Expanding Credit Portfolio of Mexican Development Banks

CEIC Macro Watch Global #43 - April 30, 2015 The credit portfolio held by development banks in Mexico has been rapidly expanding in recent years. In the last quarter of 2014, outstanding credit rose by 19.56% year-on-year (YoY) to MXN 656.4 billion, accelerating from a growth rate of 4.21% in the fourth quarter of 2010. This represented its largest YoY growth since the third quarter of 2009, when development banks’ credits grew by 45%, accompanied however by a comparatively high non-performing loans (NPL) ratio of 3.34%. Despite the double-digit credit expansion between 2012 and 2014, the NPL ratio has not increased drastically. During this period, the NPL ratio has been in a manageable range of 0.74% to 1.46%, in sharp contrast to the higher level in 2009. While the sharp increase in total credit saw the NPL ratio rising to 1.36% in the third quarter of 2013 from 0.85% in the same quarter of 2012, it eventually decreased to 1.16% during the last quarter of 2014, suggesting good credit control complementing the stronger economy. As of 2014, more than 80% of all credits granted by development banks were concentrated in three major sectors – public, industrial and financial, constituting 31.29%, 26.65% and 23.88% of the total volume of credits respectively. Among them, credit lent to the industrial sector has been expanding at the fastest pace with consecutive double-digit YoY growth rates since the last quarter of 2008. In the fourth quarter of 2009 credit to the industrial sector amounted to only 11.73% of total outstanding credit, while the public and financial sectors accounted for 31.57% and 34.96% respectively. Development banks serve a niche market in providing capital for new and upcoming productive development projects, contrary to the business model of commercial banks. With the Mexican government having set a goal to increase the available credits of development banks by up to one trillion pesos in 2013, access to financial services and bank loans had widened in the country. Further development is expected in view of the National Infrastructure Programme for 2014 to 2018, boosting the expansion of the public credit portfolio of development banks. In view of the growth in availability of credit from banks with targeted spending, Mexico can anticipate a rising rate of development-focused activities in the future. By Darlene Tamayo in the Philippines - CEIC Analyst Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
30th April 2015 Expanding Credit Portfolio of Mexican Development Banks

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