Few countries were spared the devastation brought by Covid-19 on lives and livelihoods. Few were run by governments that publicly downplayed the threat posed by the pandemic.
In Mexico, the tone was set by president Andrés Manuel López Obrador, who — even after seeing other countries succumb to the virus — encouraged Mexicans to continue with their normal lives. Movements were restricted only after some delay; and once vaccines became available, rollout was slow, resulting in the number of administered doses equivalent to fully vaccinating only about 15% of the population as of the middle of June.
Analysts expect that despite a likely economic recovery this year, the slow vaccination rate and the ongoing lockdown measures will continue to put pressure on Mexican banks. Consumer and investor confidence will remain weak, according to rating agency Fitch, limiting banks’ room for growth. Asset quality is also likely to deteriorate and dent profitability, as many loan repayment deferral programmes ended at the end of 2020 and bank customers are likely to remain under pressure.
Those forbearance programmes kept Mexican banks’ non-performing loans (NPLs) in check last year. Among the largest five locally owned lenders, NPL ratios ranged from Banco del Bajío’s 1.1% to Banco Azteca’s 4.7%, according to The Banker’s analysis of banks’ annual reports.
Overall, BanRegio showed the best asset quality score of the group. The score is based on the combination of a number of ratios: allowance for loan losses to gross total loans, NPLs, impairment charges to total operating income, and the change of these from a year earlier.
Banco Azteca is the lender that grew the most in terms of assets and loans. It scored worse than all other five banks, however, in terms of asset quality as well as return on risk, an indicator that combines the return-on-risk-weighted assets ratio with its annual change.
Banco Inbursa, on the other hand, is the lender that on an aggregate level outperformed all others. Mexico’s second largest local name — though less than a quarter of the size of leader Banco Banorte — Inbursa showed the highest profitability, operational efficiency and return on risk scores. In terms of profitability, the combination of its return-on-assets and return-on-equity ratios, profit margins and asset utilisation ratio was higher than all other large local banks.
Inbursa was also the only bank in the group to keep pre-tax-profits at similar levels as the previous year’s, with only a 6% drop compared to the double-figure drops and a pre-tax loss of the others. It was also the only lender to improve its cost-to-income ratio as well as its return-on-risk weighted assets ratio.
While retaining its clear dominance in terms of assets and size of its loans and deposits portfolios, Banorte is only third in the overall performance ranking.
