Madrid. The hyperinflationary situation in Argentina caused an extraordinary impact of 1,707 million euros in the accounts of Banco Santander and BBVA in the first half of the year, the only two Spanish banks with a presence in the country.
According to the half-yearly financial reports of both banks, the impact is 1.2 billion euros for BBVA and another 687 million for Banco Santander.
This impact is due to the net monetary loss due to inflation that both banks are required to include in their accounts as a result of the extension of International Accounting Standard 29 (IAS 29) on financial reporting in hyperinflationary economies.
According to data released last month by Argentina’s National Institute of Statistics and Census (Indec), inflation in June was 271.5 percent year-on-year. Cumulative inflation between January and June reached 79.8 percent.
The situation in the Latin American country has thus forced Banco Santander to adjust the exchange rate against the euro that it includes in its financial reports.
In its last results presentation, at the end of July, Santander explained that it decided to apply a “theoretical exchange rate” for the Argentine peso. This decision is a consequence of the “significant divergence” between the official exchange rate and other macroeconomic indicators, such as inflation.
This new theoretical exchange rate is modeled by Banco Santander’s Research Department, taking into account, primarily, the inflation differential between Argentina and the United States. In addition, the bank recalled that this rate also reflects the implicit exchange rate observed in transactions between market participants.
Santander closed the first half of 2024 with net attributable profits of 266 million euros in Argentina (up 5.4 percent), while the net margin increased 19.3 percent to 606 million euros.
In the case of BBVA, the net profit attributed to its Argentine subsidiary rose by 4.5 percent to 103 million euros, while the net margin fell by 11.6 percent to 337 million euros.
Meanwhile, Santander’s credit portfolio in the country closed the semester at 5,256 million, while BBVA’s was 3,944 million.
#Argentine #hyperinflation #impacts #Santander #BBVA
– 2024-08-09 09:03:08
