as total loans.
This slowdown is consistent with the progressive stagnation in both time deposits and current accounts witnessed since 2016, when the tax amnesty gave significant stimulus to the enlargement of total savings accounts.
Since Mid-march, annual growth rates for time deposits have stood in the 17% to 25% range, resulting in an almost null variation in real terms. If use of financial intermediaries remains on the rise, the amount of cash held in savings accounts will surpass total time deposits, signaling that yield seekers are looking away from the banking system.