Peso credit to the private sector cut its decline in June, but remains stagnant

Argentine bank lending in pesos to the private sector experienced a slight rebound in June, halting a five-month downward trend in real terms. Preliminary figures from the Central Bank indicate a 3.2% nominal increase, translating to a 1.3% rise in real terms, assuming inflation between 1.9% and 2% for the month.

The total loan stock expanded by 3.17 trillion pesos to reach 102.1 trillion pesos by the end of June. This recovery was largely fueled by demand from businesses, with disbursements for check discounts rising 6.2% and current account advances increasing by 5.8%. In contrast, financing lines for individuals and families saw only marginal expansions.

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In October of 2024 that indicator was barely 2.5%, which means it has multiplied by more than five in that period. An unprecedented jump since the end of the Convertibility.

This disparity is significant, as loans to consumers and small investors constitute nearly 46% of the total loan stock. The subdued demand from this sector is attributed to the persistently high levels of payment defaults. In May, the average default rate reached 12.7%, the highest in 22 years, while the rate among companies stood at a much lower 3.5%, according to banking executives and analysts.

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At least, after five months of decline, we finally reached a month with positive variation in real terms in the total stock. Although the annual increase is very modest, a change in trend occurs in the sixth month. And again, commercial operations surpassed the inflation barrier and compensated for the meager performance of portfolios associated with individuals.

Default rates on family credits have been rising for 19 consecutive months, marking multi-year highs. The consultancy 1816 noted that this indicator has increased more than fivefold since October 2024, a jump described as unprecedented since the end of the Convertibility plan.

Guillermo Barbero, a partner at First Capital Group, observed that while the annual increase in lending remains modest, the shift to positive real growth in June marks a change in trend after five months of decline. He reiterated that commercial operations drove this recovery, compensating for the weak performance in portfolios linked to individuals. Analysts at Invecq noted that despite the Central Bank's normalization of reserve requirements, which helped reduce volatility and lower some active rates, rates for families remain very high. They caution that this statistical rebound does not yet signal a sustained trend that would significantly boost economic activity and consumption.

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The credit in pesos to the private sector remains stagnant although this year the BCRA has advanced in the normalization of reserve requirements, which helped to lower volatility and allowed some active rates to fall, but others - especially those received by families - remain very high.