Contents

Introduction

Latin American banks have been obliged to face a scenario of lower growth in recent years as the reduction in global commodities prices from 2014 onwards has hampered growth in several major markets, while economic and political crises in Brazil and Argentina have pushed both countries into recession in 2016.

Lower growth implies a series of challenges for banking systems in the region used to double digit expansion. Nevertheless, in general terms Latin American banks have proven adept at managing the current scenario, with reductions in loan growth and management of credit risk ensuring that any asset quality deterioration has been moderate.

"Latin America has a banking system which remains solid, and which is growing at lower rates than in previous years precisely because of the lower growth that many countries in the region are experiencing," says Alberto Morisaki, economic studies and statistics manager at Peruvian banking association Asbanc and president of Felaban's Latin American Committee of Economists.

The mixture of lower growth and increased provisioning requirements has pressured bank profitability levels in several major markets.

For 2017, expectations of a return to economic growth in Brazil and Argentina, an improving outlook in countries such as Colombia and Peru, and falling inflationary pressures in several markets are fueling expectations of a timid recovery in credit growth for banks following a significant slowdown in 2016.

In this report, BNamericas provides an outlook for the Latin American banking industry in 2017, covering major regional trends, as well as more in-depth analysis of the six largest markets in the region; Brazil, Mexico, Argentina, Colombia, Chile and Peru.

Figure 1: Latin America GDP & Inflation
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Figure 2: GDP Growth of Selected Latin American Markets
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