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Big Mexican banks improve CET1 ratios in Q3 as LatAm peers see mixed performance

The largest banks in Latin America posted mixed results in terms of their fully loaded common equity Tier 1 ratios in the third quarter of 2019, with several Mexican banks emerging among the best performers.

In a sample of 16 institutions analyzed by S&P Global Market Intelligence, half of the banks posted increases in their CET1 ratios compared to the second quarter, while the other half recorded declines. Five of the eight banks that improved their ratios are based in Mexico.

The metric quantifies a bank's CET1 capital as a percentage of risk-weighted assets, and banks in the region must have a fully loaded CET1 ratio of at least 7% from 2019 onward under Basel III conditions, comprising a minimum 4.5% common equity Tier 1 ratio and a 2.5% capital conservation buffer. Certain banks might be susceptible to supplementary local capital buffer obligations.

Colombia-based Banco Davivienda SA and Chile's Banco BICE had the lowest ratios among the group at 8.15% and 8.90%, respectively. Brazilian investment bank Banco BTG Pactual SA, meanwhile, saw the largest improvement at 249 basis points. Itaú Unibanco Holding SA's ratio dipped 88 basis points from the linked quarter, the largest drop in the sample group.

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