Some Mexican banks lift capital ratio, HSBC dips

MEXICO CITY, July 9 (Reuters) - Some of Mexico's biggest banks strengthened their balance sheets in May despite loan defaults and a deep recession that weighed on their businesses, but HSBC's position slipped slightly, the country's bank regulator said on Thursday.

Leading Mexican bank BBVA Bancomer, a unit of Spain's BBVA's (BBVA.MC), had a capital adequacy ratio of 15.12 percent in May, up from 14.81 percent in April.

HSBC Holding Plc's (HSBA.L) Mexican bank let its capital adequacy ratio slip marginally in May to 11.69 percent, the lowest among the country's big banks, from 11.93 percent in April.

Defaults on credit cards and other consumer loans have risen in recent months as slumping U.S. demand leads to more layoffs at factories in Mexico, where the economy is expected to shrink around 6 percent in 2009.

HSBC Mexico has been hit particularly hard, with nonperforming loans accounting for almost 17 percent of its total credit card debt as of May, according to the country's bank regulator.

Capital adequacy ratios illustrate banks' capital relative to their risk-weighted assets and show how prepared they are to weather losses.

Mexican bank Banamex, whose parent Citigroup (C.N) was rescued by the U.S. government after facing billions of dollars in losses, let its capital adequacy ratio slip to 17.77 percent in May from 18.68 percent in April.

Banorte (GFNORTEO.MX), one of Mexico's only locally-controlled big banks, saw its ratio edge up to 15.37 percent in May from 15.03 percent in April.

Mexico forces banks with capital adequacy ratios under 10 percent to come up with plans to shore up their capitalization.

Banks that let their capital adequacy ratios fall below 8 percent may be ordered to stop paying dividends until they improve.

Banks in Mexico have not focused on subprime lending and have avoided many of the problems plaguing financial groups in the United States and Europe.

Lending to consumers and businesses in Mexico expanded at explosive rates of around 50 percent a year in 2005 and 2006 as banks tended to a market starved of financial services after a crisis in the mid-1990s brought the industry to its knees.

But in recent years, banks have become more cautious about handing out new credit cards and consumer loans. (Reporting by Noel Randewich; Editing by Tim Dobbyn)