Mexico offers growth opportunities and stable environment, says Santander; sees difficult T-MEC negotiations

México continues to attract investment interest from international financial institutions, with Banco Santander reaffirming its commitment to the country’s market despite ongoing trade negotiations. The Spanish bank has stated it will maintain its position in Mexico and plans to increase capital allocated to financing medium-sized and small businesses, citing the nation's stable competitive environment and growth potential. During a conference with analysts and investors to present second-quarter 2026 results, Héctor Grisi, global head of Santander, emphasized the bank’s disciplined approach to capital allocation, prioritizing segments with better profitability prospects and lower risk. He noted that Mexico remains an opportunity for investment, particularly in the medium and small business sectors. Grisi explained that Santander continuously evaluates market behavior, margins, and risk costs before expanding exposure in specific segments. The bank maintains strict discipline in deploying capital, stating it would not allocate resources to areas where margins narrow or where certain segments are less favorable. The bank also aims to grow its credit portfolio in Mexico gradually and selectively. Grisi confirmed that the group will continue investing in corporate financing while strengthening its presence in automotive, mortgage, and payroll loans. However, it will adopt a cautious stance toward credit cards and personal loans due to higher risk levels. If the labor market remains strong, Santander could moderately expand credit card and personal loan growth, though it will prioritize lending to existing clients. The bank’s operational transformation has helped improve transactional deposit capture and reduce funding costs, contributing to margin expansion in Mexico. Regarding the competitive landscape, Grisi acknowledged that the Mexican banking sector remains under control despite new entrants and competition over deposit acquisition. The bank’s improved efficiency has supported its market position, allowing it to enhance profitability. On the topic of the United States-Mexico-Canada Agreement (T-MEC), Grisi expressed optimism about the treaty’s future, acknowledging upcoming complex negotiations. He noted that even if the three parties fail to reach an agreement during the review, the treaty’s automatic renewal mechanism reduces the risk of cancellation. He stressed that negotiations, although difficult, are likely to result in an agreement, emphasizing the mutual dependence between Mexico and the U.S. Both nations benefit from preserving the commercial pact, with the U.S. relying on Mexico’s manufacturing capacity and competitive labor costs, while Mexico depends on the U.S. market. Grisi added that the U.S. economy still requires Mexico’s manufacturing capabilities and cost-effective labor, reinforcing the incentive for both countries to uphold the trade agreement. The ongoing negotiations, however, have been described as more challenging than previous rounds, according to some reports, with concerns over potential tariff changes remaining unresolved.