(Updates with banks' share performance, analyst's comment)
BUENOS AIRES -(Dow Jones)- The U.S. subprime debt crisis indirectly had an affect on the profitability of Argentine banks, which in July reported losses for the first time in three years due to their bond portfolios' declining value, the central bank said late Wednesday in its monthly report on local banks' balance sheets.
The report didn't quantify the Argentine financial system's losses, but according to a central bank official, they amounted to 183 million pesos ($60 million).
"In the first seven months of the year, Argentina's financial system gained more than ARS2 billion over the same period last year," the official told Dow Jones Newswires.
Reflecting investors concerns' about the impact of the crisis, banking shares have been the biggest underperformers during the recent market turmoil.
In Buenos Aires, shares of BBVA Banco Frances SA (NYSE:BFR) (BFR), the Argentine unit of Spain's Banco Bilbao Vizcaya Argentaria SA (NYSE:BBV) (BBV), closed Wednesday at ARS9.42, down 15% since the beginning of July.
During the same period, shares of Banco Hipotecario SA (BuenosAires:BHIP) (BHIP.BA) lost 26% to ARS2.52. Grupo Financiero Galicia SA's (NASDAQ-SMALL:GGAL) (GGAL) shares have dropped 17.64% to ARS2.52.
Comparatively, Banco Macro SA's (NYSE:BMA) (BMA) shares were the best performers, with an 11.7% loss to ARS9.05 at Wednesday's close.
Since the beginning of July, the Merval benchmark index has shed 6% to 2, 116.49 at Wednesday's close.
Against this backdrop, analysts bet on Argentine banking shares to ride the local market's rebound, which they see continuing if the global environment remains supportive after the U.S. Federal Reserve's 50-basis-point interest-rate cut earlier this week.
"If the good momentum lasts, the Merval can still reach its end-of-the-year target of 2,400 points," said Adrian Mayoral of local broker Mayoral Bursatil, who said he thinks banking shares will rebound.
As of Thursday at 1:57 p.m. EDT, the Merval was trading 0.47% lower at 2, 106.45 on profit-taking.
The Argentine central bank said local banks are "in a better position to absorb the negative impact of the current international scenario," thanks to their improved cash flow-generation capacity and increased capitalization in the last three years.
The central bank said the global financial turbulence had "zero" impact on public banks.
Argentine banks' trading profits dropped 3.6% in July, but increased 5.4% in the first seven months of the year, just slightly lower than last year's increase, the central bank said, without giving a comparative figure for last year.
Nonetheless, in July, Argentine banks recorded 4% growth in their lending activity to the private sector, and have recorded 39.8% growth in the last 12 months.
For August, the central bank forecast that local banks will continue growing in their traditional lending and intermediary activities.
-By Serena Saitto, Dow Jones Newswires; 5411-4311-3125; serena.saitto@ dowjones.com
(END) Dow Jones Newswires 09-20-07 1454 Copyright (c) 2007 Dow Jones & Company, Inc.
