The next three months will be the toughest for Mexican banks, but most will pull through their country’s economic crisis, Mexican banking leaders said Thursday.
The government’s bank stabilization plan will keep most afloat despite an inevitable surge in bad loans and lack of liquidity following the peso’s devaluation and subsequent high interest rates and raging inflation.
“The next 90 days will be the toughest,” Manuel Medina Mora, deputy president of Banco Nacional de Mexico, told a press briefing Wednesday.
Banco de Mexico, Bancomer and Banca Serfin are Mexico’s three largest banks and hold 60 percent of total Mexican banking assets.
Several foreign and a few U.S. banks, meanwhile, have been talking with the Mexican government about acquiring banks that may flounder during the crisis, said bankers attending the briefing.
Under new government rules, foreign banks may own up to 100 percent of Mexican banks that control less than 6 percent of the market.
NationsBank Corp., based in Charlotte, N.C., and BankAmerica Corp., based in San Francisco, have been involved in the talks, said Mora.
Both banks refused to comment. NationsBank has applied for a banking license in Mexico and BankAmerica recently received one, officials said.
The Mexican government has already bailed out three moderate-sized banks, and officials said they expect more banks, particularly smaller ones, to require rescue.
“Most will pull through,” said Hector Rangel, deputy chief executive of Bancomer S.A.
Key to their survival is a segment of the Mexican government’s economic rescue plan that allows banks to restructure commercial loans for constrained borrowers and convert them to loans indexed to inflation. Such a plan will reduce interest payments. The loans will have maturities ranging from 5 to 12 years.
The government has set aside $86 billion pesos for the restructurings, which is enough to cover 15 percent of all bank loans. About 7.5 percent of all bank loans were past due at Dec. 31, and Rangel said he expects the level to increase to at least 8.5 percent by March 31.
The program should provide a cushion for borrowers faced with interest rates hovering at 100 percent, thus preserving the quality of bank loans, said Rangel.
The government is also expected to announce soon that inflation-index loans will be available for mortgage loans and some foreign currency domestic debts.
“If companies can meet their obligations we have a better chance of coping with the crisis,” said Rangel, adding that if rates remain at current levels for another quarter “we’re in trouble.”
To head off more problems, the Mexican government is requiring all banks to maintain an 8 percent capital level and will provide recapitalization loans to those in need.