Mexico bank lending loses more steam in August

By Noel Randewich

MEXICO CITY, Sept 30 (Reuters) - Growth in Mexican bank lending to individuals and companies tapered off in August, the central bank said on Tuesday, amid increasing concerns about defaults.

Bank lending to the private sector expanded 11.3 percent in August over the year-ago period after growing 14.6 percent in July, the central bank said in a statement.

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 an crisis in the mid-1990s brought the industry to its knees.

But in recent months, banks have become more cautious about handing out new credit cards and consumer loans, sectors increasingly affected by non-performing loans.

Banks' consumer credit, which includes credit cards, fell 15.7 percent in August over the year-ago period, the central bank said in a statement.

Some of the drop was due to Banamex, the Mexican unit of Citigroup (C.N), which recently moved credit card debt off its books and into a specialized lending company, Tarjetas Banamex.

Since the end of last year, growth in bank lending to companies and consumers has steadily declined from an annual rate of 24 percent.

Non-performing bank loans crept up to 2.82 percent of total credit in June from 2.35 percent a year before, according to Mexico's banking commission.

In the United States, the Bush administration is urging legislators to approve a $700 billion plan to bail out the country's struggling financial sector after years of investment in dubious mortgage debt derivatives.

Banks in Mexico owned by Citigroup, BBVA (BBVA.MC), Santander (SAN.MC) and other international players have ballooned their businesses in the past decade by concentrating on traditional lending rather than dabbling in risky subprime niches.

They have largely avoided the problems plaguing U.S. banks although increased risk aversion may lead them to further cut plans for credit growth.

Bank mortgage lending rose 10.8 percent in August while loans to businesses were up 20 percent, the central bank said. Both of those areas expanded a bit less quickly than in July.

Credit from non-bank lenders rose 106.2 percent, reflecting the movement of Banamex's credit card portfolio to Tarjetas Banamex. (Reporting by Noel Randewich; editing by Gary Crosse)