| | |  Business News | October 2008 
Mexico's Banks' Credit Outlook Could Worsen - Moody's
 PVNN
 |  | Both delinquency and credit costs are on the rise, and could negatively affect the banks' profitability.
- Moody's |  | | | |
Mexico City - The credit outlook for Mexico's banks has deteriorated and conditions could get worse as the economy loses steam, but they are in good shape to ride out the global credit crisis, Moody's ratings agency said.
Moody's said on Monday the credit outlook for the banking industry has deteriorated to negative from stable because of deepening world financial turmoil and concerns it will hit Mexico's economic growth.
Still, Mexico's largely foreign-owned banks are well capitalized and do not suffer from cash shortages affecting banks on Wall Street and in many other countries, the agency said.
"Liquidity has tightened relative to 2007 in light of loan expansion, but the largest Mexican banks remain liquid, which is an indication of their largely core-funding basis," Moody's said.
With the world's banking system on the brink of collapse, governments in the United States and other countries are earmarking hundreds of billions of dollars to bail out financial firms stuck with dubious subprime mortgage-related securities.
Banks in Mexico owned by Citigroup (C.N), BBVA (BBVA.MC), Santander (SAN.MC) and other international players have ballooned their businesses in the past decade by handing out loans to credit-starved clients and businesses, not by dabbling in risky subprime niches or unpredictable derivatives.
But non-performing loans on credit card debt in Mexico have jumped to about 8 percent in recent months because of increasingly aggressive marketing, the country's bank association said recently.
"As a result, both delinquency and credit costs are on the rise, and could negatively affect the banks' profitability," Moody's warned.
Mexican bank lending is seen growing 15 percent this year, thanks mostly to increases in consumer and commercial lending.
Overall bank loans are equivalent to 14.5 percent of gross domestic product, low compared to more developed countries, which means there is still room for prudent growth, Moody's said.
"Moody's is also comforted by the fact that Mexican banks - particularly the dominant participants - have a defendable ability to generate consistent and recurrent earnings as they focus on highly profitable retail activities," Moody's said.
(Editing by Gunna Dickson) |
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