Grupo Galicia sees consumer delinquency normalizing by 2027

Household loan delinquency in Argentina will remain above historical levels over the coming months and will only approach normal ranges in 2027, according to Fabián Kon, CEO of Grupo Galicia. In an interview with Bloomberg Línea, Kon noted that around 80% of clients who are currently behind on payments are already refinancing their debts over longer repayment terms.

Kon stated that consumer arrears have peaked and are beginning to trend downward, though the recovery will be slow. According to the Central Bank of the Argentine Republic report for July, household credit delinquency stood at 12.9%, while corporate delinquency was 3.6%, bringing total financial system irregularity to 7.7%. Kon estimated that retail default levels are currently around 9% to 10%, up from historical baselines near 3%.

The executive linked the deterioration in family repayment capacity to faster lending growth from banks and fintech firms, higher interest rates, and lower real disposable income. Corporate delinquency also rose but stayed between 3% and 4%. Kon noted that banks prefer refinancing because the alternative is writing off non-performing loans and losing the borrower.

Addressing funding costs, Kon noted that foreign sovereign borrowing remains constrained by rates of 10% to 11% in dollar terms, while local dollar loans for exporters trade at 4% to 5% annually. For peso-denominated credit, high taxes and inflation above single digits continue to weigh on borrowing costs. On mortgage lines, Kon defended Galicia's rate of 7.5% plus UVA inflation adjustments, describing default rates in that segment as practically zero.