MEXICO CITY (Reuters) – Mexican banks face risks from sovereign and state-owned enterprise debt but have “ample rating headroom” and can expect strong financial performance this year, Fitch Ratings said on Monday.
According to the rating agency’s stress testing scenarios, the banking sector is sufficiently capitalized, Fitch added.
State-owned companies such as utilities Pemex and the Federal Electricity Commission (CFE) “continue to pose downside risks to Mexican banks, reflecting increased volatility that could reduce net income,” Fitch said.
Although government-related loans now make up a smaller share of bank loans than in previous years, Fitch said that “lending to states and municipalities in particular will remain a relevant business for banks that can finance this highly specialized sector.”
Fitch previously warned that President-elect Claudia Sheinbaum’s government, due to take office in October, faces risks to its credit rating due to a possible rise in debt burden and widening budget deficit.
Sheinbaum won a landslide victory in the June 2 elections.