By Ken Parks
BUENOS AIRES--The New York-listed shares of Argentine banks
opened sharply lower Thursday, after President Cristina Kirchner
said she will force banks to make cheap loans to businesses as her
government tries to revive a rapidly slowing economy.
BBVA Banco Frances SA (BFR, FRAN.BA), a subsidiary of Spain's
Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC)), was down 4.9%
at $3.48 around 9:45 a.m. EDT.
Banco Macro SA (BMA, BMA.BA) was trading 3.6% lower at $13.09,
while Grupo Financiero Galicia SA (GGAL, GGAL.BA) was down 4.7% at
$4.48. Both banks are controlled by Argentine investors, including
federal pension agency Anses.
The new lending rules will also affect the local subsidiaries of
other large foreign banks, including Spain's Banco Santander SA
(SAN, SAN.MC), HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK), Citigroup
Inc. (C), and China's Industrial and Commercial Bank of China Ltd.
(IDCBY, 1398.HK, 601398.SH).
Goldman Sachs economist Alberto Ramos said that requiring banks
to lend at negative real interest rates will erode their capital
base and poor lending decisions.
"Furthermore, the forceful nature of the measure will contribute
to erode even further business and investment sentiment," he said
in a note.
In a televised speech Wednesday night, Kirchner said private
sector banks will be required to lend more to businesses to spur
the economy.
She said private lenders need to match the efforts of state-run
commercial bank Banco de la Nacion, Argentina's largest bank by
deposits and loans.
"We're not going to ask any single bank to lend that amount, but
yes, we're going to ask that 20 banks do in one year what one bank
[Banco de la Nacion] did in 4.5 years," she said. "We're going to
ask them to help us sustain investment, which last year was almost
25% of gross domestic product."
The interest rate on the loans will be set at Badlar plus four
percentage points. Badlar--the average interest rate on fixed-term
deposits above 1 million pesos ($221,238)--stood at 13.25% on
Tuesday, according to central bank data.
That would imply lending rates well below the annual rate of
inflation, which most economists say is between 20% and 25%.
An official at Argentina's central bank said the bank's board of
directors will meet Thursday to determine how much each bank must
lend under the new program.
The bigger the bank, the higher the percentage of its deposits
it will be forced to lend, the central bank official said.
Argentina's top five private sector banks by deposits are Banco
Santander Rio, Banco Galicia, Banco BBVA Frances, Banco Macro and
HSBC Bank.
Kirchner is leaning on banks amid an abrupt slowdown in an
economy that grew 8.9% last year and 9.2% in 2010.
Argentina's economy faces headwinds from high inflation, soft
demand for Argentine goods in Brazil and a sluggish global
economy.
Last week, Economy Minister Hernan Lorenzino affirmed the 5.1%
growth forecast in the 2012 budget.
But a number of private sector forecasters are much more
bearish, with some even predicting the economy will stall or
contract.
There is a 99% chance the economy will enter a recession in the
coming months, according to the closely followed monthly leading
indicator published Tuesday by Torcuato Di Tella University.
That was the second consecutive month that recession odds
exceeded 95%. Historically, each time the indicator has exceeded
that threshold, the economy has suffered a recession sometime in
the following six months, the university said.
-Write to Ken Parks at ken.parks@dowjones.com