HSBC Sees Argentine Credit Boom as It Eyes 10-Year Loans

(Bloomberg) -- Argentina’s financial system will triple outstanding loans over the next four years as President Mauricio Macri dismantles 12 years of protectionist policies, according to Gabriel Martino, chief executive officer of HSBC’s local unit.

The bank is considering offering 10-year loans, Martino, 51, said in an interview at a conference in Mar del Plata, as the central bank moves toward inflation-targeting. Clients have already snapped up half of a 100 million peso ($6.6 million) credit line of 48-month fixed-rate loans offered last week, he said. While HSBC sold its unit in Brazil, the bank plans to stay in Argentina, Martino said.

“In the past years we developed through deposits,” Martino said. “From now on we’ll develop through loans.”

Macri is unraveling the protectionist policies of his predecessor, Cristina Fernandez de Kirchner, causing inflation to spike and exacerbating an economic contraction. Martino said he sees signs that the economy started to recover in the third quarter, with cement and steel sales rising and peso loans growing faster than inflation. He forecast Argentina’s economy will grow 4 percent in 2017, faster than the government’s estimate of 3.5 percent.

Argentina has battled with rampant inflation for decades, including accumulated price increases of 1,000 percent in the past decade, according to some estimates. The central bank is targeting inflation of 12 percent to 17 percent next year from as high as 47 percent in 2016.

INFLATION BET

By offering fixed-rate loans with such long maturities, HSBC is betting that the government will be able to meet its target of reducing inflation to 5 percent by 2019, said Maximiliano Castillo, director of Buenos Aires-based consultancy ACM.

“You have to take a bet right now and believe that inflation in two years will be 5 percent,” Castillo said.

Argentina’s financial industry is underdeveloped compared with neighboring Chile. While outstanding loans total $65 billion in Argentina, or about 13 percent of gross domestic product, in Chile they add up to $212 billion, or almost 90 percent of GDP.

Martino returned to his position as CEO in April, putting an end to a period of uncertainty at the bank that began in September. Last year, the central bank revoked the license of Martino, accusing him of failing to prevent clients from laundering funds and evading taxes. The order was removed when Macri came to power in December.

In offering 10-year loans, HSBC is following the example of the government, which issued 54 billion pesos of fixed-rate local currency bonds with that maturity to yield 15.5 percent this month.

To contact the reporter on this story: Charlie Devereux in Buenos Aires at cdevereux3@bloomberg.net. To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Philip Sanders, Andres R. Martinez