Mexico Bank Lending Rises 9.4% On Year In July To MXN2.025 Trillion

Mexico's bank lending picked up in July, led by public sector loans and mortgages as the supply and demand for credit continues to recover from last year's deep recession, according to a government report.

Total loan balances rose to 2.025 trillion pesos ($156.8 billion) at the end of last month, a 9.4% increase from a year ago and 0.9% higher from the end of June, according to preliminary data published Monday by banking and securities regulator CNBV.

Businesses and consumers are demanding more credit as the economy enjoys an export-led rebound, with economists widely expecting an expansion of between 4% and 5% in gross domestic product this year. GDP slumped 6.5% last year owing to the global financial crisis and a deep recession in the U.S., Mexico's No. 1 trading partner. The Association of Mexican banks has forecast double-digit loan growth this year.

The CNBV said commercial-loan balances rose 5.3% year-on-year to MXN928.21 billion at the end of July, mortgages grew 14.5% to MXN349.42 billion, and loans to the public sector were up 62% to MXN296.22 billion.

Consumer loan balances fell 7.3% on the year to MXN383.66 billion. Within consumer lending, credit-card loans declined 17.4% to MXN208.20 billion, while personal loans grew 12.6% to MXN104.74 billion.

Banks' credit card portfolios continue to contract after several big lenders were hit by a surge in defaults last year as a result of the recession and sloppy lending practices earlier in the decade.

Asset quality was stable, with the percentage of nonperforming loans to total loans rising slightly to 2.70% from 2.67% a month earlier, but considerably better than the 3.77% observed in July 2009, the CNBV said.

Mexico's banking industry is largely in the hands of foreign banks, including Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC), Citigroup Inc. (C) and HSBC Holdings PLC (HBC, HSBA.LN, 0005.HK).

-By Ken Parks, Dow Jones Newswires; 52-55-5980-5177, ken.parks@dowjones.com

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