Increase in delinquency of families and companies due to higher interest rates – 04/19/2019



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Due to the increase in interest rates, the fall in the level of activity and employment and the loss of purchasing power, in recent months there has been an increase in defaults on personal loans and credit cards, in families and credit lines granted to companies.

The combination of these factors deprived both segments of resources to pay off debt. The trend has deepened more precisely since September 2018.

In relation to the financial system, it registered an irregular portfolio of 3.3% in January 2019, against 1.8% in the previous year. The highest index of this portfolio is presented financial institutions (non-banks)) for consumption, which is evident in a context of the impact of the industry that generates this type of credit.

"Although the portfolio with the highest delinquency is family consumption, in the last quarter of 2018 a worsening was observed in the business segment, precisely in a scenario in which the economy fell 2.6% (lower demand), with a strong devaluation (which generated an increase in costs without the consequent full transfer to prices) and very high real interest rates, "the report said. in PwC.

It is the private banks that have the highest default rate and within them those of foreign capital. "Today's banks, unlike the 1990s, are quiet and liquid so that, a priori, they do not face a solvency problem, because in addition, although they should continue to increase default, they will continue to do so gradually." .

O recomposition of salaryWhen they begin to close the first parity, they must press the pressure on the default. Banks are already active, especially in the corporate segment, agreeing on alternatives to restructure their debt, the report said. "Today, the aggregate financial system maintains an excess capital of 85% above the minimum required.

"Entities have an adequate margin of coverage on their irregular portfolio," according to the current provisions of the BCRA, which is 112% (accounting estimates for the regular and irregular portfolio), while the forecasts attributable to the irregular portfolio, they represent 83% of the portfolio.

"Delinquency could continue to rise if high interest rates persist – something that will continue as long as inflation does not decline – and economic activity does not stop falling, especially in the consumer-family segment," said Gaston Inzaghi, a partner at PwC Argentina. , a leader in banking and financial institutions.

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