Loan ‘portfolio’ grows after 20 months down – El Financiero

Bank financing in Mexico recovered in April, driven by greater demand for consumer loans, given the improvement in economic activity and in the labor market.

According to data from the Bank of Mexico (Banxico), the current portfolio to the private sector advanced 0.72 percent at the real annual rate, and this was its first positive figure after 20 months in contraction.

Consumer financing grew 3.88 percent, its highest rise in almost five years, since May 2017. In credit cards, the advance was 4.86 percent, the highest since December 2016.

In mortgage financing, the portfolio also gained pace and advanced 3.41 percent, its best performance in eight months.

Meanwhile, credit for business activity moderated its fall, to 1.22 percent, but linked 20 consecutive months to the fall.

Ernesto O’Farrill, president of Grupo Bursamérica, indicated that consumer credit has been boosted by the return to normality after almost two years of the pandemic, as well as Easter.

“In April we did see that people went out to buy things for Holy Week, mainly. They also traveled more for this same reason, which is why consumer credit stood out in the month”, he indicated.

In April, the amount operated with credit cards in air transport increased 57.8 percent at the real annual rate, while that operated in hotels rose 41 percent, and 24.3 percent in restaurants, according to data published by Banxico.

However, O’Farrill said that high interest rates and high inflation could cause consumer credit to moderate towards the end of the year.

Alain Jaimes, economic analyst at Signum Research, agreed that the good pace shown in consumer loans is due to the context of economic recovery, as well as better than expected data in the labor market.

James Salazar, chief economist at CiBanco pointed out that the improvement in bank loans is the result of the economic recovery that is being seen in the country.

He recalled that, at the beginning of the pandemic, banks limited the granting of loans to avoid high rates of default.

“We are seeing an incipient economic recovery, and what ends up happening is that the financial needs and requirements after the problems that have been observed since 2020 with the pandemic, are beginning to be taken care of and a part of the sector begins to recover; in that sense we would expect this dynamic to continue in most of the credits”, he highlighted.

The specialist pointed out that mortgage loans have benefited since 2020 since the health crisis forced people to look for new spaces to live.

“In the mortgage issue, there are still attractive levels of interest rates and, additionally, there is the inertia of last year, where more work was done from home than in offices (due to the pandemic), which caused a shift in the search for this type of credits”, added Salazar.

Lag in companies

Regarding credit to companies, Alain Jaimes pointed out that it continues to show signs of caution, which shows that the conditions of uncertainty continue to exist, as well as generalized increases in credit costs.

“Corporate demand for credit has been negatively affected by weak investment prospects and policy and regulatory risk/uncertainty. Rising inflation and interest rates and growth prospects will likely keep short-term real credit growth subdued,” said Alberto Ramos, chief Latin America economist at Goldman Sachs.

positive expectations

Jacobo Rodríguez, director of economic analysis at BW Capital, said that the fact that the increase in bank credit has occurred together with the stability of the non-performing portfolio, which remains at levels below 3.0 percent, is noteworthy.

“The expectations regarding the evolution of bank credit are positive, although important challenges are faced in the short term, such as the general increase in prices and the increase in interest rates,” he said.

He added that there are also expectations of an economic slowdown in the United States, which would have a negative impact on the national economy and therefore on the intentions to apply for credits.

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