Moody's maintains stable outlook for Latin American banking systems

BOGOTA, March 1 (Reuters) - Ratings agency Moody's maintains its stable outlook for banking systems in Brazil, Chile, Colombia, Mexico and Peru, it said on Wednesday, adding that more difficult conditions could arise due to expected slowdowns among the region's economies.

The rating agency's decision was based on the solid financial profiles of banks in those countries, which will mitigate their weakening economic conditions, it said.

"The financial resilience of banks in the face of these economic imbalances will mitigate the increase in asset risks and reduce profitability," Moody's associate managing director Ceres Lisboa said in a statement.

In the case of Colombian banks, Moody's foresees more difficult operating conditions, citing an expected rapid economic slowdown and high inflation.

"This situation will put pressure on asset risk, while sustained income generation and capital will support stable credit metrics in 2023," the statement said.

In Brazil, the operating environment will also see challenges for banks due to the slowdown in gross domestic product.

"Our stable outlook reflects the banks' consistently high margins and strong recurring revenue generation, adequate capitalization, and ample liquidity profiles that will help weather less favorable risk conditions," Moody's said.

In Mexico, the stable outlook of the financial sector is underpinned by the banks' solid fundamentals.

"Asset risks will increase, but low risk appetite and banks' conservative loan loss reserves will limit deterioration," the statement said.

In Peru, political risks increase the probability that investment confidence will be structurally affected, which will result in downside risks for economic growth.

"However, the historical solid nature of economic institutions, as well as the ample profitability and diversification of the banks' loan portfolio, will continue to support the stability of the country's banking system over the next 12 to 18 months," Moody's said.

(Reporting by Nelson Bocanegra Writing by Oliver Griffin and Chizu Nomiyama)