Major Banks in Mexico: Slowdown in Credit Placement

Four of the seven largest banks in Mexico have faced, during the third quarter of this year, the first signs of an economic cooling. While all banks reported an increase in their loan portfolio, covering loans to businesses, individuals, and government, Banorte, Scotiabank, Santander, and Citibanamex showed slower growth in credit placement during this period.

Citibanamex reported a credit portfolio of 601.351 billion pesos, marking the bank with the largest slowdown compared to the third quarter of the previous year, with just a 1.8% growth, in contrast to the 8.9% of last year. Santander achieved a growth of 3.2% in 2024, while last year it reached 5.6%; Scotiabank, on the other hand, remained relatively stable with a growth of 5.7%. In contrast, Inbursa, HSBC, and BBVA Mexico were the only banks that reported double-digit increases. Inbursa's rise, which is owned by Carlos Slim, is partly due to the acquisition of the Sofom Cetelem finalized in early 2024. Experts cited by Expansión note that the decrease in credit placement is a result of the record amounts lent out by banks last year. "The contraction is due to coming off historic peaks, and they can't maintain that pace. A drop in interest rates is more attractive for loan uptake, but the current impact on people's purchasing power influences their decision on whether to accept a new credit," stated Ariel Méndez, an analyst at Grupo Financiero Ve por Más (Bx+). Banks typically categorize their loans into three categories: government credits, consumer loans (like credit cards or auto loans), and business loans. According to Méndez, in an election year where the economy is projected to grow barely over 1%, a lower level of productive activity is expected, resulting in less need for financing. The Association of Banks of Mexico (ABM) acknowledges that, due to the slowdown, credit placement is declining, although there are hopes that, with the reduction of interest rates by the Bank of Mexico, the productive sector will be more willing to seek financing. BBVA Mexico, the largest bank by assets and loans, forecasts that in 2025 credit growth will be only in single digits. "Private investment in the country is key, and we are noticing a slowdown in wholesale credit and consumer lending due to slower job growth," commented Eduardo Osuna, president of BBVA. The decline in the credit portfolio is also linked to the change in government administration, which pauses projects and the necessary financing. Both BBVA and Banorte, the two banks that provide the most funding to the government, indicated in their quarterly reports that they expect credit in this sector to stabilize towards 2025, and even more so in 2026, when the government is anticipated to kick off its infrastructure plans.

In a context of economic slowdown where an increase in bank delinquency is expected, Ve por Más considers that one of the challenges for banks’ net profits will be managing delinquency through financial reserves. "For example, both Banorte and Regional have kept their delinquency at good levels, although some other banks have seen increases, which has been partial, and it affects their necessary financial reserves," added Méndez. In the third quarter, Scotiabank, HSBC, and Banorte were the most affected, with their net profits barely registering single-digit growth.

This outlook suggests that banks are facing a complicated economic environment, and it is crucial for them to adopt effective strategies to control delinquency, especially in times of uncertainty. Prudent management of financing and continuous risk assessment will be key to maintaining their financial stability and profitability in an increasingly challenging market.