The banking sector of the Americas is a medley of talking points—both good and bad. Major markets from head to tail are experiencing fluctuating performances, with noteworthy developments in both directions.
Panama, for instance, was recently added to the European Union’s blacklist of high-risk nations that do little to counteract dirty money. At the same time, the Inter-American Development Bank invested in the Central American country’s Metrobank to increase credit-financing levels to Panama’s small- and medium-sized enterprises.
In the United States, a landmark merger between BB&T Corporation and SunTrust Banks has been agreed, pending regulatory and shareholder approval, which would create a new entity and the sixth largest US bank by assets. If the merger is successful, then observers expect a wave of US bank consolidations. With a friendly administration in the White House, eager to liberalize a banking sector that it views as overburdened by regulation, the merger will likely receive regulatory blessing and open the gates to more consolidation.
Canadian mortgage growth recently sunk to a 17-year low, sparking concerns over the highly regulated Canadian mortgage market. With residential mortgages growing 3.1 percent to $1.55 trillion year-to-date in December 2018, the growth rate is at its lowest level since 2001. The anaemic growth has caused banks to seek business elsewhere while sparking a national row over Canadians’ inability to purchase a home. While Canada’s banking regulator argues in favor of more rigorous stress tests and against loosening the reins of credit markets, detractors moan about the negative impacts on growth.
A string of positive moves by the Bank of Mexico, Mexico’s central bank, has garnered high praise. In particular, the Mexican central bank implemented more prospective and complex models that allow a Mexican institution to more readily meet its capital preservation and liquidity objectives. At the retail level, Mexico City officials also agreed to address a rash of robberies plaguing ATM customers across the city. To combat the rash of post-ATM thefts, Mexico City bank cameras will be linked to a C5 security system—which authorities expect will reduce theft incidents.
Despite these positive developments, unease still permeates the Mexican banking market as foreign investors wring their hands over Mexico’s newly elected president, Andrés Manuel López Obrador. Mexican bank stocks dipped considerably after the government’s proposal to cut certain bank commissions.
Chile’s banking industry has undergone numerous changes since its business-friendly president, Sebastián Piñera, took office in 2018. Higher credit growth in the country has allowed for the Chilean central bank to raise national interest rates by 25 basis points to 3 percent. Chile bounced back from the hefty setback brought about by the end of the commodity super-cycle. Amid the myriad of exports affected, Chile’s main export—copper—saw its price plummet to record lows.
Nonetheless, the country’s banking sector is currently in an energized upswing as new and lucrative deals are brokered throughout the industry. For instance, the insurance conglomerate Chubb—which is seeking a greater footprint in Latin America—has recently finalized a deal with Banco de Chile, the country’s largest bank. The 15-year distribution agreement will allow Chubb to capitalize on the growing Chilean market as a springboard to access the rest of Latin America’s markets.
The recent election of Brazilian populist President Jair Bolsonaro sent shockwaves throughout Latin American markets. Despite political hand-wringing, the country’s banking sector seems to have shrugged off any instability and continues to grow. Deutsche Bank recently announced that it is making the necessary arrangements to return fixed-income trading business back to Brazil. The move appears to be a direct response to the new president’s economic proposals as he pursues a pro-business agenda.
Banco Bradesco, Brazil’s second-largest bank, has announced that it will turn to artificial intelligence (AI) in an effort to enhance its banking services. The AI application has been under development for four years and promises to improve user experience, reduce costs and boost sales in 2019.
Argentina is still limping out of its 2018 currency crisis as its benchmark interest rate hovers around 56 percent. The interest rate—the highest in the world—was an attempt by the Argentine central bank to slow the bleeding as the country suffered from a strong US dollar in tandem with increasing US yields.
ICBC (Industrial and Commercial Bank of China) Argentina recently struck a deal with IBM to implement cloud and AI technology to effectively reinvent the Argentine banking industry. The deal, worth $63 million, is expected to increase response time, predict consumer behavior and reduce client queries.
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