Download Asociación de Bancos de México MORTGAGE LENDING IN MEXICO

Asociación de Bancos de México
March 7 & 11
MORTGAGE LENDING IN MEXICO
Index
1.The Mexican Banking Sector
2. Mortgage Market in Mexico
3. Outlook and Conclusions
3
Introduction
1. Mexico keeps its favorable outlook for growth for this
year, inflation and public finances are under control and
the Mexican banking system is sound and it is ready to
respond to the economy's financing requirements.
2. Banking mortgage credit has grown steadily over the past
years, and can still continue on this trend for some time.
Growth hasn't translated into higher delinquency rates.
3. Due to structural conditions, housing demand has been
rising. The favorable economic context, as well as
increasing competition among financial institutions has
provided additional support.
4
1. The Mexican Banking Sector
In a complex international environment, the Mexican Banking Sector is sound
Capitalization Ratio Percentage points
18%
14%
16.1%
1.0%
15.1%
15.9%
1.3%
14.6%
15.3%
2.0%
13.3%
16.5%
16.8%
1.9%
1.9%
14.6%
14.9%
15.7%
16.0%
2.0%
2.1%
13.6%
13.8%
10%
Core Capital Basel III (8.5%)
6%
2%
‐2%
Basel III (10.5%)
Source:
Mexican Central Bank.
2006
2007
2008
Core Capital to RWA
2009
2010
2011
2012
Complementary Capital to RWA
5
1. The Mexican Banking Sector
Delinquency trends during pre crisis levels & a high provision coverage ratio are maintained
Delinquency ratio (%) & Coverage
14%
250%
185.0%
12%
200%
10%
150%
8%
6%
3.4%
4%
100%
2.5%
50%
2%
0%
Mortgage loans portfolio (L)
Coverage Ratio of total loans portfolio (R )
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
0%
Total loans portfolio (L)
Source: CNBV.
6
1. The Mexican Banking Sector
Credit activity has a maintained a steady growth
Economic & Credit Growth
Real Growth rate in 2012
11.7%
7.8%
X 2
3.9%
Economic growth
(GDP)
Banking Credit
(real growth)
In 2012 the bank credit grew twice as much as the economy did Banking Credit
(nominal growth)
Source: INEGI and Mexican Central Bank.
7
1. The Mexican Banking Sector
Total loan portfolio has grown at double digit rates
2007
2008
2009
Growth in 2012
Source: Mexican Central Bank.
12%
2,015
1,834
2006
1,749
1,273
1,585
Total outstanding balance in 2012
2,610 billions of pesos (USD$ 202 Billions)
(Ps/USD= 12.97) 2,337
Total outstanding balance (Billions of pesos) 2010
2011
2,610
16% of GDP
Total loans portfolio
2012
Average growth Non performing 2006 ‐ 2012
loans rate
13%
2.5%
8
Index
1. The Mexican Banking Sector
2.Mortgage Market in Mexico
3. Outlook and Conclusions
9
2. Mortgage market in Mexico
Coordinated public policies and banks long term commitment have driven housing sector
Mortgage loans portfolio Source: Mexican Central Bank.
330
2007
2008
2009
Growth in 2012
10%
2010
2011
457
416
307
2006
275
231
Total outstanding balance in 2012
457 Billions of pesos (USD 35 Billions)
(Ps/USD= 12.97) 368
Total outstanding balance (Billions of pesos) 2012
Average growth Non performing 2006 ‐ 2012
loans rate
12%
3.4%
10
2. Mortgage market in Mexico
The mortgage portfolio behavior shows the banking risk appetite for the housing sector
Housing credits granted Mortgage loans share of total loans portfolio
Thousands of credits & Average credit $MXN
Mortgage loans to total loans (%)
In the last 10 years
Almost 1 million of credits were granted
151
112
698
67
113 113 114
691
593
592
800
750
700
650
600
550
500
450
400
14%
USD 10 Billions
Source: ABM.
2012
2012
2011
2010
2008
2007
2006
2005
Thousands of credits (L)
2009
490
12
2004
795
127
124
33
2003
160
140
120
100
80
60
40
20
0
2003
18%
USD 35 Billions
Average credit $MXN (R)
Note: The number of credits does not include remodeling programs (“Renueva tu hogar”).
11
2. Mortgage market in Mexico
The banks provide more than half of the funding to home builders, although the debt issue is gaining share
Financing to housing developers
Distribution %
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
31.8
30.3
7.4
7.3
16.5
7.3
11.1
17.4
37.0
Banks:
53.5%
2008
Banks: Construction loans
Banks: Other types of loans
Banks:
51.6%
34.2
2012
Debt securities
Others
Equity
Source: BBVA Research
12
2. Mortgage market in Mexico
Better credit conditions for customers without excess indebtedness Commercial bank mortgage loan portfolio: rate and term (% and years)
Commercial bank mortgage loans: mortgage payment to income ratio (%)
18.8
12.5
30
18.6
12.0
18.4
18.2
11.5
25
20
18.0
17.8
11.0
15
17.6
17.4
Rate
Source: CNBV
Term
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Nov-10
Aug-10
May-10
Feb-10
10.0
Feb-11
17.2
10
5
17.0
0
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
10.5
Source: CNBV
13
2. Mortgage market in Mexico
Financial innovation has allowed borrowers to enjoy better conditions
2000
2013
Interest rate
Variable
Fixed with incentives for timely payments
Up front fees
6%
0% ‐ 1%
10‐15 yrs
Up to 20 yrs
Acquisition
Multiple uses*
Payment pesos per thousand $22.0
$8.5 ‐ $11.0
Down payment
+35%
5% ‐ 15%
Unemployment insurance
No
Yes
Interests tax deductible
No
Yes
Term
Products
* Acquisition, Substitution, Construction, Remodeling, Co‐financing INFONAVIT, FOVISSSTE, INFONAVIT TOTAL Program Home Equity.
14
2. Mortgage market in Mexico
Main Factors that Caused the Mortgage Crisis in some Countries are not Present in the Mexican Market
Factor
Description
Housing Market
• No price bubble.
• No speculation.
Credit
• Detailed credit & risk analysis.
• Full documentation and proof of income (Stated Income
not accepted).
• Mandatory Credit Bureau report.
• Moderate Loan To Value (LTV) & Down payment required.
• Most credits are for 1st home acquisition.
Non Toxic Products
• Fixed rates (No
uncertain rate mortgages, no teaser
rates, or negative amortization).
• Home Owners Equity Credit lines at max. 50% LTV (less
than 5% of total portfolio).
Customer Insurance
• Mandatory Life and Property Insurance.
• Unemployment Insurance in recent loans is common.
15
2. Mortgage market in Mexico
The fundamentals remain sound
Market Drivers
Demographic
•
Demographic structure bonds.
•
Annual growth of 650 thousand households per year.
•
Need of replacement or renewal of housing stock.
•
•
•
Low penetration of the mortgage lending as a % of GDP.
Banks are solid and open to credit under prudent criteria.
New Federal Housing policy.
Institutional coordination: SEDATU (CONAVI, CORETT, FONAPO), INFONAVIT, FOVISSSTE, SHF.
Federal Government subsidies (CONAVI). • Co‐financing programs
Fixed rates
•
Risk Based Pricing
•
Relief programs
•
Multiples terms
•
Institutional
Product
•
•
•
Portfolio with Life and Casualty & Property
•
Mortgage & unemployment insurance
16
Index
1. The Mexican Banking Sector
2. Mortgage Market in Mexico
3.Outlook and Conclusions
17
2. Mortgage market in Mexico
3. Outlook & Conclusions
Final remarks
The Mortgage Market in Mexico will keep its potential based
on these strengths:
1) Demographic trends, Macroeconomic stability and a
sounded Mexican banking system.
2) High competition among credit institutions: Lower rates,
longer terms, and a wide range of banking products
available for a changing demand.
3) Healthy and dynamic growth of mortgage lending (12%
annual rate in 2006‐2012 and 10% in 2013e).
These strengths, combined with a close coordination
with the Mexican Federal Government, will enable
Banks to fully meet the need of housing credits for the
Mexican families.
18