Fitch Ratings said its sector and rating outlooks for Latin American nonbank financial institutions are stable, reflecting an environment that is conducive for growth despite recent negative sovereign rating actions in the region.
Low banking penetration, underserved small and medium-sized enterprises and low regulatory requirements continue to drive loan portfolio growth for nonbank financial institutions in Mexico, Colombia and Argentina.
"Fitch expects a moderate economic rebound in the region, which could support further lending activity in 2018," the rating agency said. "However, uncertainties such as electoral agendas, inflation and NAFTA renegotiation in Mexico could pressure growth in some of the countries."
The earnings of Latin American nonbank financial institutions are supported by relatively high interest margins and lower regulatory costs compared to banks. Additionally, wider interest margins have allowed the companies to absorb higher loan impairment charges associated with their focus on riskier segments.
Meanwhile, financial technology firms have continued to grow their presence in Latin America, and some of the region's nonbank financial institutions are exploring possibilities to expand their operations through fintech units, Fitch noted.