Mexico Bank Penetration, Savings And Loans Continue To Improve

Mexico has made enormous strides to increase its banking penetration in recent years, with 60% of the population currently taking advantage of banking services versus just 25% in 2004, Finance Minister Ernesto Cordero said Friday.

Speaking at an event celebrating the launch of a program that enables retail investors to directly purchase short-term government Treasury bonds, known as Cetes, Cordero reflected on how account holders and the general economy benefit from greater financial stability when more Mexicans use banking services.

Ignacio Deschamps, president of Mexico's banking association, broke down the progress in another manner. As of April, Mexican banks catered to 42 million clients, up from 28 million five years ago, he said. Private-sector savings, meanwhile, has expanded to 58% of gross domestic product from 38% a decade ago, he added.

Deschamps is also chief executive of Mexico's largest bank, BBVA Bancomer.

Mexico has long been criticized for its low bank penetration relative to other countries in Latin America.

In addition to progress made in attracting more Mexicans to the banking system, Deschamps noted that bank credit had expanded by 7% in the year through September, putting the figure on track to meet the association's goal of 10% credit growth in 2010. Total loan balances stood at 2.061 trillion pesos ($165.3 billion) at the end of September, according to data from Mexican banking and securities regulator CNBV.

Deschamps said if the sector achieves a double-digit expansion in credit this year, it could soon return to the meteoric growth it posted between 2003 and 2007, when it averaged annual credit expansion of 25%.

Mexican banks have been lending more freely this year after having cut back on loans during the 2008-2009 global financial crisis.

Mexico had one of lowest measures of bank loans to GDP in Latin America last year, at 15%, trailing other major economies like Brazil and Chile.

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

-By Amy Guthrie, Dow Jones Newswires; (5255) 5980-5177, amy.guthrie@dowjones.com

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