Credit will continue to grow in Latin America next year, but at a slower pace than in 2010-2012. While in that period credit growth rates of around 20% per year were experienced in many of countries in the region, the expectation for next year is growth of between 10% and 15%, similar to 2013 and 2014.
The slowdown in growth of the regional economy, which is projected to expand between 2% and 2.5% this year and in 2015, is a key factor explaining the slower rate of loan portfolio growth. Moreover, after the sharp jump in the levels of bank penetration during the last few years (the ratio of credit to regional GDP rose from 31% in 2004 to 38.5% in 2011), regulators have promoted prudential practices for risk management in line with international standards, which has slowed the growth of consumer credit.
In this regional scenario there are very different expectations for banks according to each country. In Mexico, Colombia, Peru and Chile lending promises to pick up thanks to higher expected GDP growth, which could offset the slowdown in credit growth in Brazil and the sharp drop in real terms projected for Argentina.
The differences in growth rates are also evident within different credit segments. The slower rate of consumer loan growth will continue in 2015. Up until 2012, rising per capita income in several countries in Latin America since the beginning of the last decade, coupled with low interest rates, caused a boom in consumer lending across much of the region. But in the last two years, slowing economic growth in a context of higher levels of household debt led banks to reduce the credit supply in that segment. However, greater GDP growth forecast for 2015 in some countries, together with lower expected issuance of international bonds and less access to credit abroad for companies, is set to boost the pace of the corporate loan portfolio.
The more conservative criteria of banks in much of the region meant low delinquency rates have been maintained despite the economic slowdown. Expectations are that these indicators will not change much next year. In this context, the profitability of banks will remain high even with the effects on financial systems in the region of the likely fall in value of investments in sovereign bonds resulting from the rate hike expected from the US Federal Reserve.