Bank of the Year 2018 -- Argentina: Banco Galicia

Bank of the Year 2018 -- Argentina: Banco Galicia

Capital Markets Argentina Economy & Policy Corporate & Sovereign Strategy

Banks in Argentina came into 2018 hoping for a buoyant economic rebound. “It was an excellent year until May,” says Fabian Kon, chief executive of Banco Galicia. “Then the convulsion came.”

Battered by a currency run and double-digit inflation, Argentina reached an agreement with the International Monetary Fund in June on a $50 billion bailout package to help stem a run on the peso. In September, the IMF announced it would lend Argentina an extra $7.1 billion.

Before the financial turbulence, Galicia, Argentina’s largest domestic bank by loans and deposits, had been capitalizing on Argentina’s more optimistic economic outlook by reigniting its mortgage business and opening new branches. For 2017, Banco Galicia posted a profit of 8.329 billion pesos, up from 6.018 billion pesos in 2016.

Grupo Financiero Galicia, which controls Banco Galicia, also visited the capital markets. Proceeds from a $550 million September 2017 follow-on equity offering recapitalized the bank and its subsidiaries, and funded the purchase of local credit card company, Tarjetas Regionales, which operates Tarjeta Naranja. In April, Banco Galicia sold a dual-tranche 6.24 billion peso local bond.

Kon says that, despite Argentina’s volatility, “profitability and liquidity of the financial system have remained positive.” He believes the Argentine economy, now mired in recession, could see a recovery in next year’s second quarter.

Regardless, Kon expects 2019 to be a dynamic year in Argentina’s banking industry, where several new digital banks and mobile banking apps are expected to come online. Traditional banks, including Galicia, are also expected to roll out new digital offerings.

“It’s going to be an interesting year in terms of how the market develops between incumbent banks and newcomers,” he says. “We believe that clients will respond to our digital offerings and ultimately choose to stay with the brand they have a long-term relationship with.” LF