Coronavirus: Banorte prepares for storm that will batter stricken Mexico
Bank scraps share buyback and postpones dividend decision as COO Arana warns lack of fiscal response from the government risks deeper decline.
Banorte’s chief operating officer Rafael Arana says that he believes most of the large retail banks in Mexico – including Banorte – are well positioned to weather the economic crisis caused by the coronavirus, with “solid capital ratios, good liquidity and relatively healthy asset quality.”
However, he warns that banks outside this top tier face a sterner test. “Smaller financial institutions, which are more exposed to SMEs and individuals, and more dependent on wholesale funding may have a bigger challenge as the pandemic worsens,” he says.
“If the economic shut down is extended for more than three to four months, then liquidity will be a major issue for the banking system and will extend to the economy. Also concerning for Mexico is a worsening in oil prices for a long period.”
To shore up its own liquidity position Banorte has scrapped plans to buy back 1% of its shares, which it announced on March 12 as its share price plummeted to Ps85.4 ($3.58) from Ps112.4 just one week before.
Arana tells Euromoney that the bank is also unlikely to pay dividends, following the recommendation by the Mexican banking regulator, the CNBV, to suspend dividend payments of profits generated in fiscal 2019 and 2020.