Moody’s changes the perspective of the Mexican banking system to negative

Moody’s changed the perspective of the Mexican positive to negative banking system, since the government’s ability to provide support is deteriorating in line with the weakening of policies and the institutional framework, which could undermine fiscal and economic results.

In turn, the sector faces the slowdown in economic growth in 2025, the effects of the lower public spending, as well as institutional changes.

The qualifier explained that banks also face uncertainties around commercial relations between Mexico and the United States, which generate more tension in macroeconomic dynamics and reduce the business volumes of banks.

Despite the prudent standards of original, the rates of expired loans will probably increase as consumption loans mature, in a context of moderation in the growth of the portfoliosaid Moody’s.

He pointed out that after reaching almost historical levels, profitability will mainly fall on greater provision needs and the acceleration of investments in digitalization to deal with the growing competition for the arrival of new banks.

Moody’s expects a slight deterioration of the quality of the portfolio, since the assets in phase 3 (expired loans) come from almost historical minimums, of 2 percent of the gross loans in 2024, which have benefited from the increase in real wages, the growth of remittances and low unemployment.

However, he stated that reserves for credit losses and capital remain solid, which favors loss absorption.

Banks will maintain prudent credit policies, which will limit the risk of a strong deterioration of defeated loans, and will keep reserves for existing credit losses highsaid the firm.

We expect a more moderate growth of the portfolio in the next 12 to 18 months, of a single digit, compared to 13 percent registered in 2024, given the caution in the face of short -term trusted crisesthe financial institution mentioned.

Growth for loans

In 2024, the growth of the credit portfolio of the banks was led by consumption loans – organized by cards, personal and payroll credits – which rose 18 percent, while corporate financing grew 14 percent in 12 months.

Moody’s added that financing and liquidity will continue to benefit from the volume of customer deposits.

The firm qualifies eight banks in Mexico, including six of the 51 commercial benches and two of the six development, which as of December 2024 represented 64 percent of gross loans, 62 percent of total deposits in commercial institutions and 43 percent of gross loans in development, respectively.

The Mexican banking system is highly concentrated, and the seven most important commercial banks maintained around 77 percent of gross loans in the same periodis mentioned in the analysis.