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Mexican banks expect greater credit demand in Q3 despite gloomy economic outlook

Mexican banking executives expect greater demand for credit in the third quarter of 2018 despite a perceived deterioration in the domestic and international economic environment, according to a survey by Banco de México on the general conditions and standards in the credit market.

According to the survey, executives of loan-granting banks with the highest market share predict an increase in credit demand from nonbanking and mortgage financial intermediaries segments. For banks with lower market share, credit is expected to rise in the segments of nonbanking financial intermediaries, credit cards and mortgage loans.

Banks accounting for higher market share also believes conditions and credit approval standards for large nonfinancial companies will narrow in July and August.

Meanwhile, banks with lower market participation expect tighter credit conditions for large nonfinancial companies, nonbank financial intermediaries and mortgage loans. On the other hand, approval conditions for the credit card segment are expected to loosen.

The sanguine credit outlook comes amid a general perception among banks of "a deterioration of the national and international economic environment, as well as the economic situation of the companies," the survey said. The sentiment is prevalent among banks with low market share, which reported declining confidence in the economic activity by businesses and households.

The perception is better among banks with high market share, which expects an improvement in employment conditions and economic activity confidence among households, as well as an increase in their capitalization level.

For the second quarter, banks with the highest market share reported expansion in credit demand in the nonbanking financial intermediaries and mortgage credit segments while demand for automotive credit declined. Meanwhile, banks with lower market share saw an increase in demand from nonbank financial intermediaries and credit card segments.