Argentine cenbank temporarily halts bank dividends

By Fiona Ortiz

BUENOS AIRES, June 10 (Reuters) - Argentina's central bank is keeping a number of private sector banks from paying dividends to shareholders in a temporary, precautionary measure after stress tests analyzing areas of concern, a source at the central bank told Reuters.

Banks that have not been able to distribute dividends from 2008 profit as the central bank puts them through a rigorous evaluation include Banco Macro (BMA.BA) (BMA.N), Banco Patagonia (BPAT.BA), BBVA Banco Frances (FRA.BA) and others, a private banking sector source said.

The central bank analyzed rising delinquent loan rates, the banks' practice of accounting for their sovereign debt holdings at face value even though market value is much lower and the limited access to lending markets if it were needed.

"We did stress tests ... this is a precautionary measure," the central bank source said on condition of not being identified. He said once the economy has stabilized, the restrictions would no longer apply.

Argentina's banking system has been profitable and isolated from the financial failures that have hit other banks around the world because the economy is highly cash-based, lending practices are conservative and profit is largely fee-based.

But the central bank wants to make very sure that no bank will need a bailout or capital injection before it lets them pay dividends.

The central bank's action has not hit prices of bank stocks, which have risen this year in Argentina, along with the rest of the market.

DOUBTS ON ECONOMIC GROWTH

Bank balance statements register holdings in Argentine sovereign bonds at face value, much higher than market value, as investors have shied away from Argentine debt due to interventionist government policies, doubts about key economic data and concerns about the tight government budget.

The delinquent loan rate in Argentina's banking sector is around 3 percent, lower than regional and historic levels. The central bank source said it is "growing but not worrying."

Banks cannot easily place debt because the Argentine government is shut out of international debt markets due to lingering fallout from its massive 2001-2002 default which means Argentine corporate borrowing is also limited.

Argentine President Cristina Fernandez has said the country's economy will expand this year, even as neighbors Chile and Brazil enter recession, but Argentina's official data is widely questioned and the Central Bank has refrained from making any projection for 2009 growth.

Many analysts and economists project Argentina's economy will contract this year, affecting jobs and income and therefore the ability to pay loans.

Total lending in Argentina is around 11 percent of gross domestic product, much lower than in Latin America's other major economies. (Additional reporting by Guido Nejamkis; Editing by Kenneth Barry)