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The outlook is promising for Latin American banks in 2014, although things will move at different speeds in each country. While Chile, Colombia, and Peru expect a moderate slowdown in the pace of credit expansion compared with the rapid growth seen in recent years, Mexico is expecting credit to surge due to greater economic growth. Analysts are also focused on Brazil, where the increasing role of public banks - which is driving portfolio growth at a much higher rate than the increase in the country's GDP - could put pressure on asset quality in the medium term.
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After years of rapid expansion, the banking sector in Latin America is preparing for a slight slowdown in growth of the loan portfolio in 2014. Reduced economic growth, signs of deterioration in labor markets, and efforts of regulators and banks themselves to contain the incipient rise in levels of non-performing loans have prompted analysts to forecast lower credit growth next year.
Changes in the portfolio
Since the beginning of the last decade, the increase in per capita income in most Latin American countries, low interest rates, and the banks strategy to expand their reach to new segments of the population have made the consumer segment the main driving force for credit expansion. But analysts anticipate changes in the loan portfolio balance sheet next year.
Profitability to remain high
Analysts expect a rise in funding, but dont foresee a significant increase in borrowing costs, since the currently low levels of delinquency are only expected to climb slightly in 2014. They estimate that asset quality will remain the same or deteriorate somewhat from the record figures observed in 2011 and 2012 in several countries in the region, which means that margins will be similar or slightly higher than this year.
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