“The stable outlook is largely supported by macroeconomic and operating conditions, as well as the banks’ strong credit fundamentals, which will help manage uncertainty stemming from rising inflation and global volatility that should affect, albeit to a lesser extent, scale, economic activity in the region,” they considered.
According to Moody’s, Latin America has few direct economic and financial links with Russia and Ukraine, “so the region’s banks are relatively protected from the financial sanctions that affect Russia.”
The continuation of inflationary pressure and the reactive tightening of monetary policy in Latin America will impact economic activity at a time when asset risk is also increasing in the region, albeit slowly, after the end of aid programs implemented since 2020.
Moody’s expects Latin American bank profitability to continue to recover and improve overall, benefiting from higher interest rates and more moderately growing business volumes in 2022.
In this regard, they explained that the general funding source for Latin American banks will continue to be deposits, with a limited dependence on market funding, which reduces their exposure to a more volatile global financial market, they concluded.
Source: Ambito
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