Moody’s: Paraguay banking system to negative

Moody's Investors Service said it lowered its outlook on Paraguay's (Ba1 stable) banking system to negative from stable on the expectation that loan delinquencies are set to rise and banks' profitability will decline.

The slump is being driven by an ongoing downturn in the agricultural industry, a key export sector, as well as a generally less exuberant economy.

Banks are heavily exposed to the agricultural sector, with loans to soy producers accounting for 10% of total loans in the banking system and credit to cattle producers amounting to another 10%, making them vulnerable to the recent slump in commodity prices, the agency said.

"The drop in soy prices has fueled a steady rise in problem loans, and asset quality will likely weaken further in the coming months as borrowers in the agriculture segment remain under pressure," Moody’s assistant vice president Alexandre Albuquerque said in a news release.

"Loan loss reserve coverage is also relatively weak in the Paraguayan system, leaving banks poorly prepared."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.