Growth Rebound To Further Strengthen Mexico's Banking Sector

• Credit growth in Mexico’s banking sector is forecast to reach 6.4% at end-2021 on the back of an economic rebound, though rising interest rates will place a ceiling on loan demand. 
• Total loans spiked in Q220 alongside the arrival of the COVID-19 pandemic, rising from MXN5.40Tn in January 2020 to a peak of MXN5.84Tn in April. However, this increase reflected the use of credit lines to meet immediate liquidity needs, as well as currency effects, which increased the value of the sector’s foreign currency loans in MXN terms. 
• Higher asset growth combined with a steady improvement across a range of indicators such as leverage and non-performing loans suggests the banking sector will remain stable moving forward. 
• Fitch Solutions maintains its constructive long-term outlook on the sector, given Mexico’s improving economic outlook and relatively low levels of banking sector penetration. 
• This outlook augurs well for the interest income and general profitability of banking and non-banking financial corporates such as Banorte, Alpha Holdings, and Unifin Financiera.

(Source: Fitch Solutions)