Banks in Mexico, which remain sound and are withstanding international financial turbulence, remain cautious and are closely monitoring the most troubling time for the US financial system since the Great Depression, sources within the industry told BNamericas.
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"It is the crisis of confidence the factor that has most notably changed our business climate," said Enrique Castillo, head of banking association ABM.
Uncertainty is in the air as a result of recent collapses of US financial institutions and takeovers and risk appetite has sharply come down, financial sources said.
"The situation we are monitoring the most is actions taken in the US to restore confidence in the financial system," said Castillo.
On October 3, the US congress approved a US$700bn bailout plan to revive the financial system, after the initiative was rejected on September 29, making global stock markets plunge and threatening to worsen an economic slowdown. The bill was signed into law by President George Bush straight after congress' approval.
LEHMAN BROTHERS COLLAPSE
The collapse of investment bank Lehman Brothers, which filed for bankruptcy on September 15, is not expected to have an impact on the Mexican banking system as the sector's exposure to Lehman is very limited, said Castillo.
In a filing with the Mexico City stock exchange Grupo Financiero Banorte said its exposure to the failed investment bank totals some US$22mn, equivalent to 0.07% of GF Banorte's assets and 0.6% of its equity as of June 30, 2008.
lxe Grupo Financiero for its part, the 10th largest financial group by assets, said it had no exposure to the collapsed investment bank.
CREDIT GROWTH TO SLOW
Loan growth is expected to continue slowing in coming months as banks have become more cautious about lending in light of a worsening economic environment and deteriorating asset quality, analysts agree.
Latest figures from the central bank show bank credit to the private sector slowed to 12.4% in the 12 months to end-August after increasing 15.4% in the previous 12-month stretch.
According to a recent survey of private sector economists published in October by central bank economists predict GDP growth will be approximately 2.3% in 2008.
