Moody’s warns that additional reserves by Covid-19 undermine the profitability of banks in Latin America.

The creation of additional reserves due to the coronavirus pandemic and the macroeconomic forecasts reduced the profitability of financial institutions in Latin America. The largest banks in Brazil, Chile, Colombia, Mexico and Peru experienced similar trajectories, a reduction in the net profit of the institutions of up to 20 base points. Moody's adds that, although the impacts on the quality of the banks' assets are not yet known, the deterioration will show when the grace periods granted to users end; although the deferment of payments gave relief to debtors, as these deferments expire the quality of the assets will reveal. A prolongation of the confinement measures will weigh on the economic recovery.