Moody’s sees a stable outlook for banks in Mexico and LATAM despite global context.

The only negative outlook for banking systems in the region was for Argentina. Mexico stands out.

Ignacio Teson•Wednesday, April 3, 2024•2 min read

Mexican and Paraguayan banks stand out in the region with a positive outlook for 2024 due to favorable operating conditions, analysts from Moody’s said on Wednesday, as they revised the outlook for lenders in the major Latin American markets.

Banks in Mexico and Paraguay stand out in the region with a positive outlook for 2024 due to favorable operating conditions, said analysts from Moody’s on Wednesday as they revised the outlook for lenders in the major Latin American markets.

Among ten banking markets in the region, Moody’s has seven stable outlooks and two positive ones, while economic imbalances in Argentina led the firm to have a negative outlook for its sector.

The assessment comes despite the complex outlook for banks globally, in a context of slower economic growth and the climate of still high interest rates this year in the United States and Europe.

“We expect bank profitability in Mexico to benefit from the conditions created by ‘nearshoring’ and lower financing costs,” said Felipe Carvallo, an analyst for Moody’s, in a webcast for the market.

The positive impact of ‘nearshoring’, or the approach of investments from companies to nearby markets of interest, will begin to be perceived later in the year in Mexico’s commercial banking and in some Central American markets, such as Costa Rica, the credit rating agency said.

In the southern cone, the evaluation considered Chilean banking as well positioned for an improvement in its credit quality following the deterioration seen since early 2022. The outlook remains stable, but Moody’s expects increased loan demand and better household ability to meet debt payments.

Banks in Peru and Colombia, meanwhile, are shaping up with a stable outlook after the weak macroeconomic scenarios of 2023, with inflation rates still high but expected to decrease.

Regarding Brazil, the agency considered that lenders will generally have positive conditions despite the expected slowdown in the largest regional economy. The 2024 scenario is more benign due to a lower expectation of defaults that will help profitability remain stable, it said.

The only negative outlook for banking systems in the region was for Argentina, where Moody’s considered that lenders’ high exposure to government debt is affecting risks to their assets.

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ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.