Mexico City. The credit business conditions of banks in Latin America will stabilize or improve in the next 12 to 18 months, due to a normalization of inflation and interest rates, but entities in Colombia and Panama will still go through adverse situations, said this Tuesday the rating agency Moody’s.
In the last two years, banks faced difficulties in the quality of the portfolio due to the strong rise in inflation that resulted in the high cost of money, which forced financial entities to increase provisions, which impacted their profits.
For Moody’s, in most countries these conditions are becoming normal, while banks are applying stricter criteria for granting credit.
“The positive news about the labor markets, except in Chile, and the gradual increase in investment, particularly in Mexico with nearshoring, have increased local demand for credit and banking volumes,” the rating agency said in a statement.
However, he warned that in the case of Mexico, the accelerated growth of riskier consumer loans and exposure to government-related entities could neutralize the benefits of a more favorable operating environment.
“Small and medium-sized enterprises (SMEs) will be a cause for concern as they remain susceptible to higher rates for longer. In Brazil and Peru, where banks are more exposed to smaller companies, government guarantees should help minimize losses in the event of default,” he noted.
The risk rating agency noted that in the case of Colombia and Panama, pressure on portfolio indicators will persist amid the economic slowdown.
“Banks are likely to experience more adverse conditions in Colombia and Panama, where slower economic recovery and disinflation pose potential difficulties for the recovery of trading volume and credit performance,” Moody’s explained.
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– 2024-05-02 20:11:43
