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Moody's: Stable outlook on LatAm banks reflects strong economic growth

Moody's on Dec. 11 said it has a stable outlook for Latin American banks, reflecting an expected improvement in the region's economic growth that will stabilize operating environments for lenders.

An ensuing stability in asset quality will in turn anchor profitability and capitalization, both of which will cushion banks from a sudden spike in delinquencies. Asset risks remain controlled despite corporate governance issues and corruption scandals.

The regional banks' ample base of core deposit funding will also strongly support loan growth, Moody's said. Strong operating efficiency in the region will continue to improve due to ongoing investments in digitalization along with short-term increases in capital expenditures.

However, economic growth could be affected by shifts in public policy throughout the region following several elections in 2018, the rating agency said.

The banking systems in Argentina, Bolivia, Colombia, Paraguay and Uruguay have stable outlooks, according to the rating agency, while Peru's banking system has a positive outlook. Meanwhile, the banking systems in Brazil, Chile and Mexico have negative outlooks, in line with their respective government's outlook, Moody's said.