Fitch Ratings' 2017 outlook for South American banks excluding Brazil, published Dec. 8, highlights "mixed degrees of robustness" amid a challenging economic environment.
With the exception of Venezuela, Fitch expects banks in the region to continue showing resilience in the face of global headwinds. "Banks have largely adjusted to currency and commodity price volatility and major electoral and climate downside risks failed to materialize," Fitch said.
In addition, South American banks have generally shown solid loan quality ratios since 2014, despite sluggish economic growth, currency volatility and tighter margins, Fitch said.
Going forward, sector outlooks could improve in line with recovering credit growth, improved financial performance, better solvency indicators, and the alignment of local regulations with Basel III capital rules, Fitch added.
But national outlooks differ in terms of banks' performance and capitalization. "Peruvian and Chilean banks stand out for their resilient financial metrics, a trend Fitch expects to continue in 2017."
As for Colombia, banks are expected to continue to adapt to tighter interest margins and capital pressures related to the local currency's depreciation and changes in accounting standards.
In Venezuela and Argentina, "inflation-induced credit growth should continue to support near-term loan quality ratios."
The performance of Argentine banks remains "reasonable" and the government has significantly reduced political and regulatory intervention in the banking system, but the environment remains challenging in the short term, Fitch said.
Finally, the "inadequate policy response and deepening crisis" in Venezuela and the weak economy in Ecuador, as well as regulatory uncertainty in both countries, is behind their negative sector outlooks.