'Worst is over' as Mexican banks look to leave the pandemic behind

An “ambitious” new escalation of vaccination efforts suggests Mexico has turned the corner on COVID-19 and that “the worst is over,” according to the head of banking association ABM, Daniel Becker.

“In light of the information we have today, the answer is yes: the worst is over. We will surely see growth that begins to rebound from the second half of this year,” said Becker (pictured) at an ABM press conference Wednesday, his first official media event since assuming the trade group’s presidency in March. 

The true health of assets in Mexico’s commercial banking sector remains partly masked due to loan and credit card payment deferment programs that concluded in December, with overdue payments not yet reported as delinquent. 

Hitting the 90-day past-due mark at the end of March, charge-offs are expected to begin in earnest this month on unpaid loans. Similar waves of asset deterioration could be seen each month up to the 180-day mark at the end of June. 

Becker, however, was upbeat, saying the NPL rates, which one Fitch analyst told BNamericas recently could hit as high as 9% by mid-year, would begin to decline in the coming months, with demand for credit resuming with economic reactivation and vaccinations.

Becker said he received details of the government’s upcoming plan to ramp up vaccinations during a meeting Tuesday with finance minister Arturo Herrera, leading ABM to believe the recovery is set to pick up speed. 

“[Herrera] told us that there is a very ambitious vaccination project, and yesterday [Tuesday] we had the opportunity to review the doses that will be applied in the coming months,” said Becker. “There’s very encouraging data, and this will be closely related to the growth of demand for credit.”

Becker warned, however, that any additional mobility restrictions caused by a resurgence in infection rates would have an impact on credit demand and delinquency rates.

One study indicated 30% of Mexicans stopped paying their debts at some point due to the economic impact of the pandemic. 

The ABM head added that even though the association sees the economy rebounding and resuming “normal” activity levels by year-end, formal job creation could take as long as until 2023 to reach pre-pandemic levels, citing research from BBVA México.