Argentina’s banks hit by bolt from the blue
They are used to dealing with a crisis, but they can usually see one coming. Does the shock of the IMF bailout leave local firms vulnerable?
This crisis is much smaller than previous ones, but it was largely unexpected, so that’s why we are feeling this one in such a very full-on way,” says Nerio Peitiado, chief operating officer of Banco Supervielle in Buenos Aires.
“This came from nowhere,” echoes Banco Galicia’s chairman, Sergio Grinenco. “It was a sudden and unexpected stop that we weren’t expecting. Argentina has been through worse crises, but this time the challenge isn’t so much the stress itself but rather the fact it came with almost no warning.”
The crisis has knocked Argentina’s banking industry back to its previous model of treading water. High inflation and even higher interest rates suppress real credit growth and the banks compensate by generating high securities returns from cheap funding.
There are still around 70 banks in the system, and in this environment not everyone will survive - Maria Valeria Azconegui, Moody's
Argentina’s banks have responded by retreating from their recent strategies, which had seen them issue equity in the international markets to fund capital investment for volume growth. For the first time in well over a decade, economic growth and falling inflation had led to strong credit demand in real terms.