Mexico City.- The restriction on access to international, government and local resources left non-bank financial institutions at risk of facing major refinancing and possible funding problems, Fitch Ratings said.
Independent finance and leasing companies are the most exposed, due to their need for continuous funding, the rating agency said in a new analysis of the sector.
“These dynamics are particularly negative for the credit profile of issuers that cannot proactively address short-term debt maturities, but even for those issuers that can access the markets it is likely to be on more onerous terms.
“This will put pressure on net interest margins, limit portfolio growth or reduce financial flexibility,” Fitch anticipated.
Among the possible sources of financing for the country’s non-banking institutions, local markets and secured credit facilities, which are bank lines or asset-backed securitizations, will remain relatively more accessible, he added.
By comparison, international debt markets are mostly closed after defaults on international bonds, issued by three of the country’s non-banking institutions in the last 18 months, he added.
At the end of 2022, about 71 percent of the local issuances of Mexico’s non-bank institutions assessed by Fitch had the highest rating on the national scale.
Of the non-bank institutions rated by Fitch, 28 percent have an authorized local debt program and 18 percent have placed debt in the national market since October 2022.
In absolute terms, the issuances of Mexican non-bank financial institutions in the local debt market are low, the rating agency highlighted.
As of year-end 2022, these represent 4.4 percent of total debt issued, with almost half of the debt only from nonbank institutions issued by captive companies, which have high national ratings, support derivatives, and broader brand recognition. in the debt markets. “On the one hand, low market penetration could offer an opportunity for Mexican non-bank financial institutions to seek to expand their investor base, although likely at higher funding costs.
“On the other hand, it can also suggest a certain degree of risk aversion on the part of the market. Issues could be smaller and less frequent in relation to corporate and bank issuers,” he contrasted.
