| | |  Business News | January 2009 
Mexican Banks Move to Avoid Credit Card Defaults
 Noel Randewich - Reuters
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| | With U.S. demand for exports slumping, analysts say healthy internal demand, fueled by credit growth, is key to Mexico weathering a global downturn this year. | |
Mexico City - Two Mexican banks are launching programs to help consumers reduce credit card debt as a slowing economy threatens to worsen already ballooning loan defaults.
After relaxed lending standards in recent years, nonperforming consumer credit at Mexico's banks has jumped and executives are bracing for more trouble as a recession in the United States boosts unemployment in the Mexican economy.
Banorte (GFNORTEO.MX), Mexico's fifth-largest bank, is offering to cut clients' credit card interest rates by half if they sign up for fixed payments to eliminate their balance within four years.
The Mexican unit of HSBC (HSBA.L) has said it will launch a similar program soon and other banks have plans geared toward clients who have already fallen into default.
Lending to consumers and businesses in Mexico expanded at explosive rates of around 50 percent a year in 2005 and 2006 as banks served a market starved of financial services after a crisis in the mid-1990s brought the industry to its knees.
In recent months, banks have become more cautious about handing out new credit cards and giving loans to consumers as those lines of businesses are increasingly hurt by defaults.
With U.S. demand for exports slumping, analysts say healthy internal demand, fueled by credit growth, is key to Mexico weathering a global downturn this year.
But in November, consumer credit fell 2.9 percent, with credit card lending down 1.5 percent, according to the central bank.
Mexico's banks are considered well-capitalized. They have not loaned to subprime niches and have avoided many of the problems plaguing financial groups in the United States and Europe.
Still, nonperforming consumer loans rose to 8.49 percent in November from 8.10 percent a month earlier, according to Mexico's banking and securities commission.
Mexico's banking system is dominated by international giants including Citigroup (C.N), BBVA (BBVA.MC), Santander (SAN.MC) and HSBC along with locally-owned Banorte.
High interest rates on credit cards, currently 42 percent on average, help Mexico's banks absorb the cost of loan defaults.
(Editing by Tim Dobbyn) |
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