trending Market Intelligence /marketintelligence/en/news-insights/trending/WrrVnDuw5u7_cJMsqeXL9A2 content esgSubNav
In This List

Asbanc: Delinquency rates for Peruvian banks rise in August, 'solarization' seen declining

Blog

Latin American and Caribbean Market Considerations Blog Series: Focus on LGD

BLOG

Banking Essentials Newsletter: June Edition

Case Study

กรณีศึกษา A Bank Takes its Project Finance Assessments to a New Level

Blog

Financial Institutions Factor Transition Risk into Climate-Related Stress Testing


Asbanc: Delinquency rates for Peruvian banks rise in August, 'solarization' seen declining

The delinquencyrate on Peruvian bank loans rose to 2.91% in August from 2.84% in the previous month,and was up by 0.22 percentage point from the same month a year ago, mainly due tothe country's economic slowdown, local banking association Asbanc said.

The mainreason for the increase is a rise in the delinquency rate for loans to large andmedium-sized businesses, as well as for consumer loans and mortgages. This was partlyoffset by a lower delinquency rate for corporate loans and credit to small businessesand micro-enterprises.

In general,the increase in overdue loan payments is related to slowing internal demand, whichin turn is partly due to lower employment, according to Asbanc.

"However,we maintain our projection of a possible recovery in [delinquency rates] in thecoming months, driven by better expectations for consumers and investors,"the association said in a Sept. 23 statement.

The country'schallenging economic situation is also reflected in slower loan growth. Overall,credit to the private sector from banks and other financial institutions rose 6.2%in August from a year ago, down from annual growth of 7.7% registered in July, Gestión reported, citing central bank data.

Meanwhile,Peru's private banks grew their total loan book to about 232.82 billion Peruviansoles in August, up 5.34% from the same month a year ago at a constant exchangerate, Asbanc said in a separate statement. Loans denominated in the local currencyrose 12.06% during the 12 months through August, while lending in foreign currencyfell 6.43%.

However,growth in local currency lending is decelerating due to weak internal demand anda slowdown in the conversion of U.S. dollar-denominated loans into soles, Asbancnoted. Reflecting this trend, loans denominated in soles fell 0.38% in August fromthe previous month, while loans in dollars ticked 0.87% higher.

Demandfor dollar-denominated credit in Peru has recovered in recent months amid volatilityin the exchange rate. The higher demand has been driven mainly by the corporatesector and loans to large companies.

In addition,banks have generally met regulatory requirementsdesigned to reduce their loan portfolio in foreign currencies, which means theynow have more room to increase lending in dollars, Asbanc noted.

Partlyas a result, the percentage of total loans denominated in soles — known as "solarization"— has declined, Asbanc said. As of August, local currency loans represented 67.73%of total loans, up 4.24 percentage points from August 2015 but down 0.55 percentagepoint from the previous month.

As of Sept. 23, US$1 was equivalentto 3.35 Peruvian soles.