Expected to Grow at 10% to 15% Rate for Years
Bank lending to Latin America's private sector will grow at least 10% to 15% a year in the next five years, First Boston Corp. analysts predicted.
And bank lending to consumers alone could surge by as much as 50% a year, the analysts said.
The boom could make Latin America one of the world's most attractive banking markets, according to Stefano Natella, a bank analyst with First Boston.
In the 1980s, "government borrowing to finance budget deficits crowded the private sector out of the market," Mr. Natella noted.
Today, however, many Latin governments -- running budget surpluses or with vastly reduced deficits -- are no longer turning to banks for financing.
Mr. Natella declined to predict how long the fast growth in private borrowing would continue.
However, he noted that there was ample room for growth, and that bank lending in Latin America was still low compared to lending in other countries.
For example, while private-sector lending amounted to 65.3% of gross domestic product in the United States in 1991 and 94.9% in Japan, it was only 43.6% of GDP in Argentina, according to First Boston research.
The percentages were even lower in Chile (40.6%), Mexico (22.8%), and Venezuela (19.1%).
Mr. Natella noted that the relatively young population of Latin America and high concentration of people in major cities makes banking in the region easier and less expensive to develop than in industrialized countries.
"You have lower costs because you can handle a larger number of customers out of a more limited number of branches," he said.
A Long Way to Go
But he cautioned that lending to the private sector in Latin America is starting from a very small base.
It could take the region 15 to 20 years to reach U.S. levels of bank lending as a share of gross domestic product, he said.
In Mexico, where bank lending to the private sector is growing 30% a year, he predicted it would take at least five years to raise lending from 22.8% of GDP to between 30 and 40%.
So far, rapid growth in lending has led to strong increases in profits for many banks in Latin America.
On Monday, for example, Mexico's Bancomer reported that net earnings increased 66% to $308 million over the first nine months this year compared with the level in the period last year.