Higher interest income and fewer reserves support banking profits


Higher interest income, given the increases in the reference rate of the Bank of Mexico (Banxico), as well as lower reserves for credit risks now that the effects of the Covid-19 pandemic have been mitigated, continued to boost banks’ profits in the first months of 2022.

In recent days, the main financial groups operating in Mexico, whose main assets are banks, finished reporting their quarterly results.

It was BBVA Mexico that, once again, reported the highest profit of all, with 17.8 billion pesos for the group in the period, which represented an increase of 60.3% compared to the first quarter of 2021.

This result was driven, explained the financial group, mainly by the positive evolution of the financial margin and commissions, derived from the continuous growth in the credit portfolio; robust asset quality management, and expense control, as well as a reduction in provisions.

For its part, Banco Santander México, reported that its profit in the first three months of the year amounted to 5,111 million pesos, this is an increase of 56% in its annual comparison, which was driven by a solid increase in the financial margin, a lower preventive estimate for credit risks, and lower administration expenses; which partially offset lower income from commissions and brokerage results.

Citibanamex, meanwhile, had a profit of 5,800 million pesos in the period, an increase of 32% compared to the same period in 2021. This result was mainly due to a decrease in total income derived from the decrease in Afore commissions. , and the performance of the markets, which was offset by income from the brokerage house, while expenses remained stable.

At Banorte, the profit was 10,748 million pesos in the first quarter of 2022, 26% more than in the same period of 2021. This was helped by growth in interest income, commissions; and a decrease in the amount of provisions.

As of February, profit amounted to $36,000 million

This Tuesday the National Banking and Securities Commission (CNBV) released the report of all the banks -main assets of the financial groups-, but with figures as of last February.

There, the banking sector as a whole already registered a profit of 36,191 million pesos, against the 21,753 million obtained in the first two months, but of 2021.

According to the regulator’s report, the result was due precisely to higher interest income, as well as commissions and fees, intermediation results, and fewer preventive estimates for credit risks.

Except for HSBC, the rest of the banks considered to be the largest in the system (Santander, Banorte, Citibanamex, Scotiabank and Inbursa), showed growth in their profits as of last February, compared to the same month last year.

It is worth mentioning that in 2020 and part of 2021, banks had to make additional reserves to face possible impacts as a result of the Covid-19 pandemic.

Of the portfolio, 95.5% without credit risk

Since January of this year, in order to have transparent and comparable information with other countries, banks operating in Mexico must report with new criteria to the CNBV.

Among the changes, they highlight that, instead of the current portfolio, they must classify it as a portfolio in stages 1 and 2 (that is, all that is not past due), and the past due portfolio in category 3. The latter includes credits that they were not paid. In addition, the comparisons must be monthly.

According to the CNBV report, as of last February the total credit portfolio stood at 5.6 trillion pesos, while that classified as stage 1 credit risk, added 5.3 trillion, this is a monthly decrease of 0.5%, and represented 95.5% of the total.

portfolio quality

In terms of portfolio quality, the Default Rate (IMOR) stood at 2.54% in February, 0.11 percentage points higher than the level observed in the previous month.

At the end of the second month of the year, the multiple banking sector was made up of 50 institutions in operation, the same number as in the same period of 2021.

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