The Week in Finance: Banking Sector Steady but Cautious

The Mexican banking sector continues to boost the economy despite moderate growth in consumer credit. Moreover, overdue payment rates remain low. The Mexican stock market could also have a strong end of the year, considering low stock prices.

In international markets, even though Moody’s downgraded its rating on German banks, Bundesbank says there will not be a recession.

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Mexican Banking and Stocks

Banxico says between July and September 2019, almost 80 percent of companies did not use new bank credits mainly due to national economy performance as well as banking interest rates.

The commercial banking sector is not afraid of the upcoming challenges, as it sees low overdue payment rates despite Mexico’s economic scenario. According to CNBV, the overdue payment rate is at around 2.24 percent. 

Credit expansion in Mexico will be moderated according to S&P. The firm says Latin American banks are on trial against a challenging economic scenario.

Despite deceleration, banking thrives as one of the sectors boosting the Mexican economy, according to BBVA.

There will be an ‘end of the year’ rally for the Mexican stock market as stock prices remain low compared to other markets, according to BMV director.

Mexico’s international reserves grew US$289 million over the last week to reach a total of US$180.6 billion.

Regional Forecasts

Latin America will suffer another year of weak economic growth in 2020. According to Goldman Sachs, regional GDP will grow around 1.7 percent next year.

The Federal Reserve’s third cut of interest rates was due to risks for the US economy. The Fed highlighted the possibility of a global deceleration and its risk for the US economy.

Germany will stagnate, but will not be in a recession. According to the Bundesbank, the biggest economy of Europe will perform weakly.

Auctions and International Banking

No one is good enough for Moody's, not even the Germans. The company downgraded its rating on German banks and forecasts a downturn on their profitability and liquidity for the next 12 to 18 months.

Alantra analysts recommended BBVA to sell its subsidiary bank in the US given its high costs and weak results.

Alibaba gets US$11 billion in its public listing in Hong Kong. The Chinese firm set a price of US$176 per stock, resulting in the biggest listing in the city since 2010.