Mexico's development banks have room to increase lending, S&P says

Mexico's development banks have room to increase lending, S&P says

Loans Project & Infrastructure Finance Economy & Policy Debt Politics Mexico

Mexican development banks have enough financial flexibility to support the government's plans to spur economic growth by increased lending from the state-owned financial institutions, S&P Global said in a report.

As the finance ministry, or SHCP, said in July, the export credit agency Bancomext and the development bank Nafin will provide MXN270bn ($14.1bn) in loans and credit guarantees for borrowers in the private sector.

Banobras, another development bank run by the government, is not participating in the program, but S&P said it could supply financing for government projects if needed.

"In our view, Nafin, Banobras and Bancomext have the highest lending capacity for future programs and government projects," S&P said, adding that the microcredit lender Banco del Bienestar could become "increasingly relevant" during the administration of President Andrés Manuel López Obrador.

Mexico's development banks have room to increase loans by roughly $19.9bn, S&P said, with $8.18bn for Banobras, $6.85bn for Nafin and $4.97bn for Bancomext.

The banks will remain focused on their areas of expertise, rather than risk an increase in nonperforming loans by entering sectors where they have no experience, the rating agency added.

Nafin will likely allocate roughly MXN200bn for small and medium-sized enterprises (SMEs) through the program, while Bancomext will put in MXN70bn for exports, S&P said.

In a ranking of the top 10 lenders in Mexico, S&P placed Banobras in fifth place with MXN437bn in its loan book at the end of June this year. Nafin came in ninth with MXN249bn and Bancomext finished in 10th with MXN230bn.

BBVA topped the list with a loan portfolio of MXN1.2tn at the end of the second quarter this year, followed by Banorte with MXN764bn and Santander with MXN700bn, according to S&P.

S&P gives the three development banks a BBB+ rating with a negative outlook, the same score it gives the government.

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