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Mexico hikes benchmark rate; Cielo warns of possible hit to profitability

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Mexico hikes benchmark rate; Cielo warns of possible hit to profitability

* Card payment processor Cielo S.A. is projecting its net income to take a hit from the Brazilian Senate's decision of setting a 2% floor on the ISS, a service tax charged by states and municipalities, Reuters reported, citing CFO Clovis Poggetti. A decline of 1% to 2% in annual profit due to a 1 percentage-point rise in the ISS tax is possible, Poggetti said. The senate bill is expected to take effect in early 2018.

* Banco de México raised its benchmark interest rate by 50 basis points to 5.75%, citing inflationary pressures, the potential impact of U.S. trade policies on the Mexican economy, and the U.S. Fed's recent decision to raise its benchmark rate. This is the central bank's fifth rate hike so far in 2016 and follows an increase of 50 basis points in November.

MEXICO AND CENTRAL AMERICA

* Some banks in Mexico are looking to cut down on their exposure to credit cards by decreasing spending limits as they navigate through an economic slowdown, Reuters reported. The banks are concerned about more currency volatility in 2017 following a 19% fall in the Mexican peso this year. Reducing credit card exposures would help the lenders offset a potential increase in consumer defaults.

* Fitch Ratings conducted a portfolio review of selected Mexican financial institutions following the rating agency's revision of Mexico's sovereign outlook to negative from stable. As part of the review, Fitch revised its outlook on 13 financial institutions to negative from stable.

BRAZIL

* A congressional constitutional affairs committee in Brazil accepted for debate President Michel Temer's proposed pension reform, which would set the minimum age of retirement at 65 years, Reuters reported. A special commission will be created in February 2017 to evaluate the proposal.

* Brazil's economic activity dropped 0.48% in October from September, Reuters reported, citing central bank data. In a survey by the newswire, economists had predicted a fall of 0.50% in October.

* Banco Nacional de Desenvolvimento Econômico e Social said it is formalizing a credit line agreement with the Inter-American Development Bank worth up to $2.40 billion to finance productive and sustainable investments. The first funding operation, reportedly worth $750 million, was recently approved for a sustainable energy program that will be guaranteed by the Brazilian government.

* Brazilian President Michel Temer unveiled new economic measures in an effort to lead the country out of its worst recession in decades. The measures are focused on increasing productivity and reducing bureaucracy. They include steps to help companies by simplifying taxes, as well as reducing labor and social security obligations. Banco Bradesco SA CEO Luiz Carlos Trabuco Cappi said the announced measures could represent a turning point for the troubled economy, Valor Econômico reported.

* ORIX Corp. said it acquired a controlling interest in Brazilian capital markets and asset management platform RB Capital Empreendimentos SA. RB Capital controlling shareholders Luis Claudio Garcia de Souza, Marcelo Barbará and Marcelo Medeiros sold 100% of their stake, which represents 68% of the company's capital. The deal's pricing was not disclosed.

* Banco Santander (Brasil) SA said Mario Roberto Opice Leão has resigned as a director. According to Bloomberg, he was responsible for the bank's corporate investment banking division.

* Brazilian Finance Minister Henrique Meirelles plans to propose changes to the country's bankruptcy law to facilitate the acquisition of financially troubled companies or those under bankruptcy protection, Reuters reported, citing newspaper O Estado de S. Paulo. Under the proposal, buyers would be less accountable for the previous obligations of the company they acquire.

* Moody's withdrew all of its ratings on HSBC Bank Brasil SA - Banco Múltiplo following the lender's reorganization after it was acquired by Banco Bradesco SA. The outlook was negative before the withdrawal.

* Fitch Ratings said the recent dismissal of corruption charges against banker Joseph Safra, the majority shareholder of Banco Safra SA, is neutral for the bank's ratings and offsets possible negative effects that could have risen regarding the lender's reputation due to the banker's indictment in March.

* Australia's QBE Insurance Group Ltd. named Peter Rebrin to replace Raphael Swierczynski as head of the company's Brazilian business from 2017, O Estado de S. Paulo reported. Swierczynski is leaving after having spent more than 10 years at the firm.

ANDEAN

* Ecuador Finance Minister Fausto Herrera is stepping down due to health reasons after three years in the position, Reuters reported, citing President Rafael Correa. A replacement has not been named yet.

* Juan José Echavarría Soto has resigned as a director at Colombia-based Banco Popular S.A. The bank did not immediately name a replacement.

* S&P Global Ratings raised its long-term issuer credit rating on Banco Internacional del Perú S.A.A. to BBB from BBB- and revised the bank's stand-alone credit profile to "bbb-" from "bb+." The upgrades reflect the bank consistently strengthening its capitalization due to sound internal capital generation, while maintaining solid asset quality metrics.

* Banco Central de Reserva del Perú held its monetary policy interest rate steady at 4.25%, noting that inflation expectations have continued to show a downward trend. Peru's GDP is expected to grow 3.9% in 2016 and 4.2% in 2017, the central bank said.

* Switzerland-based Bank Julius Baer & Co. Ltd. plans to launch operations in Colombia in the first quarter of 2017 once it obtains a license from local regulators, Portafolio reported.

SOUTHERN CONE

* The total debt held by Chileans rose 7.4% in June compared to the same month a year ago, but the average level of debt of Chilean households remained relatively stable, according to data from banking regulator SBIF. On average, debtors owed 1.6 million Chilean pesos in June, up just 0.7% from a year earlier.

* Argentina's government led by President Mauricio Macri will face greater political pressure and external economic risks in 2017, which could hinder progress in consolidating reforms aimed at boosting private investment and growth, Moody's said. For banks, lower inflation and a rise in real funding costs will impact profitability and capital.

* Argentine Foreign Minister Susana Malcorra said the country is open to discussing a bilateral free-trade agreement with the U.K., but in order for that to happen, the countries must first resolve their ongoing dispute over rights to the Falklands Islands, Bloomberg News reported.

* Some economists are questioning the Argentine central bank's strategy to reduce inflation by lowering its benchmark rate, Reuters reported. The central bank cut rates for four consecutive weeks in November, which some said was a move aimed at improving growth rather than tackling inflation. "There's no doubt that in the month of November, the central bank was acting politically," said Rodolfo Rossi, a former central bank chief.

* Paraguay's Congress passed a budget bill for 2017 but lowered the amount of debt the government can issue next year to $349 million from a proposed $558 million, Reuters reported. The budget forecasts economic expansion of 3.8% in 2017, compared to 4% in 2016.

* Fitch Ratings conducted a portfolio review of selected Chilean banks following the revision of Chile's sovereign outlook to negative from stable. The rating agency revised its outlook on Banco del Estado de Chile and Banco Santander Chile to negative from stable.

* Argentina's Sancor Seguros will offer car, house and commercial insurance in Paraguay under a partnership agreement it has signed with Paraguay-based Capital Inversiones Comerciales, La Nación reported.

* Banco de Inversión y Comercio Exterior SA issued bonds worth about 1.16 billion Argentine pesos and will use the proceeds to finance investments, especially in small and medium-sized enterprises, El Cronista reported.

PAN LATIN AMERICA

* Total economic losses from disaster events in 2016 amount to at least $158 billion, compared to $94 billion a year earlier, according to Swiss Re Ltd. The reinsurer's preliminary sigma estimates also indicate that insured losses have risen to approximately $49 billion in 2016 from $37 billion a year earlier.

* Moody's maintained a stable outlook on Latin American asset managers, citing growth opportunities and conservative positioning that will benefit the region's firms. In particular, Mexican asset managers' conservative investment strategies are driven by the increased uncertainty surrounding growth and trade following U.S. election results, Moody's said.

IN OTHER PARTS OF THE WORLD

* Europe: Intesa fined; Monte dei Paschi details share issue; Achmea eyes job cuts

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.

Matthew Craze contributed to this article.

The Daily Dose has an editorial deadline of 8 a.m. São Paulo time, and scans news sources published in English, Portuguese and Spanish. Some external links may require a subscription.