Credit conditions in Latin America will return to normalcy in 2022, rating agency Moody’s has predicted, pointing to the growing rate of vaccination across the region.
Steady economic growth is stabilizing banks, making them resilient to potential risks arising from inflationary pressures and weak job markets.
“Recurring earnings generation, high reserves, and strong capital injection offset the potential for rising asset risks at Latin American banks,” stated the agency in a report to its clients.
More and more Latin Americans are getting vaccinated, with the rate of inoculation reaching above 60% in most countries, the report added.
The successful vaccination program creates a positive operating environment, enabling businesses to expand and add more employees to their workforce.
The existing environment supports the growth of fintech companies and e-commerce services providers, thanks largely to the region’s young population and low financial inclusion.
Although the new fintech firms create a kind of anxiety among the traditional bankers, the general public will stand to gain in the long run, according to the report.
Rodrigo Marimón, a Moody’s Analyst, has warned that smaller-niche banks may find themselves in trouble if they don’t diversify and remain exposed to weaker borrowers.