LatAm banks beat Asia on wholesale returns by weaponising economic chaos

Latin American banks treat "recovery" not as a defense but as a profit driver.

Latin American banks’ return on equity (ROE) is outpacing that of China and Asia, lifted by operating models geared for risk, said McKinsey & Company.

The ROE of LatAm banks’ wholesale banking businesses averaged 16.1% from 2021 to 2024, compared to China’s 9.3% and the rest of Asia’s 8%, based on data from McKinsey Panorama and S&P Capital IQ.

In 2000 to 2020, China and Asian banks had a higher average ROE than their LatAm peers.

McKinsey said that LatAm operating models are geared for risk, with structured lending and active monitoring helping grow its wholesale banking returns at a rate faster than most regions.

Recovery is not just a defensive function but is a major part of the LatAm banks’ profits.

In Brazil, for example, the special situations market ranges from $28.89b to $38.53b (BRL150b to BRL200b) and can contribute up to 15% of total profits of established banks, McKinsey found.

Leading LatAm institutions have dedicated special-situation capabilities that combine credit, legal, restructuring, and sector expertise, it added.

“Whilst banks globally have similar capabilities, they tend to play a more central and systematic role in the region, reflecting the frequency of stress cycles and the complexity of restructuring environments,” McKinsey said.

Leading wholesale banks in LatAm treat instability as a baseline condition, shaping balance sheets, credit structures, and client engagement based on that, the report said.

Loans in LatAm are typically secured, leverage is conservative, and maturities are shorter, the management consulting company said in a report in June 2026.

“These factors allow banks to rebalance exposure, reprice risk, and adjust structures dynamically, which reduces loss variability and limits the capital required to support exposures,” the report said.

Client concentration is also key. In Brazil 75% of large corporations channel a significant share of operational flows to a small number of banking partners, McKinsey found.

LatAm banks also play a more central role in corporate funding because capital markets remain shallower and private credit is still developing.

Corporate and investment banking accounts for over 37.5% of banking revenue in the LatAm region. The top performers sustain profitability of about 20%, McKinsey said.

(US$1 = BRL 5.19)