The banks of Latin America will face challenges in maintaining stable and high levels of profitability over the next decade, he anticipated. Moody’s Ratings in a report to which Ámbito had access.
A possible extended period of economic growth slower than expected, the need for investments considerable in technology and fierce competition between traditional entities and fintech more efficient are some of the obstacles that threaten the stability of recent years.
“Historically, the profitability “The performance of the region’s banks has been much higher than in developed markets,” Moody’s admitted, but warned that to generate future profits they will have to “adapt to new difficulties.”
In the report, the rating agency stated that “the net interest margins (NIM) are also high, reflecting credit risks high rates arising from significant costs associated with underdeveloped credit markets, a history of economic volatility and legal obstacles.”
At the same time, he said that “some banking systems will probably continue to face high financing costs, which will put to the test the traditional low-cost deposit bases that supported high margins in recent years.”
Economic activity and technology
Moodys warned that the economic activity will remain weak in the region, “with uncertainties that will limit the quality of the portfolios” and anticipated that this scenario “will require caution in the origination of loans to maintain the improvement of the indicators of “credit risk”.
“Country-specific obstacles may also reduce business volume and force banks to cut back on loan origination,” the rating agency said, adding that “competition in credit markets will increase as banks seek to improve their credit quality.” productivity and product offering, which will put pressure on price differentials. credit.
As for the technology, He considered this aspect as “key to efficiency, operational safety, credit risk assessment and customer acquisition”, which is why banks in the region “are doubling their investments”.
However, the survey stated that “these issues involve greater operating costs, But they are necessary to achieve greater long-term income generation, which is particularly important in Latin America, a region with high population growth and still low credit penetration.”
Source: Ambito
