Bad News for a Micro-Lender, Sort Of

Mexico's foremost micro-bank, Compartamos, is facing a record proportion of non-performing loans. Bad news? It's a bit more complicated than that:

Banco Compartamos SA, Mexico’s second-best performing stock the past six months, expects past- due loans to rise to the highest in its 19-year history as the recession sparks layoffs and curbs migrant-worker remittances, Chief Executive Officer Carlos Labarthe said.

Non-performing loans at the Mexico City-based bank, which targets the nation’s poorest borrowers, will climb to about 2.5 percent of its portfolio by year-end from 1.9 percent in March, he said. The bank will open 20 branches this year, down from 60 in 2008, and will stop adding loan officers in cities to keep costs down, Labarthe said.

[Break]

Compartamos shares rose 8.8 percent, the most since Dec. 19, to 40.77 pesos yesterday in Mexico City trading.

Compartamos’s overdue-loan ratio, while rising, remains below the industry average, a result of the microlender’s rules, which include forcing most borrowers to link up in groups of 20 and guarantee each others’ loans, said Carlos Alberto Gonzalez, assistant head of research at IXE Grupo Financiero SA.