Background on Mexican Banking Sector and Banxico
The Mexican banking sector has long relied on interest income as its primary source of earnings. However, recent trends indicate a significant slowdown in this crucial revenue stream due to the Bank of Mexico’s (Banxico) interest rate reduction cycle.
Banxico’s Interest Rate Adjustments
In mid-2021, Banxico initiated an upward cycle to curb high inflation, which peaked at 11.25% in April 2023. The rate remained at this level for almost a year.
Impact on Bank Interest Incomes
During this period of elevated interest rates, Mexican banks experienced substantial growth in interest incomes, with some months exceeding 40% annual real growth.
- May 2025 saw a mere 2.76% increase, marking a considerable slowdown.
- The interest income balance reached 769,227 million pesos, up from 716,856 million pesos in the same period of 2024.
According to the National Banking and Securities Commission (CNBV), interest incomes doubled from 806,283 million pesos in 2021 to over 1.79 billion pesos in 2024.
The most significant growth in interest incomes occurred in 2023, with figures exceeding 30%, and some months surpassing 40% annual increases.
May 2023 recorded the highest growth in interest incomes, with a 42.3% increase.
Since then, interest income growth has slowed. While the increase remained above 30% in 2023, it dropped to double digits in 2024 and reached only 2.76% in May 2025, the lowest in three and a half years.
Interest Income Composition
Of the nearly 770,000 million pesos in interest incomes recorded by May 2025, the majority came from various credit types: corporate, consumer, and housing loans.
Bank Interest Expenses
Conversely, banks’ interest expenses—what they pay for returns to savers—totaled 397,931 million pesos in May 2025, a real annual growth of 1.17%.
This indicates that interest expenses account for roughly half of the banks’ interest incomes.
Overall Bank Profitability
Interest incomes, along with commissions and gains from intermediation, contribute to bank profitability. In May, banks reported a net income of 126,367 million pesos.
In 2023, when the target rate was 11.25% for several months, interest incomes grew by over 40%. However, May 2025 saw a 2.7% increase.
Key Questions and Answers
- What is the main issue? The slowdown in interest income growth for Mexican banks due to Banxico’s rate cuts.
- What is the significance of Banxico’s interest rate adjustments? These adjustments aim to control inflation. In 2021, Banxico raised rates to 11.25%, which remained constant until April 2023.
- How have interest incomes evolved? Interest incomes grew significantly during the high-rate period (2023), but slowed considerably afterward, with a 2.76% increase in May 2025.
- What proportion of bank incomes come from interest? Interest incomes constitute a substantial portion of banks’ earnings, with expenses accounting for roughly half.
