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Sunday, Oct. 4, 1998
Outlook dimming for banks in Mexico
Soaring interest rates offer some pluses but also pose financial hazards, analyst says
By SANTIAGO PEREZ
Associated PressMEXICO CITY -- The outlook for top Mexican banks for the rest of the year is darkening due to global market turmoil and high interest rates, with analysts expecting generalized losses and a deterioration in the quality of assets.
Despite some improvement in operations and margins, losses stemming from trading operations, lower loan volumes and expectations of a rise in non-performing credits could hit earnings through the fourth quarter.
``Under the current environment, the outlook is very negative from an asset-quality perspective,'' said Yolanda Courtines, financial institutions analyst at SG Cowen Securities in New York.
Brent Erensel, director of Latin American bank equity research at Warburg Dillon Read, said third-quarter results are expected to be hit by trading and mark-to-market losses, while in the fourth quarter much will depend on the trend registered by interest rates.
Local interest rates have soared due to global financial turmoil and various central bank moves to restrict liquidity and counter volatility in the currency market.
Warburg Dillon Read's Erensel said high interest rates could increase margins in certain assets, while liability costs and retail deposits at banks rise more slowly.
But high rates can also ``hurt the recovery of troubled assets,'' so that the financial burden increases and the borrowers' cash flow diminishes due to the slowdown in economic growth, he added. Also, ``loan demand diminishes because the price of money goes up.''
Merrill Lynch bank analyst Rodrigo Quintanilla said in a recent note to investors that Banamex, the flagship banking unit of Grupo Financiero Banamex-Accival, is expected to post a loss in the third quarter, and so is Grupo Financiero Bancomer.Post your comments about local news eventsFront Page || Main Index || News || Business || Texas || South Texas Outdoors || Birdwatching || Sports || Entertainment || Selena || Education || South Texas Attractions || World Wide Web