A sharp rise in household delinquencies is shaking Argentina’s banks and fintech firms, presenting another challenge to President Javier Milei’s ambitious economic overhaul.
The number of households falling behind on debt payments jumped to a 15-year high of 11.5 percent of total loans in March, from 2.6 percent at the end of 2024, according to figures published by the Central Bank this month.
That jump is eroding the earnings of banks and other financial companies, forcing many to raise provisions for bad loans while some report first-quarter losses. Four institutions – Ualá, Compañía Financiera Argentina, Banco de Servicios Financieros and Banco del Sol – received capital injections in recent months to offset the equity erosion, according to FIX SCR, the local affiliate of Fitch Ratings in Argentina.
“The problem was that many banks and fintechs came out with the accelerator pressed too hard on lending in 2024, when Argentina’s macro was only just beginning to stabilise,” said Fernanda López, senior director at FIX SCR.
The banking sector tremors are, at least in part, an outgrowth of Milei’s reform agenda, which has succeeded in lowering Argentina’s endemic inflation while hitting various parts of the economy. The slide in annual inflation – from 290 percent at the start of Milei’s administration to under 33 percent today – came as a shock to households used to debt being inflated away in real terms. Meanwhile, higher utility rates ate into disposable income, while the country’s growth took a hit late last year.
Damage throughout the banking sector has been widespread, though some analysts said lenders have avoided a worst-case scenario as they moved to buttress capital and the Central Bank provided support.
Stressed banks included Banco de Servicios Financieros, Carrefour’s financial arm in Argentina, which needed a capital injection after delinquencies rose above 49 percent in the first quarter, according to Central Bank figures. Ualá received a US$197-million capital injection in March, after delinquency reached 39.5 percent in February. That figure was measured before write-offs, which reduced the ratio to around 15 percent, according to a person familiar with the matter.
Compañía Financiera Argentina, a consumer lender known as Efectivo Sí that is focused on lower-income segments, reported a 26 percent drop in equity at the end of 2025 and announced a capital injection before being absorbed this week by Banco Columbia for a little over US$30 million, according to a company statement. The company still shows a delinquency rate of 39 percent, according to February data published by the central bank.
Cost cutting
The blow is also pushing banks to cut costs in order to preserve capital.
Banco Supervielle launched voluntary separation plans in March and April aimed at reducing its workforce by about 500 people from a total of more than 2,900 employees, according to people familiar with the matter. Across the banking system, lenders have already cut 6,000 jobs over the past year from a workforce that numbered 96,000 at the end of 2024.
“Lenders are focusing heavily on recovery efforts, using their commercial teams to offer borrowers longer maturities and interest waivers. They are doing so because they see willingness to pay on the part of individuals, but not the ability to pay,” López said.
The Central Bank has been trying to relieve some of the pressure. In April, it loosened monetary policy, pushing rates down toward 20 percent a year even as inflation was still running at 32 percent, and relaxed reserve requirements to free up liquidity. Central Bank officials also urged banks and financial technology firms to offer delinquent borrowers relief through longer maturities, lower rates and waivers on penalty interest, according to people familiar with the matter.
Alejandro Butti, chief executive officer at Banco Santander Argentina, said the jump in household defaults reflected last year’s elevated real interest rates and real wages that have failed to grow over the past 10 months. He believes delinquencies are nearing a peak and should ease as rates decline.
“The recovery in real wages starting in April should help reduce delinquencies,” he said at an event in Buenos Aires last week.
Others are less convinced the worst is over.
“We still haven’t seen the peak in delinquency,” said Marcelo De Gruttola, vice-president for financial institutions at Moody’s Ratings. Still, “we are starting to see the pace of deterioration slow.”
by Ignacio Olivera Doll, Bloomberg
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