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Q2 profits improve in Brazil and Mexico; Itaú faces XP investment limit

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Q2 profits improve in Brazil and Mexico; Itaú faces XP investment limit

Earnings flurry

* Several major Mexican and Brazilian banks released their second-quarter results this week, including Banco Bradesco SA, which posted a near 10% year-over-year profit improvement on the back of stronger fee and commission income and lower provisions. Recurring net income came to 5.16 billion reais for the quarter. Bradesco bank executives also predicted that delinquencies could return to precrisis levels by the end of the year.

* Elsewhere in Brazil, Banco Santander (Brasil) SA reported a 30% annual increase in managerial net income for the second quarter, hitting 3.03 billion reais, as net interest income grew 15%.

* In Mexico, Grupo Financiero Banorte SAB de CV posted a 26.6% rise in second-quarter profit as the financial group booked stronger net interest and fee income. The company, which recently became Mexico's second-largest bank following its acquisition of Grupo Financiero Interacciones SAB de CV, said that its quarterly profit reached 7.19 billion pesos, or 2.59 pesos per share.

* Banco Santander (México) SA Institución de Banca Múltiple posted a 12.1% rise in 2018 second-quarter profit, as lower provisions and a boost in net interest income offset rising administrative costs. The company showed net income of about 5.17 billion pesos for the quarter.

* Most other larger Mexican banks also showed year-over-year improvement, with Grupo Financiero HSBC SA de CV more than doubling its quarterly profit, Grupo Financiero Inbursa SAB de CV posting a 66% rise, and Regional SAB de CV showing a 24% jump.

* On the flip side, Grupo Financiero Banamex SA de CV booked a 11% decrease in second-quarter profit as the bank suffered from a rise in administrative and other costs that offset improved net interest income, while Grupo Elektra SAB de CV reported a 48% decline due mainly to a steep slide in non-operating income.

Buying and selling

* Banco Central do Brasil, reportedly will keep Itaú Unibanco Holding SA from owning anything larger than a minority stake in brokerage company XP Investimentos SA. The central bank also may limit the the size of that minority ownership. While the initial stage of agreement, under which Itaú will acquire 30.1% of XP Investimentos' common shares and 49.9% of its total capital, should move forward as planned, future stages of the deal will have to be revised.

* Banco Macro SA reportedly is in "advanced talks" to purchase Argentina-based Banco de Servicios y Transacciones SA's retail banking portfolio and branch network. The deal would see Macro take over around 30 branches, 10 of which are located in the greater Buenos Aires area.

Market expansion

* Bank of China Ltd. reportedly is seeking approval to set up a full-fledged banking unit in Peru, to be called Bank of China (Perú). The Chinese banking giant already has a representative office in Peru.

* Paraguay's Banco Basa SA is planning to open a brokerage firm and is currently carrying out the procedures needed to secure regulatory approval. A director at the bank reportedly said that the bank has been preparing for the new business by buying up stocks and participating in capital markets.

* While its rivals have taken a more conservative stance, Banco Santander (Brasil) will continue to expand its loan portfolio in the second half of 2018 despite a reduction in Brazil's growth prospects, CEO Sergio Rial said. The executive expects small and medium-sized businesses to continue seeking credit, though noted that credit demand from large corporations likely won't bounce back until after Brazil's October elections.

* Bull Market Brokers S.A has purchased the DolarHoy platform and plans to relaunch it as Argentina's first online foreign exchange house. The company expects DolarHoy to be operational within the next three or four months.

In other news

* Spain's Banco Bilbao Vizcaya Argentaria SA is confident about growth in Mexico as political headwinds dissipate, and company executives said they now expect double-digit net profit growth at its Mexican operations in 2018.

* Venezuelan President Nicolas Maduro ordered to remove five zeroes from the bolivar, which will be linked to the new state-backed cryptocurrency amid an overhaul aimed at curbing the country's hyperinflation. The move came shortly after the IMF projected that Venezuelan inflation will reach 1,000,000% in 2018, making it one of the worst hyperinflationary crises in modern history.

* Argentina's economy contracted 5.8% year over year in May, the second straight month of declines, signalling a possible recession and contraction of GDP in 2018.

Featured this week on S&P Global Market Intelligence

* Individual credit growth to anchor Q2 profits of Brazil's major banks: Brazil's three largest listed banks are expected to book slightly improved profits for the second quarter of 2018,

* Hires and Fires: A weekly rundown of executive management, board and other personnel moves at Latin American financial institutions.

* Ratings Roundup: A summary of various ratings actions on Latin American financial institutions and economies.