In mid-February Argentina’s MerVal index of leading stocks closed at previously unsurpassed levels, with much of the activity involving the shares of Grupo Financiero Galicia. The conglomerate told the Buenos Aires stock exchange that its banking operation, Banco Galicia, suffered a net loss of Ps126 million ($40 million) in 2006 as a result of a debt compensation programme with the central bank dating back to the country’s 2001 financial crisis.
Galicia is at a critical juncture in its own reform process, says Guillermo Glattstein, chief of strategic planning at Banco Rio. "Galicia is in a period where it is trying to solve its balance sheet problems," he says. "They reported the one-time loss at the end of 2006 but they have been suffering recurring losses each quarter as a result of a gap of almost 300 basis points between their dollar-denominated assets and liabilities. The central bank authorized Galicia to buy back the dollar debt and eliminate this negative interest margin, and I think this will be achieved some time in 2007."
Rumours
Argentina’s banking sector has seen much consolidation and international investment since the crisis, with only Galicia and MacroBansud among the major retail operations still managed locally.