Mexican banks exposed to public sector debt have room to maneuver, Fitch says

MEXICO CITY (Reuters) – Mexican banks face risks from exposure to sovereign debt and debt from state entities, but have “sufficient ratings headroom” and can expect solid financial performance this year, Fitch Ratings said on Monday.

The banking sector has ample capitalization according to the ratings agency’s stress test scenarios, Fitch added.

State firms like energy companies Pemex and the Comision Federal de Electricidad (CFE) “continue to represent downside risks for Mexican banks reflecting increased volatility that could reduce net income,” Fitch said.

While government-linked loans now represent a smaller share of bank loans than in previous years, Fitch said “lending to states and municipalities in particular will remain a relevant business for banks that can finance this highly specialized sector.”

Fitch has previously warned that the government of President-elect Claudia Sheinbaum, set to take office in October, will face risks to its credit rating from a possible growing debt load and larger fiscal deficits.

Sheinbaum won a landslide election victory on June 2.

(Reporting by Raul Cortes and Brendan O’Boyle; Editing by Kylie Madry)


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