Mexican Banks' Profits Dip 2.2% in First Half Amid Rate Adjustments and Higher Loan Loss Reserves

Mexican private banks experienced a 2.2% drop in profits during the first half of 2026, earning 149.12 billion pesos compared to 152.476 billion pesos in the same period of 2025. After accounting for inflation, the decrease is 5.4%.

Analysts attribute this profit reduction to interest rate adjustments and a significant increase in provisions for potential credit losses. These provisions reached a record 124.188 billion pesos by the end of June, surpassing the 105.523 billion set aside in June 2020 during the COVID-19 pandemic uncertainty.

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Given that the expansion has coincided with a weakening of economic conditions and a slowdown in wage and formal employment growth, portfolio write-offs have increased in the last three years by almost 100 basis points in consumer credit, reaching 8% in May 2026.

Moody's highlighted that Mexico's relatively low debt levels are offset by lower economic growth and rapid expansion in consumer credit, posing risks for banks as loan defaults rise. The agency noted that defaults in consumer credit have increased by nearly 100 basis points in the last three years, reaching 8% in May 2026.

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The banking environment will be more challenging due to pressure on profitability and the expected deterioration in some risk indicators.

Álvaro Vértiz, partner and director for Latin America and the Caribbean at DGA Group, stated that the banking sector faces a more challenging environment. Profitability is under pressure, and risk indicators are expected to deteriorate. He noted that reduced interest income will continue to impact results, and the behavior of non-performing loans, especially in higher-risk segments, requires close monitoring.

Despite these challenges, the total credit portfolio grew by 4.3% in real terms to 8.4 trillion pesos. Consumer credit was the main driver, increasing by 8.1% to 2 trillion pesos, reflecting strong demand from Mexican families. However, the overall quality of the credit portfolio showed year-on-year deterioration, with the total non-performing loan index rising to 2.3% and the adjusted index reaching 4.7%.

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The reduction of interest income will continue to affect the results of institutions, while it will be necessary to monitor the behavior of non-performing loans, especially in the higher-risk credit segments.