Economics: Mixed credit market signals in 3Q19
The economic slowdown has partially discouraged businesses from taking out loans or tapping into other financing sources in Mexico, but demand for consumer credit remains strong while mortgages and other housing-related credit grew slightly.
We observed the private sector making more debt placements abroad as firms looked to take advantage of more favorable conditions thanks to falling interest rates, and sought to roll over existing debt at longer terms.
Local currency financing to businesses has grown in response to greater stock and bond issuance, but at a steadily slowing pace in a sign of declining physical investment expenditure and successes in achieving longer-term debt placements.
While company loans continue to account for just over half of commercial bank portfolios and grew by more than an annual five percent in September (even as they fell by roughly two percentage points compared to August), the increase was achieved almost entirely on the strength of the debt-refinancing efforts of large corporations. The delinquency rate on company loans has remained low and without any significant variation.
The ongoing easing of monetary policy, including last week’s lowering of Banco de México’s interbank reference rate, could lead to a slight increase in commercial bank lending. But monetary policy has traditionally had a muted effect on finance and credit markets in general. This time it is likely to be all the more limited given the extent of the general economic slowdown and the lack of visibility as to when an upturn might develop.
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