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Mexico adds to LatAm bank gloom

Banorte CEO says market will be 'surprised' by what comes next for the bank; fintech growth unlikely to impact bank growth in the short-term.


Mexican banks have become the latest in Latin America to face a structural weakening in their operating environment.

With investors in the region’s financial institutions still reeling from the fallout from the collapse of Argentine bank stocks, those who were looking for relief in Mexican banks are likely to be disappointed.

Recent second-quarter – and first-half 2019 – results from the listed Mexican banks paint a picture of slowing credit growth and falling profitability.

According to BTG Pactual’s financial analyst Eduardo Rosman, who had been predicting an improving risk environment for Mexican banks as recently as May, the sector’s outlook is negative, and he fears we have entered a de-rating environment for Mexican banks.

The reason for the structurally lower-earnings environment is likely lower return on equity (ROE) in the coming quarters.

Unemployment levels – a surprise to most – and consumer confidence managed to resist for longer than expected, but at some point, things derailed - Eduardo Rosman, BTG Pactual

The weakening economy – Mexican GDP was flat in the second quarter – has combined with the banks’ strict credit policies to limit credit growth to 7.5%;

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