NPL Markets regularly publishes forecasts for non-performing loans for many countries in Europe, the Americas and Asia. In this note, we focus on Mexico where NPL Markets has recently established a cooperation with the Worldbank IFC to foster the market for NPLs. All credit performance indices and macroeconomic stress scenarios are available on the NPL Markets platform for valuation and stress testing.
Overall, we expect stable NPL volumes in Mexico. Some downside risk remains with persistent high inflation and global recession resulting in higher debt service costs in a weakened economic environment (stagflation). In such an adverse stress scenario a doubling of NPLs is a plausible albeit relatively unlikely outcome. We conclude that while NPLs overall seem under control in Mexico, a few segments of the market should be monitored carefully. There are regional differences with some Mexican states having recently suffered steep increases in NPLs and the higher credit risk at mortgage agency Infonavit and the non-bank financial sector requires continued attention.
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