Moody’s predicts positive outlook for banks in Mexico

Mexico City. Banks from Mexico and Paraguay stand out in the region with a positive outlook for 2024 thanks to beneficial operating conditions, analysts from the credit agency Moody’s said this Wednesday, who reviewed the outlook for lenders in the main Latin American markets.

Among 10 banking markets in the region, Moody’s has seven stable and two positive outlooks, while economic imbalances in Argentina led the firm to have a negative outlook for its sector.

The evaluation occurs despite the complex outlook for banks globally, in a context of lower economic growth and the climate of still high interest rates this year in the United States and Europe.

“We hope that the profitability of banks in Mexico will benefit from the conditions created by the nearshoring and lower financing costs,” said Felipe Carvallo, Moody’s sector analyst, in a webcast for the market.

The positive impact of nearshoringor bringing companies’ investments closer to nearby markets of interest, will begin to be perceived later in the year in the commercial banks of Mexico and in some Central American markets such as Costa Rica, the credit firm said.

In the southern cone, the evaluation considered Chile’s banks as well positioned for an improvement in its credit quality after the deterioration seen since the beginning of 2022. The outlook remains stable, but Moody’s expects greater demand for loans and better lending capacity. households to comply with the payment of debts.

The banks of Peru and Colombia, meanwhile, appear to have a stable outlook after the weak macroeconomic scenarios of 2023, with inflation rates that are still high but will decrease.

As for Brazil, the agency considered that lenders will generally have positive conditions despite the expected slowdown of the largest regional economy. The scenario during 2024 appears more benign due to a lower expectation of defaults that will help profitability remain stable, he said.

The only negative outlook for the region’s banking systems was for Argentina, where Moody’s considered that lenders’ high exposure to government debt is affecting risks to their assets.

Argentina is going through a deep recession with hyperinflation that leaves banks little room to maneuver and improve profitability, the agency added.