By Noel Randewich
MEXICO CITY (Reuters) - Banorte, Mexico's fourth largest bank, expects to expand credit by as much as 20 percent this year, helping offset pressure on margins caused by falling interest rates, Chief Executive Luis Pena said on Friday.
Increased lending and the fact that about 40 percent of Banorte's (GFNORTEO.MX: Quote, Profile, Research, Stock Buzz) loans are pegged at fixed interest rates will help its profits withstand declining benchmark interest rates, Pena told the Reuters Latin America Investment Summit.
"Of the 105 billion pesos ($9.6 billion) in our portfolio, we think we can expand by between 18 and 20 percent," he said.
Mexico's central bank has cut its closely watched overnight lending rate to 7.25 percent from 9.75 percent last August, in turn pushing banks' rates lower.
Low interest rates are a mixed blessing for banks because, while increasing demand for credit, they also make each loan less profitable.
"I don't have a crystal ball to say what is the optimum interest rate," Pena said. "But we're very close to it."
Shares of Banorte, which analysts have recently described as undervalued, closed up 3.81 percent at 25.89 pesos on Friday, outperforming a 0.31 percent gain in the IPC benchmark stock index .MXX.
Consumer lending in Mexico has surged in recent years amid declining interest rates and campaigns by banks to increase their loan portfolios by offering more credit cards, personal loans and mortgages. Continued...
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