In October, bank credit continued to contract, but moderated

Although commercial bank credit to the private sector continued to contract in October, it is becoming less pronounced.

According to the monetary aggregates and financial activity of the Bank of Mexico (Banxico), in the tenth month of 2021 the total current portfolio showed a real annual contraction of 6.1%, bringing the balance to 4.7 trillion pesos. In previous September the fall was 7.7 percent.

It was in August 2020 when bank credit to the private sector registered its first fall as a result of the crisis caused by the Covid-19 pandemic, but in April 2021 it had the deepest with 14.6 percent. Hence, the contraction has been easing month after month.

Credit to companies and individuals with business activity, was the one that in October continued with the greatest fall, of 9.4% in its real annual comparison, but less than that registered in September when it was 11.9%. The balance was 2.6 trillion pesos.

Specialists explain that this is due to the fact that, although at the beginning of the pandemic, companies resorted to existing credit lines to face the effects of the contingency, they subsequently stopped the demand for credit or resorted to other sources of financing.

Within the business portfolio, the segments in which there was a greater drop in bank credit in October were: manufacturing of transportation equipment with a real annual contraction of 31% and mining with 18.2 percent.

Regarding consumer credit, it showed an annual fall of 4.5% in October, when in September it was 4.8 percent. The balance was 994,500 million pesos.

In the interior, in payroll loans the fall was 0.3% in October (1.4% in September); in the personnel of 8.3% (against 9.3%); in credit cards of 7.1% (against 6.2%); and in those destined to durable consumer goods of 5.0% (against 4.5 percent).

Housing slows growth

With regard to housing credit from commercial banks – which is the one that has not fallen at any time during the pandemic – this continued with growth this time of 3.2% in October in its real annual comparison. However, this rise was marginally lower than the 3.3% of the previous September.

The balance of this portfolio was 1.06 billion pesos.

Banxico has highlighted the weak performance

In their most recent minutes of the meeting of the Board of Governors of Banxico, most of the members highlighted the weak performance that continues in financing the private sector, especially in relation to companies.

The Association of Banks of Mexico has highlighted, for its part, that credit shows some signs of recovery, including that destined for companies, but that the reactivation of the latter will become more evident as demand and economic activity increase.

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