Mexico's banking majors are expected to report mostly higher full-year 2016 earnings in the coming days, despite their facing a turbulent economic environment marked by a steadily weakening peso.
According to S&P Capital IQ estimates, both Grupo Financiero Banorte SAB de CV and Grupo Financiero Santander Mexico SAB de CV are expected to show double-digit improvements in their 2016 profit figures when they report Jan. 26 and 27, respectively.
Banorte is seen posting net income of 19.60 billion pesos for the year, up 14.6% from 2015, leading to an expected EPS of 7.14 pesos. Santander Mexico is expected to post a full-year profit of 15.77 billion pesos, up roughly 11.5% year over year, for an EPS of 2.29 pesos.
However, Grupo Financiero Inbursa SAB de CV, which booked weaker results in the first half of 2016 on the back of market-related losses and loan loss provisions, is expected to finish the year with a 7.7% drop in full-year profit at 10.82 billion pesos from 11.73 billion pesos.
The expected 2016 results come amid an operating environment of rising interest rates, slower economic growth and a dramatically weaker local currency.
Mexico's central bank steadily increased its benchmark rate in 2016, bumping it by 250 basis points over the course of the year to 5.75% amid inflationary pressures, economic concerns over U.S. trade policies and action by the U.S. Federal Reserve.
In the minutes for its final monetary policy meeting in 2016, the central bank noted that it expected an economic slowdown in the fourth quarter of 2016. Overall, Mexican GDP growth was expected to have slowed to 1.90% in 2016 from 2.63% a year earlier, according to Economist Intelligence Unit estimates.
Those issues have weighed heavily on both Mexico's stock market and its currency, with the latter sinking by about 16.5% against the U.S. dollar over the course of 2016. The SNL Mexico Bank Index, meanwhile, lost nearly 12% on the year, with the majority of the losses suffered in the final months of 2016 following the U.S. election results.
The Mexican banking majors fared far better, however, with their 2016 total returns ranging from 2.22% for Inbursa to 10.55% for Banorte.
As of Jan. 24, US$1 was equivalent to 21.36 Mexican pesos.
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