Argentina's Banco Frances Sees 20%-23% Loan Growth in 2012

08/10/2012| 01:17pm US/Eastern

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By Ken Parks

BUENOS AIRES--Argentine bank BBVA Banco Frances SA (BFR, FRAN.BA) expects its loan portfolio to grow between 20% and 23% this year during the slowdown in the economy, according to an executive.

"During the quarter we saw an important decline in foreign trade operations that was offset by the increase in the rest of the portfolio. For the year we expect something like 20%-23% growth," Investor Relations Director Cecilia Acuna said during a conference call Friday to discuss second-quarter results.

Acuna said the bank's deposit base is expected to grow 15% this year.

Banco Frances's loan portfolio increased almost 49% in 2011, a year in which the economy grew 8.9%.

The forecast would imply that Banco Frances's loan book will grow at a similar rate to inflation, which most private sector economists say is between 20% and 25%. The government's latest data put annual inflation as measured by the consumer price index at 9.9%.

The economy will likely grow 3.1% this year, according to the central bank's most recent monthly survey of more than 50 economists, universities and analysts.

While prices for Argentina's grain exports are near historic levels, a sluggish Brazilian economy has crimped demand for such domestically manufactured goods as automobiles.

Ms. Acuna said the bank's asset quality is unlikely to suffer significant deterioration this year.

Asset quality as measured by nonperforming loans as a percentage of total loans was 0.7% in the quarter, up from 0.5% a year ago.

"We are below 1% and we expect to remain below that level," she said.

President Cristina Kirchner has launched a number of stimulus measures in recent months to keep the domestic economy humming, including a new rule that will force the banking industry to lend about 15 billion pesos ($3.3 billion) at below market rates by the of the year.

Banco Frances will have to make about ARS1.2 billion in loans to comply with that requirement, she said.

Acuna hinted there might not be enough demand to meet the government's lending directive.

"The idea is to maintain the risk standards [on those loans]," she said.

Spain's Banco Bilbao Vizcaya Argentaria SA (>> Banco Bilbao Vizcaya Argentaria S.A.) owns a controlling interest in Banco Frances, which operates a network of 270 branches and 656 ATMs.

Banco Frances shares were recently trading 0.8% higher at ARS7.81 in Buenos Aires

-Write to Ken Parks at ken.parks@dowjones.com

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