In March 2008, we updated all data for the 59 countries surveyed with official figures, sourced fromcentral banks and regulators. In most cases, we were able to find data that pertained to the end of 2007: inalmost all other cases, the data pertains to September 30 2007. As a result, the insights that we derive onparticular countries are based on consistently sourced information that is far more current than it had beenpreviously.
Although we gather data for countries such as the US, Japan, Australia and the eurozone, the vastmajority of the 59 countries whose banking industries we survey are, or are generally seen as being,emerging markets. For all the widely publicised problems of large banks in developed countries, in thewake of the subprime banking crisis in the US, 2007 was an extremely good year for the banking sectorsof the emerging markets. In local currency terms, the median growth in assets was 21% (in Brazil). Themedian rates of growth in loans to non-bank customers and in deposits were 22% (in India) and 18% (inMorocco). In some countries - and not just those enjoying oil booms - the figures were spectacular. InUkraine, for instance, assets and deposits rose by 76% and 62% respectively. Loans grew by more thanone-third in Bulgaria, Estonia, Latvia, Lithuania, Romania, Russia, Serbia, Slovenia, Peru, Bahrain, Iranand Nigeria. Deposits also rose by more than one-third in most of these countries.
In absolute terms, Mexico’s banking sector enjoyed reasonable growth through the year to September 302007. In local currency terms, total assets, total loans and total deposits increased by 9%, 20% and 7%respectively. The loan/deposit, loan/asset and loan/GDP ratios all rose.
Changes in Mexico’s banking sector must be considered relative to other countries. Of the 59 countriessurveyed by BMI, Mexico ranks 54th in terms of local currency asset growth, 33rd in terms of localcurrency loan growth and 52nd in terms of local currency deposit growth. All three of the ratios are risingfrom very low levels. Mexico’s rankings in terms of its loan/deposit, loan/asset and loan/GDP ratios are31st, 30th and 57th respectively. In a country with per capita GDP of US$8,249, deposits per capita arejust US$1,585.
In Q108, we envisaged that total assets, total loans and total deposits would rise by 9%, 12% and 10%annually through the 2007-2012 forecast period. Now, despite using an improved forecasting method, weare still looking for similar growth rates of 8%, 12% and 7% respectively.
Since Q108, we have calculated, on a consistent basis, a Commercial Bank Business Environment Rating(CBBER) for each of the 59 countries surveyed. The CBBER includes an assessment of the limits ofpotential returns: it does this by taking into account the size, growth potential and bancassurancepotential of the banking sector, as well as aspects of the economy in 2007. The CBBER also depends onan assessment of the risks to the realisation of potential returns: this reflects BMI’s assessments ofoverall country risk, together with the regulatory and competitive environment.
Mexico’s CBBER is 64.8. In the context of Latin America, this means it is an attractive country; theCBBER is only higher in Brazil. Within the CBBER, the most important aspect is the commercialbanking market structure element of the limits of potential returns. Mexico’s rating for this element - 63.1- is only marginally lower than the country’s overall CBBER and roughly equivalent to the countrystructure element of the limits of potential returns - 59.9. This indicates a commercial banking sectorwhose development is neither substantially over- nor underdeveloped relative to the general wealth,stability and financial infrastructure in the country.
Nevertheless, the CBBER highlights the factors that are holding back Mexico’s banking sector. One is therelatively high potential level of volatility in the broader economy. Another is the modest estimatedgrowth in total assets. On the positive side for Mexico, despite the potential for economic volatility, thepotential for long-term financial risks for the commercial banking sector remains low.
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