Today, the demand for credit in the country is explained more by expectations of economic growth than by interest rates, says Daniel Becker Feldman, president of the Association of Banks of Mexico (ABM).
The still leader of the country’s bankers – who will leave office within the framework of this convention – believes that the Mexican economy can grow again this year by 3.0 percent. In this sense, his estimate is that credit will continue to increase this year as it happened in 2022.
“The element that businessmen and families consider to take a loan is more, to a certain extent, due to the expectation of growth, and I do believe that we can see this year, as stated in the Federation’s Expenditure Budget, that Mexico can grow again 3.0%”, he emphasizes.
He says that of course there is a point at which, at a certain level of interest rates, people refuse to take a loan anymore, because, he says, it becomes inoperative and unpayable.
However, it considers that as long as the rates remain more or less at current levels –in which no bank credit product has reflected the same increase in the reference rate of the Bank of Mexico (Banxico)– there should not be large increases neither in the cost of financing nor in arrears.
Remember that while Banxico has raised the target rate by 700 base points, in some bank credit products such as mortgages, the rates have increased by barely between 150 and 200 base points.
“Actually, there are few segments that have matched the increase in rates as Banxico has done,” he points out.
In this, he adds, the strong competition between banks has also influenced. “Not only in the sector, there are also other non-bank intermediaries that are beginning to generate market force that forces us to compete. So that is why I think that also generating elements of competition in banking becomes fundamental”.
Dynamics in consumption can be maintained
The president of the ABM estimates that the dynamism of consumer credit granted by commercial banks – which grew the most in 2022 – can be maintained in 2023, given that, first of all, it comes from a relatively small base, and this segment has rebounded in recent years. “So I believe that consumer credit will continue to grow.”
In addition, he points out that today credit is better used, and exemplifies the case of the card. “In previous crises, what we observed is that people used their credit card, consumer credit, as working capital, to correct momentary problems due to the circumstance, and that in the end generated possibilities of default.”
He adds: “what we see today is that people continue to use their credit cards very prudently.”
He mentions that a reflection of this is that today the Delinquency Index (Imor) of the consumer credit portfolio is below 3.0 percent. “In consumption, which is generally the credit segment that sees the greatest increase in delinquency.”
But it also refers that, on the side of the institutions, there is a lot of responsibility in the origination of credits.
“I would recommend that credit products be used for what they are. A credit card is not to solve a working capital problem, it is to buy personal property, and yes, pay your minimum, but always be within your abilities, and I think that in this sense, continue doing financial education things in our country It becomes essential.”
Daniel Becker alludes to the minimal impact that banks registered due to the effects of the Covid-19 pandemic -to which the joint measures between the sector and the authorities also contributed-, well, remember, the maximum Imor that was seen in consumption it was 4.0%, much lower than in previous crises, when the economic contraction in 2021 was 8.0 percent.
“What we saw from the ABM, is a population that is much more aware of the use of credit, and also with a very important element of savings. It is also attributed to the fact that banks, in general, have better risk models associated with what has to do with Basel III, that banks are more responsible, and also something very important: credit bureaus”.
All of this means, he stresses, that banks are much more solid today, with good capitalization and liquidity ratios.
However, given that rates remain high and inflation could last longer than expected, there would be increases in delinquency, but banks are ready to continue supporting economic growth.
In companies you can already see recovery
The still leader of the bankers highlights that in companies, the credit portfolio is also already showing recovery, even in small and medium-sized ones (SMEs), although here he considers that one of the great pending issues, within the financial sector, is to have a market for deeper capitals.
