Argentina's banks cut trading desk jobs after market plunge

[BUENOS AIRES] Banks are shrinking the size of their trading desks in Argentina after a rout sparked by the Aug 11 primary election resulted in the return of currency controls and capital flight to the battered local market.

Banco Itau Argentina SA, BNP Paribas SA, Banco BBVA Argentina SA and HSBC Bank Argentina SA are among banks that cut their trading desks or relocated their traders, according to people with direct knowledge of the matter. The reason was the market drop after opposition leader Alberto Fernandez trounced president Mauricio Macri in August primaries with a wider margin than was expected.

The concerns around a return to protectionist policies under a Peronist opposition were cemented on Oct 27 when Mr Fernandez beat incumbent Mr Macri in the first round. He'll take office on Dec 10. The benchmark S&P Merval almost halved in dollar terms, while bond spreads tripled to 22.92 percentage points since the primaries.

Representatives for Itau and BBVA declined to comment. BNP did not immediately reply to a comment request. A spokeswoman at HSBC Argentina confirmed the relocation and added that the position was replaced locally.

The moves come as Argentina's political risk leads foreign institutional investors to shy away from local assets. Banks started by cutting senior roles amid concerns on their budgets for the year ahead and that a Fernandez government may put limits on layoffs.

Among the biggest blows to the sector were delays on the payment of local notes and FX controls, which limit banks' ability to trade futures.

"The futures market was lost, as the instrument ceased to be used as a hedge and volume fell by 65 per cent," said Pablo Castagna, head of wealth management of local broker Balanz Capital.

Since Argentina's currency crisis began in April 2018, jobs in the financial system shrank by 2.4 per cent, or 2,500 jobs, according to central bank data.

BLOOMBERG