Peruvian banks' ample liquidity bodes well for a recovery in lending growth, as well as supports a stabilization of asset risk, Moody's Investors Service affirmed in its latest report.
According to Moody's, the strength of Peru's
banking system benefits local companies, which rely heavily on their banking relationships.
"Peru's banking system is strong today," the credit agency underscored.
Moreover, Moody's pointed out it has not seen "severe liquidity constraints" in the Inca country lately. Yet, liquidity grew tight in other Latin American markets during the 2007-08 worldwide economic downturn.
"Although Peruvian banks' liquidity will likely decline in 2018-19 as lending accelerates, they will continue to exceed regulatory liquidity requirements comfortably," it noted.
This will be partly driven by their high reserve requirements for deposits, as well as weak loan demand in general.
Moody's went on to add "the banks' diverse lending exposures have helped them maintain stable asset risk profiles overall despite the recent economic slowdown."
It must be noted
loans granted to large companies account for nearly 58% of the banking portfolio, while retail lending makes up 35%.
Likewise,
credit to small and medium-sized enterprises account for less than 25% of total lending.
"Moreover, loans to cyclical industries such as real estate and construction, or industries vulnerable to external shocks —such as
mining and
agriculture— represent only a modest share of the banks' portfolios," it concluded.
(END) NDP/JAA/MVB