Fitch Publishes Chilean Retail Lenders Dashboard
Fitch expects Chilean retail banks and non-bank financial institutions' (NBFI) profitability to suffer due to deterioration in asset quality and slower growth.
While the banking system's consumer loans quality remains solid, that of the payroll lenders has markedly deteriorated since 2012. Credit cards non-performing loans (NPLs) have remained relatively stable since 2010, although with higher chargeoffs. Most banks have been more focused on medium and higher income segments, which helped maintain healthier asset quality. This also led to stronger loan demand for retail oriented NBFI (especially the cajas de compensacion de asignacion familiar [CCAFs]) from more vulnerable segments, resulting in higher credit risks. Fitch expects higher credit costs throughout 2016 and 2017 for retail lending, especially from low income segments, as unemployment is set to rise due to the sluggish economy.
Since the default of CCAF La Araucana in November 2015, NBFIs, especially CCAFs, saw their access to capital market and bank financing, their two main funding sources, temporarily restricted. While two CCAFs (Los Andes and Los Heroes) have issued medium-term bonds in recent months and Los Heroes refinanced all its bank debt, banks remain reluctant to give new financing to this sector. The situation of other NBFIs has gradually returned to normal, although costs remain somewhat higher.
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