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Opinion

Banking: Challengers pile on risk in Mexico

The country’s positive real interest rates shine like a beacon for international banks.

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Keep an eye on Mexico – it has always been an interesting banking market.

It is dominated by foreign banks, and the one major domestically owned bank has, at times, frustrated local regulators, whose desire for credit growth has been thwarted by risk-averse decisions taken overseas.

International banks’ risk aversion has sometimes been based on views of Mexico – a desire to limit exposures to an economy that refuses to develop GDP growth momentum.

More often than not, in those admittedly infrequent times, this has been part of a global risk strategy – cutting back in regions, or emerging markets, and leading to weak risk appetite for the credit needed to grow the Mexican economy.

However, times have changed.

Mexico’s positive real interest rates now shine like a beacon for the international banks that are mired in low or negative interest rate markets elsewhere. And so it’s risk-on time for those banks that now seemingly desire scale in Mexico.

Growth

HSBC grew its loan portfolio by 13% in September and Scotiabank grew 12%.

Meanwhile, the leaders BBVA grew 5% and Banorte by -3%, while in the second tier Santander Mexico grew by 3% and Banamex by -1%, all below the system’s 6% – and that aggregate was clearly pulled higher by the aggressive expansion of the challengers’ growth in loans.




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