Recognized for being one of the sectors that enjoys the best health and is one of the most profitable, private banking achieved a dream semester due to the rise in interest rates of Bank of Mexico (Banxico) and the reserves to face the most complicated days of the pandemic.
With more than 90% of the business in Mexico, the seven main financial groups added Profits for 106 billion pesos for its operations in the first half of the year, according to its financial results published last week.
The bulk of the profits came from the interest charges, because the financial margin of the seven groups totaled 250 billion, while the commissions and net fees generated a return of 60 billion. Other operations such as expenses, costs and payment of taxes 204 billion subtracted.
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The Spanish BBVA it took the highest profits, whose total was 39 billion pesos, an increase of 50% compared to the first half of last year.
It was followed by the Mexican Banorte, with a profit of 22 billion, 30% more. In third place was found the Spanish Santander, whose net profit was 12 billion, an increase of 50%. “The second quarter was the best in the bank’s history”, highlighted the group’s CEO, Hector Grisi.
Inbursa, owned by Carlos Slim, earned 10 billion pesos, 22% more. However, the Canadian group Scotiabank reported the highest growth in profits, adding 7 billion pesos, 59% compared to last year.
The American CitiBanamex and the british HSBC They also made profits, but less than in 2021. The first obtained 11 billion pesos and the second, 5 billion.
“In general, the increase in interest rates is positive for the profitability of banking,” he told EL UNIVERSAL Fitch analyst Veronica Chao.
To try to curb the most powerful inflation in 21 years, the Bank of Mexico has raised its main interest rate from 4.25% in 2020, to 5.50% in 2021 and now stands at 7.75%.
Analysts agree that the authority will raise its rate to a historical maximum of 8.50% on August 11 and they expect it to continue increasing until it reaches close to 10% by the end of the year.
For German Vega Laingfinance specialist and professor at the Banking and Commercial School (EBC), the positive scenario for banks with high rates is explained by higher credit prices.
“Credits are revalued with the rise in Banxico’s interest rates,” he explained.
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From his point of view, banks widen the difference between the rates they charge and those they pay when Banxico increases its interest rate, bringing with it “higher interest margins.” He highlighted that variable-rate loans, which have a direct impact from Banxico’s rate adjustments, represent close to 50% of total bank loans.
The agency Moody’s reported yesterday that the three largest banks in the country, BBVA, Banorte and Santander, will continue to benefit from higher interest rates for the remainder of the year and will continue with the dynamics in the pace of placement of new loans.
He stressed that the good amount of its reserves in the balance sheet to cover the losses expectations will continue to keep credit costs down.
“However, we expect that 2023 could present significant challenges for the cost effectiveness. We expect lower results for 2023, since we anticipate inflationary pressures and the tightening of monetary policy to control them will continue. Higher inflation could undermine the repayment capacity of some of its borrowers, especially in consumer portfolios,” Moody’s said.
He estimated that the growth of the Mexican economy will reach at least 2% in 2023, which could slow down the dynamics of bank credit.
“At the same time, there are contingent risks such as a possible slowdown in the US economy that could affect Mexican exports,” he warned.
The chief economist of Valmex, Victor Cejaindicated that credit has been favorable in recent months, but may well decrease due to economic weakness and higher rates.
He explained that, in the case of clients with greater purchasing power and greater margin to save, they would seek to invest in short-term instruments, until the end of the upward cycle of rates.
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