Asociación de Bancos de México. Mexico s economic recovery and the contribution of the banking system

Transcription

1 Asociación de Bancos de México Mexico s economic recovery and the contribution of the banking system Tuesday, April 5,

2 Agenda 1 Mexican recovery 2 Banking System: performance and contribution 3 Conclusions 2

3 Two years after the Great Recession, Mexico has shown it's resilience Mexican economy has a recovery path in activity, low and stable inflation and it is isolated from recent global financial uncertainties. Mexico, GDP 1Q08=100 Source: Inegi Mexico, inflation y/y and contribution Source: BBVA Research 700 Mexico, EMBI spread pp Source: Bloomberg Q 08 2Q 08 3Q 08 4Q 08 1Q 09 2Q 09 3Q 09 4Q 09 1Q 10 2Q 10 3Q 10 4Q Ene-09 Abr-09 Jul-09 O c t- 0 9 Ene-10 Abr-10 Jul-10 O c t- 1 0 Ene-11 Abr Mar/08 Jun/08 Sep/08 Dic/08 Mar/09 Jun/09 Sep/09 Dic/09 Mar/10 Jun/10 Sep/10 Dic/10 Mar/ Core Non Core INPC 3

4 Competitiveness is improving and funding conditions are healthier Performance of the Mexican manufacturing exports in USA has been impressive in Exchange rate price competitiveness is not the unique cause behind competitiveness fostering. The cost of Banking credit is low and stable, it is supportive for economic growth and employment 14.5 Mexico, quota on US imports and Exchange Rate Source: BBVA Research Mexico, Interbank rate (Percentage, monthly average) Source: BBVA Research and Banxico Ene-01 Jul-01 Ene-02 Jul-02 Ene-03 Jul-03 Ene-04 Jul-04 Ene-05 Jul-05 Ene-06 Jul-06 Ene-07 Jul-07 Ene-08 Jul-08 Ene-09 Jul-09 Ene-10 Jul-10 Ene-11 Mexican Quota in US, Manufacturing, left axis Jun-05 Dic-05 Jun-06 Dic-06 Jun-07 Dic-07 Jun-08 Dic-08 Jun-09 Dic-09 Jun-10 Dic RER Mexico, Peso and USD, right axis. Higher Value, depreciation 4

5 Competitiveness, funding and employment drive economic expansion Improved foreign demand and better funding conditions diffuses by higher employment to foster domestic demand and economic growth. Employment Formal market, million) Source: BBVA Research Economic Growth Source: BBVA Research and INEGI Thousands 15,000 14,600 15,000 14,600 Thousands ,200 14, , Th +1,020 Th 13, ,400 13, ,000 Ene-06 Jul-06 Ene-07 Jul-07 Ene-08 Jul-08 Ene-09 Jul-09 Ene-10 Jul-10 Ene-11 13, (P) 2012 (p) -8.0 GDP Domestic Demand 5

6 Despite external shocks inflation expectations remain fairly unchanged Expectations agree that during 2011 inflation will be considerably lower than Medium and long term inflation expectations remain anchored. Inflation medium & long term inflation expectations (avg. yoy % chg.) Source: BBVA Research & Encuesta Infosel Ene-04 Jul-04 Ene-05 Jul-05 Ene-06 Jul-06 Ene-07 Jul-07 Ene-08 Jul-08 Ene-09 Jul-09 Ene-10 Jul-10 Ene-11 Long Term (5Y) Medium term (3Y) 6

7 Monetary policy: probably hike, in 4Q11 Banxico could hike rates in a preventive manner in the last quarter of 2011 to avoid the contamination of inflation expectations from current oil and commodities shocks Fondeo Rate (%) Source: BBVA Research Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Fondeo Rate Forecast 7

8 Peso appreciation is coherent with a more favorable scenario for the US economy, abundant liquidity and heightened risk appetite among investors. We expect the currency to outperform its peers, it is still undervalued with respect to 2008 levels. México, exchange rate, Ppd Source: BBVA Research Peso: appreciation by inflows and cycle Abr-09 Ago-09 Dic-09 Abr-10 Ago-10 Dic-10 Abr-11 Ago-11 Dic-11 Data Forecast 8

9 Higher potential GDP growth with reforms The second generation of pending reforms will trigger potential growth by improving economic efficiency. Mexico: potential GDP (y/y % change) Source: BBVA Research Major reforms that: Enforce the rule of law. Increase competition and market scrutiny. Reduce the fiscal vulnerability of the public sector. Inertial with Protracted process of Reforms 9

10 Agenda 1 Mexican recovery 2 Banking System: performance and contribution 3 Conclusions 10

11 The Mexican Banks have remained robust and have not required any public stimulus The Mexican Banking Sector remains highly capitalized and its limited credit risk is well covered. Capital Ratio of the Mexican Banking Net Capital / transactions at risk, % Mínimun BIS (8%) Mínimun CNBV (10%) Why? Adequate regulation Banking Supervision Legal Framework Improvement (Guarantees) Solid Risk Management In addition, 99.8% of the Collection Accounts are guaranteed (IPAB) 11

12 The Mexican Banks have remained robust and have not required any public stimulus The NPL has declined to pre crisis levels, while coverage remains high Non Performing Ratio Non Performing Loans / Total Loans, % Coverage Ratio Reserves / Non Performing Loans, % Source: ABM with information from BANXICO Source: CNBV 12

13 The economic slowdown is the main reason for the Commercial Bank s Lending growth decrease to the private sector Despite the GDP s decrease because of the recession, the Commercial Bank s Lending has just simply stopped its growth trend Lending to the private sector, GDP by Sectors Annual Real Growth, % I 04 II III IV I-05 II III IV I 06 II III IV I 07 II III IV I-08 II III IV I-09 II III IV I-10 II-10 III-10 IV-10 Construction GDP (Axis left) Factory GDP ( Axis left) Services GDP (Axis right) Credit Banks (Axis right) 13

14 During 2003 and 2009, the expansion of credit from the banks to the private sector has been outstanding Between , Commercial Bank s Lending to the private sector grew dynamically based on an adequate regulatory framework as well as a capitalized banking system. Between , the growth was bigger but these elements were absent. Growth of the Commercial Bank s Aumento del Crédito Interno al Sector Privado Lending (Por to ciento the Private del PIB) sector (% PIB) Fuente: Banco Mundial y estimaciones propias. Source: World Bank and AMB. 14

15 In comparison to other crisis, this time has not existed constraints related to the Credit Bank s Lending In comparison to other economic crisis, the Credit Bank s Lending, as percentage of GDP, did not decreased Source: BANXICO and INEGI. Changes in bank's credit (% GDP) 15

16 In comparison with other countries, Mexico did not experience a credit contraction during the crisis In contrast with other economies, credit in Mexico has shown a more dynamic behavior Banks Credit Annual growth rate, % México EEUU Chile Gross Domestic Product (GDP) Annual real gorwth rate, % M M J S N 2010 M M J S N Source: SEE BBVA based on central banks and economic authorities Source: SEE BBVA y FMI. 16

17 Since November, the annual growth in loan portfolio reached 10% Total loan portfolio Balance ( 000 mdp) Average Growth +18% Growth +4.8% Growth +10% Source: BANXICO. 17

18 The commercial portfolio has set the momentum with a growth of 10.3% Total oustanding portfolio Balance ( 000 mdp) Average growth +14% 2010 Growth +10.3% Source: BANXICO. 18

19 Credit Performance Commercial Portfolio during 2010 Thousands of Millions Pesos Total Financing: $152 mil mdp Source: ABM and BBVA Bancomer. 19

20 Commercial Portfolio Performance: Banxico s Survey Question: «Are cost and access to credit a constraint for the firm?» 1T09 4T10 Almost 80% of the firms confirmed that cost and access to credit represent a minor or non constraint: The best figures in last 2 years. Source: ABM with BANXICO figures 20

21 Credit to SMEs has grown strongly: +19% SMEs loans Growth % +19% +17% 1% Source: ABM 21

22 The annual growth in mortgage portfolio reached 10% Total mortgage portfolio Balance ( 000 mdp) TAM +35% % Source: BANXICO. 22

23 Also, the Consumption portfolio had a quick recovery The consumer portfolio has grown since september 2010 Consumer Lending Portfolio Balance ( 000 mdp) Mar 2010 Jan % Source: BANXICO. Jan 23

24 Also, the Consumption portfolio had a quick recovery In fact, the Consumption Portfolio growth has come from a 15% (jan. 2010) to +9% (jan. 2011), meaning an increase of +2,400 basis points bp Consumption Portfolio 2010 Annual growth, % Source: ABM with BANXICO figures 24

25 The Mexican Banks have remained robust and have not required any public stimulus The level of investment in banking infrastructure is high: 10% of the profits. Capital 000 Millons Ps Source: CNBV 25

26 Banking investment In the past 5 years, Commercial portfolio nearly doubled in proportion to GDP. Commercial Portfolio GDP % Number of Credits Commercial Portfolio Thousands Source: BANXICO and INEGI. Source: CNBV. 26

27 Banking investment In recent years, the credit to the housing sector has grown dynamically Housing Portfolio Total, banks, and other* Balance (millions of pesos), December 2010 Housing Sales Thousands, units * Other: Includes Infonavit and mortgage non- bank banks Source: BANXICO 27

28 Banks improve their infrastructure Banks increased by 44% the number of branches in the last 5 years: Branches There are almost 165 mil employees, 30% more than 2005: 28

29 Banks improve their infrastructure In the period , the growth of ATMs was 57% and POS 139%. ATMs (number) Thousands POSs (number) Thousands 29

30 Remarkable outcomes The banking industry has increased almost by 2 credit cards and debit cards times over the past 5 years, improving payment methods Debit Cards Millions Credit Cards Millions 30

31 Remarkable outcomes In the past years the Banking sector has attained the following achievements: Increased its customers base in more than 18 million from 2003 to date, reaching an increase of 54% in the last 5 years. Customers Millions 31

32 There has been a significant expansion in the coverage of banking services in the larger towns: Municipal level coverage of banks in Mexico* Increasing investment <50% 50% 65% 65% 80% 80% 100% 65% 80% 80% 100% *% presence in municipalities with more than inhabitants 32

33 There is still great potential for increasing coverage Through Correspondent Banking, the gap in coverage of financial services can be narrowed: Prospect of Banking Correspondents Coverage percentage Notes: Commercial Banking: includes Compartamos service offices EACP: includes cooperatives, solidarity funds, credit unions and SOFIPOS Retail Superstores: Walmart, Soriana, Chedraui, Comercial Mexicana, Sears, Sanborns, Coppel Convenience Stores : Oxxo, 7 Eleven, Farmacias Benavides, Farmacias del ahorro, Farmacias Guadalajara, Waldos, Office Max, Mix Up, Muebles América, Pitico, Promujer Diconsa: considered only 25% of stores (5.801 out of ) by the technological capability. Considering the 100% Diconsa is present in 90% of municipalities (2.199 out of 2.456) 33

34 Support national infrastructure and economic growth The banks provides most of the resources for infrastructure Total investment: $297,117 millons of pesos Amount of funding provided by banks: $218,317 millions of pesos 73% of financing comes from Banks 34

35 Banking Competition is growing Increasing banking licenses has been important and the figure of "niche banks has been stablished. Number of Banks (Commercial Banks) Source: ABM with information from the Mexican Financial System Catalogue published by the Mexican Ministry of Finance. 35

36 Agenda 1 Mexican recovery 2 Banking System: performance and contribution 3 Conclusions 36

37 Conclusions: better forecasts for the Mexican Economy and huge banking potential Mexico GDP growth will be in the 4.5 5% range in It is on track to a more mature cyclical stage with a growing contribution of domestic demand. A factor supporting the Mexican economy is its isolation from global financial tensions throughout 2010 & 2011 as a result of the commitment to fiscal consolidation. The fall in inflation in 2010 will continue in Increasing the growth capacity of the Mexican economy requires a steady and firm process of wide ranging reforms affecting the rule of law, competition and an enhanced efficiency of the public sector. The banking sector was a strength for the economy in this recession: high level of solvency, liquidity and credit supply. Banks do not need public support. The performance of bank credit has been very positive compared with other similar episodes and economies. Despite the deep recession, credit penetration has been maintained. The lower rate of credit growth was mainly due to demand factors. Mexico offers a huge potential for financial services. Drivers: demographics and under banks clients. There is room for an additional increase in bancarization if measures to foster economic formality are taken 37

38 Asociación de Bancos de México Mexico s economic recovery and the contribution of the banking system Tuesday, April 5,