Fitch: Mexican Banks' Slower Growth Aiding Capital Improvements

NEW YORK--(BUSINESS WIRE)-- Slower loan growth amid Mexico's sluggish economic conditions is contributing to the modest improvements in the capital positions of the country's big banks, says Fitch Ratings.

The average capital ratios of Mexico's seven largest banks, including Banamex, BBVA Bancomer, Santander Mexico, Banorte, Banco Inbursa, HSBC and Scotiabank Mexico (Mexico's G7 banks), have improved over the past 15 months, even as the slowdown in the economy has reduced the demand for corporate and retail customer credit.

Slower loan growth is offset by good loan pricing, low funding costs and steady service revenues. Net interest margins have remained good, which supports the earnings strength that is contributing to capital ratio improvements.

The Fitch Core Capital to risk-weighted asset ratios of the G7 banks averaged over 15.5% at year-end 2014, compared to an average of 14.9% over the 2011 to 2013 period.

Average earning assets of Mexico's G7, which mostly include loans, trading securities and cash, have grown at an average rate of 9.8% over the past 15 months, compared with growth that typically ran over 40% prior to the financial crisis. Just accounting for the loan portfolios, growth averaged 8.6% over the past 15 months.

Interest expense on customer deposits-to-average customer deposits has been historically low among the G7. At year-end 2014, Mexico's G7 banks' average was 1.42%, while the average over the 2011 to 2013 period was 1.87%. Today's levels support the resilient interest margins contributing to the banks' core earnings performance.

Going forward, Fitch expects the capital ratios of Mexico's banks will trend lower as structural reforms take place and the demand for credit revitalizes. Nonetheless, we see the capital levels of these banks remaining at healthy levels and continuing their historically better-than-average levels relative to other systemic banks across Latin America.

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20150608005973/en/

Fitch Ratings
Alejandro Tapia
Director
+52 81 8399-9156
Fitch Mexico, S.A. de C.V.
Monterrey, N.L., Mexico
or
Angel Maass
Associate Director
+52 81 8399-9148
Monica Ibarra
Director
+52 81 8399-9150
Matthew Noll, CFA
Senior Director
Financial Institutions Fitch Wire
+ 1 212-908-0652
New York, NY
or
Media Relations
Alyssa Castelli, New York, +1 212-908-0540
[email protected]
or
Elizabeth Fogerty, New York, +1 212-908-0526
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• Is the global equity rally broadening? UBS weighs in
• Arena Group to rename as Paradium.AI, ticker changing to PAAI
• BMO starts chip stocks coverage: Here are its preferred picks