Top 1000 World Banks – Mexican lenders shore up Tier 1 capital

There are two interesting things to note about Mexico’s banking sector. The first is that Banco Regional de Monterrey – a lender that focuses on small businesses, which are often perceived as carrying higher risk – is the country’s best performer among the largest players.

The second is that Mexico’s biggest bank by Tier 1 capital, Grupo Financiero Banorte, also displays a healthy balance between size, leverage and return, resulting in the second best score for performance in the country. This positions it for continued market dominance in years to come. 

Banco Regional de Monterrey, or BanRegio, began operations in 1994, in the state of Nuevo Leon, close to the US border, and listed on the Mexican Stock Exchange in 2011. It is now the fifth largest bank in the country by Tier 1 capital, with $957m, and the best performing among the largest five players. 

Grupo Financiero Banorte, meanwhile, is the country’s established and locally owned leader, with a Tier 1 capital nearly eight times that of BanRegio. It has the top return indicator among its peers as measured by the combination of its return on risk-weighted assets ratio and the ratio’s annual change; and the best leverage indicator, measured by the liabilities-to-assets ratio and its annual change. 

Growth indicators, however, bring another name to the fore. Banco Azteca has the fastest moving combination of annual percentage growth of assets, loans, deposits as well as operating income. The bank is part of the Grupo Salinas conglomerate, which, in addition to its various financial services activities, includes TV, entertainment and a motorcycle business. 

Mexico presents other reasons to reflect on the state of its banks. Similar to other Latin American markets, the country is dealing with the devastating impact of the coronavirus pandemic, to which its president, Andrés Manuel López Obrador, initially responded in ways that have been criticised for undermining the gravity of the situation.

Out of a population of 162 million, Mexico reported over 19,000 deaths by June 17, with no obvious signs at time of writing of a flattening of the casualties curve. Economic prospects are equally dire, with the International Monetary Fund expecting real gross domestic product to contract by 6.6% in 2020. With this particularly uncertain scenario, it is reassuring that, on the banking front at least, the country’s biggest lenders (except Inbursa) have all strengthened their Tier 1 capital, matching or outpacing the growth in assets.