Moody's: Favorable economic conditions support stable outlook for LatAm banks

Press release from Moody's

12 December 2018

-Rising loan growth and low operating and credit costs will underpin strong profits

The outlook for Latin America's banking system is stable for 2019 with rebounding growth stabilizing the operating environment as political uncertainty recedes, says Moody's Investors Service in a new report.

"Stable economic growth will help support the operating environment for Latin American banks, keeping problem loans at bay in most countries," says Moody's Vice President Felipe Carvallo. "Contained credit costs, strong efficiency and higher loan growth will support profitability and capital. In addition, ample core deposit funding provides a strong base for loan growth and insulates banks from market volatility."

Rising GDP in the region will improve employment, corporate activity and internal demand, therefore, increasing demand for corporate and consumer loans. Brazil's economic recovery will continue as growth remains stable in other countries. However, Argentina's economy will remain an outlier in the region with high inflation and a shrinking GDP.

Bank profitability is set to remain strong in Latin America according to the rating agency. Higher-yielding and higher-risk assets, along with fee income will benefit profits in Brazil and Chile, with Mexico benefiting from higher rates. In addition, reliance on market and foreign currency funding will remain low, even as liquidity narrows in the face of recovering loan growth.

Moody´s subscribers can access the report "Banks -- Latin America," at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1154033

ENDS