Non-performing loans in Mexico are growing at a worrying pace. Despite official estimates putting consumer NPLs at 5.8% of the total consumer loan market, some analysts believe that real levels are in double digits already.
"There are a growing number of consumer loans ending up as NPLs in Mexico. This emerging trend is the result of increasing over-indebtedness," says a loan financial specialist in Mexico. "Although this indebtedness is still lower than in places like the US and UK, it is reaching a worrying level for Mexico."
He adds: "A couple of banks have recently sold NPL portfolios that have been made up of defaulted consumer loans but the individual loans are for small amounts and so these portfolios aren’t worth much. The banking system in Mexico is very concentrated – it’s the main consumer banks that are involved here."
David Martens, head of distressed debt at ABN Amro, saw these two portfolios in the market. "These portfolio sales could have been a coincidence but it could also be the sign of a growing trend," he says.
"Mexico is economically tied to the US so if the US is having credit market issues and falling into recession then it would be unrealistic to think Mexico will carry on without feeling some of the US pain."