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Inbursa keeps best-performing crown in Mexico

Mexico's banks have proved their resiliency, improving asset quality and profitability metrics. Barbara Pianese reports.
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Mexico’s economy jumped by 5% in 2021, following an 8.2% contraction the year before. Mexican banks were hit by some of the most severe effects of the Covid-19 pandemic, but demonstrated resilience throughout 2021. They improved asset quality and earnings and profitability metrics, while capitalisation, funding and liquidity remained good, according to Fitch.

All of Mexico’s largest five domestic lenders increased their pre-tax profits, with Banco Inbursa recording the largest leap in percentage terms, a 77.8% rise to $842m. For the second year in a row Inbursa, the country’s second-biggest bank, tops the overall best-performance table, which is based on eight indicators. The lender ranks first among its peers in operational efficiency, asset quality, return on risk, soundness and leverage. It also had the highest return on assets across Latin America and the Caribbean, at 3.48%.

Grupo Financiero Banorte, Mexico’s largest bank by Tier 1 capital, ranks first in liquidity, a metric that takes into account loans-to-assets and loans-to-deposits ratios. It is also second-best with regards to asset quality. The lender is second in overall performance, moving up one position from last year. Its pre-tax profits increased by 9.1%.

Banco del Bajio is the third-biggest bank by Tier 1 and third in overall performance. It shows good scores in soundness and leverage, where it is ranked second. Bajio increased its pre-tax profits by 26.5% to $280m last year.

In fourth place in the overall best-performing table, Banco Regional de Monterrey (BanRegio) ranks second in terms of growth, a metric encompassing annual percentage growth in assets, loans, deposits and operating income. It also ranks second in operational efficiency. Total assets grew by 8.4% year-on-year and pre-tax profits increased by almost 12% to $231m at the end of last year.

Banco Azteca is the lender that improved the most in terms of growth and profitability. It went from making a loss to earning $105m in pre-tax profits, while its assets grew by 10.1%. It also ranks second in liquidity and return on risk.

This year, Fitch Ratings believes that asset quality will remain stable due to many banks still having loan loss allowances. However, potential risks could still undermine the banking sector’s recent gains. The rating agency said inflation is one of the main challenges to the Mexican economic recovery, which could have a knock-on effect.

The current inflation spike could impact individuals’ and companies’ internal consumption, and might translate into lower credit demand and decrease asset quality.

Next year, the Mexican banking system might display a different configuration following Citigroup’s decision to sell its Mexican unit, Banamex, which it bought for $12.5bn in 2001. The move, announced in January, could make the banking sector more locally owned. President Andres Manuel Lopez Obrador said he preferred Banamex be bought by local investors. Banorte, Spain’s Banco Santander and Inbursa all reportedly showed interest in the unit, which had more than $75bn in assets at the end of 2021.

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Barbara Pianese is the Latin America editor at The Banker. She joined from Mergermarket, where she spent four years covering mergers and acquisitions across Europe with a focus on the consumer sector. She holds an MA in International and Diplomatic Affairs from the University of Bologna having studied in Brazil and France as well.
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