Asociación de Bancos de México. March 7 & 11 MORTGAGE LENDING IN MEXICO

Transcription

1 Asociación de Bancos de México March 7 & 11 MORTGAGE LENDING IN MEXICO

2 Index 1.The Mexican Banking Sector 2. Mortgage Market in Mexico 3. Outlook and Conclusions 3

3 Introduction 1. Mexico keeps its favorable outlook for growth for this year, inflation and public finances are under control and the Mexican banking system is sound and it is ready to respond to the economy's financing requirements. 2. Banking mortgage credit has grown steadily over the past years, and can still continue on this trend for some time. Growth hasn't translated into higher delinquency rates. 3. Due to structural conditions, housing demand has been rising. The favorable economic context, as well as increasing competition among financial institutions has provided additional support. 4

4 1. The Mexican Banking Sector In a complex international environment, the Mexican Banking Sector is sound Capitalization Ratio Percentage points 18% 14% 10% 6% 2% 2% 16.1% 15.9% 16.5% 16.8% 15.3% 15.7% 16.0% 1.0% 1.3% 1.9% 1.9% 15.1% 2.0% 2.0% 2.1% 14.6% 14.6% 14.9% 13.3% 13.6% 13.8% Core Capital to RWA Complementary Capital to RWA Basel III (10.5%) Core Capital Basel III (8.5%) Source: Mexican Central Bank. 5

5 1. The Mexican Banking Sector Delinquency trends during pre crisis levels & a high provision coverage ratio are maintained 14% 12% 10% 8% Delinquency ratio (%) & Coverage 185.0% 250% 200% 150% 6% 4% 2% 100% 3.4% 2.5% 50% 0% Mortgage loans portfolio (L) Coverage Ratio of total loans portfolio (R ) Total loans portfolio (L) Source: CNBV. 0% 6

6 Economic & Credit Growth Real Growth rate in The Mexican Banking Sector Credit activity has a maintained a steady growth 3.9% X 2 7.8% 11.7% In 2012 the bank credit grew twice as much as the economy did Economic growth (GDP) Source: INEGI and Mexican Central Bank. Banking Credit (real growth) Banking Credit (nominal growth) 7

7 1. The Mexican Banking Sector Total loan portfolio has grown at double digit rates Total loans portfolio Total outstanding balance (Billions of pesos) Total outstanding balance in ,610 billions of pesos (USD$ 202 Billions) (Ps/USD= 12.97) 1,273 1,585 1,749 1,834 2,015 2,337 16% of GDP 2, Source: Mexican Central Bank. Growth in 2012 Average growth Non performing loans rate 12% 13% 2.5% 8

8 Index 1. The Mexican Banking Sector 2.Mortgage Market in Mexico 3. Outlook and Conclusions 9

9 2. Mortgage market in Mexico Coordinated public policies and banks long term commitment have driven housing sector Mortgage loans portfolio Total outstanding balance (Billions of pesos) Total outstanding balance in Billions of pesos (USD 35 Billions) (Ps/USD= 12.97) Source: Mexican Central Bank. Growth in 2012 Average growth Non performing loans rate 10% 12% 3.4% 10

10 Mortgage market in Mexico The mortgage portfolio behavior shows the banking risk appetite for the housing sector Housing credits granted Thousands of credits & Average credit $MXN In the last 10 years Almost 1 million of credits were granted Thousands of credits (L) Average credit $MXN (R) Note: The number of credits does not include remodeling programs ( Renueva tu hogar ). Mortgage loans share of total loans portfolio Mortgage loans to total loans (%) % USD 10 Billions 18% Source: ABM. USD 35 Billions 11

11 2. Mortgage market in Mexico The banks provide more than half of the funding to home builders, although the debt issue is gaining share Financing to housing developers Distribution % 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Banks: 53.5% Banks: Construction loans Banks: Other types of loans Debt securities Others Equity Banks: 51.6% Source: BBVA Research 12

12 2. Mortgage market in Mexico Better credit conditions for customers without excess indebtedness Commercial bank mortgage loan portfolio: rate and term (% and years) Commercial bank mortgage loans: mortgage payment to income ratio (%) Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Dec-12 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Rate Term Source: CNBV Source: CNBV 13

13 2. Mortgage market in Mexico Financial innovation has allowed borrowers to enjoy better conditions Interest rate Variable Fixed with incentives for timely payments Up front fees 6% 0% 1% Term yrs Up to 20 yrs Products Acquisition Multiple uses* Payment pesos per thousand $22.0 $8.5 $11.0 Down payment +35% 5% 15% Unemployment insurance No Yes Interests tax deductible No Yes * Acquisition, Substitution, Construction, Remodeling, Co financing INFONAVIT, FOVISSSTE, INFONAVIT TOTAL Program Home Equity. 14

14 2. Mortgage market in Mexico Main Factors that Caused the Mortgage Crisis in some Countries are not Present in the Mexican Market Factor Housing Market Credit Non Toxic Products Customer Insurance Description No price bubble. No speculation. Detailed credit & risk analysis. Full documentation and proof of income (Stated Income not accepted). Mandatory Credit Bureau report. Moderate Loan To Value (LTV) & Down payment required. Most credits are for 1st home acquisition. Fixed rates (No uncertain rate mortgages, no teaser rates, or negative amortization). Home Owners Equity Credit lines at max. 50% LTV (less than 5% of total portfolio). Mandatory Life and Property Insurance. Unemployment Insurance in recent loans is common. 15

15 The fundamentals remain sound 2. Mortgage market in Mexico Market Drivers Demographic Institutional Product Demographic structure bonds. Annual growth of 650 thousand households per year. Need of replacement or renewal of housing stock. Low penetration of the mortgage lending as a % of GDP. Banks are solid and open to credit under prudent criteria. New Federal Housing policy. Institutional coordination: SEDATU (CONAVI, CORETT, FONAPO), INFONAVIT, FOVISSSTE, SHF. Federal Government subsidies (CONAVI). Fixed rates Co financing programs Risk Based Pricing Relief programs Multiples terms Portfolio with Life and Casualty & Property Mortgage & unemployment insurance 16

16 Index 1. The Mexican Banking Sector 2. Mortgage Market in Mexico 3.Outlook and Conclusions 17

17 2. Mortgage market in Mexico 3. Outlook & Conclusions Final remarks The Mortgage Market in Mexico will keep its potential based on these strengths: 1) Demographic trends, Macroeconomic stability and a sounded Mexican banking system. 2) High competition among credit institutions: Lower rates, longer terms, and a wide range of banking products available for a changing demand. 3) Healthy and dynamic growth of mortgage lending (12% annual rate in and 10% in 2013e). These strengths, combined with a close coordination with the Mexican Federal Government, will enable Banks to fully meet the need of housing credits for the Mexican families. 18