Argentina’s second-tier banks on the move
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Argentina’s second-tier banks on the move

Mid-sized banks moving quickly to take advantage of credit growth: focus on organic rather than acquisitive growth could be a positive.

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While the biggest banks in Argentina have been receiving most of the attention in terms of growth potential – not least because of the speculation about the future ownership of Banco Patagonia – the second tier banks in the country are also implementing ambitious growth plans.

Banco Supervielle is the obvious example: the 12th largest private bank in the country has already responded to the economic normalization programme being implemented by president Mauricio Macri’s team with an IPO in May 2016 and a follow-on in September this year. Supervielle is leading the entire market in terms of growth – it grew 95% during 2016 and the first six months of 2017, the fastest rate of any Argentine bank, and almost double the already-high system average. Even when adjusting for Argentina’s high rate of inflation, the portfolio grew a substantial 25%, while the country’s overall banking system contracted.

Assuming Banco Supervielle continues to grow at twice the pace of the Argentine banking system average, the bank will be able to grow its market share to about 3.6% from 2.7% currently and 2.3% before the IPO.

Euromoney is expecting to run a feature on Supervielle in its October issue. Its story, though remarkable (Euromoney awarded Supervielle its Award for Excellence for Argentina this year) is not unique. Two other midsized banks are quietly making a move in the market.

In May 2017 Banco Comafi completed its acquisition of Deutsche Bank’s Argentine subsidiary Deutsche Argentina. The move will enable Comafi to strengthen its fiduciary and depositary businesses, provide access to Deutsche Bank’s Argentine client base in the country (including several leading mutual funds and institutional investors) and thereby strengthening revenue diversification and profitability.


Moody’s says there are some risks inherent in the transaction – not least the possible migration of clients that were working with Deutsche Argentina because it was part of a global franchise – but this is limited given the nature of the market. “There are relatively few other institutions that provide the fiduciary and depositary services Deutsche Bank offered, and they are also domestically owned,” says Moody’s.

The rating agency suggests the positives of the transaction will certainly outweigh the negatives: “The purchase will improve Comafi’s funding structure and lower its average funding cost by giving it access to Deutsche Bank’s inexpensive current accounts and reducing the weight of more costly and less reliable time deposits in its funding base.”

Using March 2017’s financials, Comafi’s total deposits should increase by around 10% (in line with assets) and time deposits will fall to 41% of this total. At current interest rates this shift in the funding structure would result in a decrease of about 100bo in the bank’s average cost of funding.

Meanwhile in March 2016 Banco Hipotecario became the second Argentine bank to issue an inflation-linked bond to boost funding for the exceptionally high demand being seen in Argentina for mortgages. Moody’s says that traditionally Hipotecario has been one of the leading players in the (albeit very small) segment – with a 4.2% share, the largest of any private sector bank. And although the bank has tried to diversify in recent years mortgages still account for 11% of the total credit portfolio.

The bank’s bond deal, at Peso1 billion, was equal to 35% of the bank’s mortgages and Moody’s says the deal will “allow the bank to grow its inflation-adjusted mortgage book substantially”.

The demand to fuel rapid organic growth seems to be there following the move by the Argentine bank to create an inflation-adjusted unit called the UVA – similar to Chile’s UF – which has enabled Argentines to access long-term financing for homes for the first time in a generation.


Mortgages are now only worth 1% of GDP but demand is growing fast – so much so that in August Nerio Peitiado, COO at Banco Supervielle, told Euromoney that it may run out of funding for the segment.

“We are talking to the government,” said Peitiado. “But if we don’t see any public-sector funding for UVA mortgages we will have to stop issuing new mortgages in between six and 10 months because the size of the mortgage portfolio relative to the entire credit portfolio will get too high and we don’t want to run an unmatched risk.”

The mortgage product isn’t a particularly profitable product but the Argentine banks are all interested in developing the segment as it is offers an unmatched strategic opportunity to lock-in client relationships – and sell other financial products in an economy with lots of potential for credit penetration – for the medium-to-long term – something that previously was unthinkable in the ‘transactional’ economy. Hipocatario’s development of inflation-linked funding therefore gives the bank an advantage in building its mortgage business – as well as using that to diversify into other areas with a stable client base.

It is expected that the second-tier banks will pursue M&A in an opportunistic way but, given their size, the obvious leading banks for sale won’t be an opportunity. Also, given the organic opportunity the lack of M&A is a positive for some clients.

In Euromoney’s Supervielle feature (published in October) UBS’s analyst of Supervielle, Frederic De Mariz, sees this is a positive:  “I like the fact that the bank’s management won’t get distracted with an extensive M&A deal – they have a lot to do with the organic opportunity,” he says. “My base case is organic growth.”

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