Economics: What the troubled Sofomes say about the state of the Mexican financial system
This past August 8 an important Sofom (one of the Multiple Purpose Financial Companies or Sociedades Financieras de Objeto Múltiple) announced it was suspending payments to its creditors given “the complicated environment facing the non bank financial institution sector.” Given that this company is the third in the sector to make a similar announcement, and that the three institutions have considerable weight in this segment, it sparked uncertainty over the risk of contagion to the rest of the financial sector.
It is important to consider that commercial banks are currently reporting low delinquency levels and high capitalization rates, while the information available shows that in general, regulated Sofomes are also maintaining relatively low delinquency rates. This is due to the fact that credit has contracted considerably, especially in 2021, largely in a preventive manner when faced with a greater perception of risk in the consumer and business segment.
The vulnerabilities of the Sofomes in general come from a context of increased cost and astringency of credit both nationally and internationally, which significantly affects this type of institution. Given that they do not have bank deposits, their funding costs steepened considerably in line with increases in interest rates and due to a greater perception of risk associated with the sector. In this week’s Outlook section, we analyze business and consumer credit conditions and the implications of the heightened risks that the Sofomes are facing.
Among the economic indicators released this past week, it was reported that Mexico’s second quarter Gross Domestic Product (GDP) expanded an annual 2.0%, a result only marginally slightly shy of the 2.1% preliminary estimate Inegi had made a month earlier.
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