Inflation leads Mexicans to pay their expenses with credit: BBVA

The increase in inflation in Mexico has generated that families begin to buy their daily consumption through credit alternatives, because their real income is lagged by the price increase.

According to the Chief Economist of BBVA, Carlos Serrano, in this scenario delinquencies are expected to register a marginal increasewhile inflation would begin to decline until next year.

Higher inflation is causing real incomes to lag and therefore there are families that are using credit to compensate for this decrease.“, he assured during the presentation of the study “Mexico Banking Situation”.

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Serrano explained that there is an increase in consumer credit in nominal terms due to the fact that to acquire the basket of goods, because the population must pay more and consequently resort to bank credit products.

According to BBVA, the sector’s consumer credit portfolio grew 2.8% in annual terms at the end of March compared to the same period in 2021, in fact, this segment has grown at positive annual rates in real terms (discounting inflation) since January of 2022, after almost two years contracting.

According to BBVA, in March 2022, the current credit card portfolio increased by 3.3% in real terms, the highest recorded since June 2017, and both the private consumption indicator in the domestic market and the Global Activity Index Economy (IGAE) of retail trade have presented a significant rebound in the use of credit cards.

“The lower savings accumulated by households due to reopenings and the relative return to normalcy in the face of the decrease in Covid-19 cases, could explain the change in trend in the credit card segment,” the study specifies.

In addition, BBVA indicates that it is observed that, from the second two months of 2020, that the balances of non-total accounts show annual contractions until the sixth two months of 2021, the latest data available from Banxico.

But during the same period, the current balances of totaleros clients presented a real contraction until the fifth bimester of 2020 and have increased since the sixth bimester of that year, with a slowdown in the last two bimesters of 2021.

“The recomposition of the balances that this evolution implies by type of client has a direct impact on interest income and, consequently, on the financial margin of banking institutions,” the institution assures.

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While the current balance of payroll loans accumulated 5 months of real annual growth in March, registering an increase of 3.8% in that month, the highest since January 2020 and averaging an increase of 3.5% at the annual rate in the first quarter. %.

For its part, the current portfolio of personal loans grew 1.1% in real terms in March, after 39 months of falls; while the balance of current credit for the acquisition of durable consumer goods continues to record annual falls in real terms, registering -1.8%.

In addition, BBVA anticipates that Banco de México (Banxico) will continue to raise its reference rate, reaching 8.75 to 9% at the end of the year, which could affect the demand for credit, mainly by companies.

Carlos Serrano pointed out that there is also a reduction in the holding of Mexican government bonds, due to the strong increase in interest rates, mainly in the United States, and the volatility that prevails in the markets.

“The reduction in the holding of Mexican bonds by the government by non-residents in 2021 exceeded what happened in 2020. Given the higher interest rates in the United States and the volatility, it seems difficult that there is an appetite for Mexican bonds in the short term,” he said.

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