Loans are Back? Let’s Talk BCRA Monetary Report!
So, folks, gather ’round! The latest BCRA (that’s the Central Bank of Argentina for you non-Econ Wizards) Monthly Monetary Report for September has just dropped, and if you’re wondering if loans are still a thing, spoiler alert: they are! You might have to turn back the clock to 2017 to find similar growth in loan extensions. Yes, they’re popping up like daisies in spring—without the sneezes! 🏦🌼
Here’s the juicy bit: Loans in pesos to the private sector have increased by $4 billion—that’s nearly a 7.7% growth at constant prices, and it’s been six months of this sweet upward trend! I don’t know about you, but my savings account is shaking in its boots!
What’s Driving This Loan-Loving Frenzy?
Now, before we start thinking we’re in the middle of a monetary miracle, let’s dive into the details. Apparently, the recovery of real incomes (shout out to all you wage earners and pensioners receiving more than the minimum—go buy yourself something nice!) and falling interest rates are driving this growth.
However, hang on to your wallets—there’s a twist! It seems no one’s quite realized that interest rates are dancing a different jig. Comparing annual nominal rates with inflation feels a bit like trying to spot a unicorn in daylight—good luck with that!
“Real interest rates based on inflation over the last 12 months are beginning to worry many economists.”
Now, before you start googling “do I really need a loan?” let’s remember that this whole lending party might heat up the demand for loans beyond all reason. Economists are pondering if this will lead to overheating, which could pause the path to what we refer to as disinflation. Ah, the joys of monitoring inflation like a hawk!
The Numbers Don’t Lie
Let’s break it down: commercial loans skyrocketed with a 7.3% real increase—over half of that month’s expansion! You could say businesses are learning to play the loan game just right. Loans implemented through documents (they sound so official, don’t they?) saw an 8.8% growth in real terms.
But here’s the kicker: personal loans shot up by 13.8%, making them the fastest-growing type of loan this month. So if you’ve been thinking about finally buying those shoes you probably won’t wear often enough, now might be your moment. Just remember to pay them back, would you?
“The most dynamic line in the month was personal loans—up by 13.8% in real terms!”
What’s Next? The Crystal Ball
But wait; before we do the happy dance of fiscal joy, brace yourselves for what the economists are calling a possible turning point. They are concerned that as real interest rates rise, we might be in for some turbulence. It’s like being on a rollercoaster—just when you think it’s all fun and games, you hit that unexpected drop!
Fortunately, if average incomes keep doing their thing, using credit for property purchases could remain advantageous. I mean, who doesn’t want to be a homeowner while bankers cheer from the sidelines? 🏠
“As long as the average recovery of the population’s income is sustained, using credit for housing purchases will still be advantageous.”
Summing it Up, Shall We?
So, in summary, if the economic rollercoaster continues its upward climb, expect consumer lending to continue flourishing. But keep one eye on the interest rate fluctuations and the other on inflation trends—after all, it’s a jungle out there in the world of finance, and those loan contracts aren’t going to understand your feelings about monthly payments!
Thank you for joining me in this expedition into the realms of economic reports—with a twist of humor! Stay wise, and keep your financial hats firmly on. Until next time, keep laughing while you save! 🎉💸
“The growth in loans extended to all lines, as in the previous months. To find a period with these characteristics, we must go back to the end of 2017,” highlights the latest BCRA Monetary Report (Photo: Reuters)
The BCRA’s Monthly Monetary Report for September highlights: “Loans in pesos to the private sector registered an increase of close to $4 billion, consistent with a monthly growth of 7.7% at constant prices and without seasonality. Thus, they have accumulated 6 consecutive months of increase and are in real terms almost 60% above the minimum since the beginning of the year.”
And he adds: “The growth in loans extended to all lines, as in previous months. To find a period with these characteristics, we must go back to the end of 2017. In particular, in September the performance of personal and mortgage loans stood out, growing at double-digit monthly rates. In terms of GDP, credit to the private sector reached 5.9%, accumulating an increase of 1.5 percentage points in the last 5 months.”
A key factor in this movement, along with the incipient recovery of the real income of the population (both of the average wage earner and of retirees and pensioners who receive more than the minimum), is the fall in nominal and real rates. of interest at a faster rate than disinflation, both with respect to December 2023 and September of that year.
However, a change in trend is beginning to be seen in interest rates in real terms that still does not seem to be properly perceived by economic agents and various analysts, as they compare the annual nominal rates with the inflation rate of the last twelve months.
In that case, the exercise of comparing the series of real interest rates for every September since 2018 shows that there are very high values for the very short-term financing of companies (temporary advances and discounting of documents, mainly), and also for personal loans and through credit cards, they went into negative territory and increased to the extreme of more than 50% negative (below inflation).
Real interest rates based on inflation over the last 12 months are beginning to worry many economists
This situation is beginning to worry many economists, because they consider that it could lead to overheating of the demand for loans for the purchase of consumer goods in all lines – perishable and also durable – with the consequent negative effect of leading to interrupting the path of disinflation.
Although interest rates were dissociated from the monetary policy rate, after the decision of zero issuance for financial to the Treasury, first, and then the transfer of remunerated liabilities from the Central Bank to the Central Administration, they maintain a reference relationship with the rate of issuance of short-term public securities by the Ministry of Finance, such as Capitalization Letters (Lecap).
This link, along with the natural game of supply and demand, where the supply increased due to the passage of crowding out a crowding in (that is, the absorption of liquidity by the public sector, displacing the private sector, to the release of those resources), and the demand for the incentive represented by the sharp drop in annual nominal rates, allowed a substantial improvement in the share ratio /monthly income of interested parties. Particularly in the section of long-term lines for the purchase of durable goods with collateral, this resulted in an increase in rates in all sections of the market for the second consecutive month in September.
The notable decrease in nominal interest rates allowed for a substantial improvement in the monthly payment/income ratio of collateral and mortgage loans.
The BCRA Report highlighted: “Growth in the month was largely driven by commercial loans, which together showed a real increase of 7.3% without seasonality (se) and explained approximately half of the month’s expansion.
Within commercial loans, credits implemented through documents stood out, which grew 8.8% monthly, without seasonality, in real terms and are 13.1% above the level registered a year ago. Both single-signature loans and those discounted by SMEs showed a favorable evolution in the month.
Within commercial loans, credits implemented through document discounting stood out (Photo: Uipba) Buenos Aires)
For their part, advances registered a monthly increase of 4.3% in real terms in September (17.3% yoy). Likewise, consumer credit continued to expand in September and showed an improvement of 7.6% monthly at constant prices (12% yoy).”
And the entity’s analysts added: “In the case of personal loans, they increased 13.8% in real terms compared to August, resulting in the most dynamic line in the month, with an interannual growth of 38.1% (see Chart 3.2.3). For its part, credit card financing moderated its pace of expansion, showing a monthly increase of 4.1% at constant prices.”
Personal loans increased 13.8% in real terms compared to August, resulting in the most dynamic line in the month (BCRA)
Loans with collateral also showed good performance, driven by mortgage loans, which showed a monthly increase of 14.2% in real terms, the largest expansion in the last 22 years.
However, this path could be attenuated in the coming months, when a clear turning point is observed in real interest rates considering the pace of September inflation projected twelve months ahead.
The most notable cases were those of loans to small and medium-sized businesses, through advances in bank checking accounts, personal loans and through the use of credit cards, which went from negative real rates of 48% to 54% annually to real positive of 1.75%, 12.1% and 20.9%, respectively.
In the rest of the segments, although the values remained well below the inflation rate one year after the last known data, they also showed a notable cut, from more than 50% in real terms to less than a fifth of the ratio that they had in the same month of the previous year (7.5% for pledges, 8.6% for the discount of documents, and 11.5% for mortgages).
To the extent that the average recovery of the population’s income is sustained, it is estimated in the market that the use of credit for the purchase of housing will continue to be advantageous.
In any case, to the extent that the average recovery of the population’s income is sustained, it is estimated in the market that the use of credit for the purchase of housing will continue to be advantageous.
This is due to the upward trend in property prices, and the notable decrease in nominal interest rates, which, although they become positive in real terms, have substantially improved the fee/income ratio for all terms.
