Coverage: Q1 2025 · Information to 6 June 2025
Originally Published as TGB Premium Intelligence
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TGB Quarterly Regional Banking Monitor · 6 June 2025
Brazil raised the Selic to 14.75% while Mexico cut to 8.50% and the Federal Reserve held, as US banks lifted first-quarter 2025 return on assets to 1.16% and capital ratios stayed high in the United States, Canada and Mexico.
The desk view
Monetary policy across the Americas kept diverging in the first quarter of 2025 and into the second. Copom raised the Selic by 250bp in three steps to 14.75% by 7 May 2025, while Banco de México cut by 150bp to 8.50% and the Bank of Canada paused at 2.75% after cuts in January and March. Banks met the tariff shock from strong positions: US banks earned $70.6 billion in the quarter, large Canadian banks averaged a 13.3% CET1 ratio and Mexico's commercial banks reported a 19.90% capitalisation index. The pressure points are rising delinquency in Brazil, where the 90-day ratio reached 3.5% in April 2025, strain in Colombian commercial lending, shrinking loan books in Chile and US commercial real estate.
The regional picture
The first quarter of 2025 extended the split in regional monetary policy. The Federal Reserve held its target range at 4.25–4.50% on 19 March and 7 May 2025. The Bank of Canada cut its overnight rate target by 25bp to 3% on 29 January 2025 and by a further 25bp to 2.75% on 12 March 2025, then held on 16 April and 4 June 2025. Banco de México cut by 50bp to 9.50% on 6 February 2025, to 9.00% on 27 March 2025 and to 8.50% on 15 May 2025. Banco de la República cut Colombia's benchmark rate unanimously by 25bp, from 9.50% to 9.25%, on 30 April 2025. Brazil moved the other way: Copom raised the Selic by 100bp to 13.25% on 29 January 2025 and to 14.25% on 19 March 2025, then by 50bp to 14.75% on 7 May 2025.
Inflation explains much of the divergence. At Copom's May 2025 meeting the Focus survey put expected Brazilian inflation at 5.5% for 2025, whereas Mexican headline inflation was 3.93% in April 2025 and Canadian CPI inflation 1.7% in the same month. Colombia sat in between, with annual inflation of 5.1% in March 2025. The FOMC held in May 2025 while judging that the risks of both higher unemployment and higher inflation had risen.
Trade policy then became the dominant source of uncertainty. The Bank of Canada's April 2025 Monetary Policy Report set out a scenario in which a protracted trade war pushes Canada into recession in 2025, and risks to global trade were among the topics most frequently cited in the survey for the Federal Reserve's April 2025 Financial Stability Report.
Policy rates after the latest decision, early June 2025, %
Source: Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement (7 May 2025), 7 May 2025; Bank of Canada, Bank of Canada maintains policy rate (4 June 2025), 4 June 2025; Banco Central do Brasil, Copom eleva a taxa Selic para 14,75% a.a. (270ª reunião), 7 May 2025; Banco de México, Monetary Policy Statement, Press Release, May 15, 2025, 15 May 2025; Banco de la República (Colombia), The Board of Directors of Banco de la República unanimously decided to reduce the benchmark rate by 25 basis points (bps) to 9.25%, 30 April 2025.
United States: earnings up, securities losses down
FDIC-insured banks reported net income of $70.6 billion in the first quarter of 2025, up $3.8 billion (5.8%) on the fourth quarter of 2024, and a return on assets of 1.16%, up 6bp on the quarter and 8bp on a year earlier. Higher noninterest income, up $5.4 billion (7.0%), drove the increase, helped by mark-to-market gains at several large firms amid market volatility, together with lower losses on securities sales. The industry net interest margin slipped 2bp to 3.25%, equal to its pre-pandemic average, while community banks lifted theirs for a fourth straight quarter to 3.46%. Profit growth in the quarter therefore came from noninterest income rather than from spread income, and market-related gains are harder to repeat.
FDIC-insured institutions: selected indicators
| Indicator | Q4 2024 | Q1 2025 |
|---|---|---|
| Net income ($ billion) | 66.8 | 70.6 |
| Return on assets (%) | 1.10 | 1.16 |
| Net interest margin (%) | 3.27 | 3.25 |
| Past-due and nonaccrual rate (%) | 1.60 | 1.59 |
| Net charge-off rate (%) | 0.70 | 0.67 |
| Unrealised securities losses ($ billion) | 480.7 | 413.2 |
| Deposit Insurance Fund reserve ratio (%) | 1.28 | 1.31 |
| Problem banks | 66 | 63 |
Total loans rose $62.0 billion (0.5%) in the quarter, and annual loan growth of 3.0% remained below the pre-pandemic average of 4.9%. Domestic deposits increased for a third consecutive quarter, by $180.9 billion (1.0%). Unrealised losses on held-to-maturity and available-for-sale securities fell $67.5 billion (14%) to $413.2 billion as longer-term rates declined, but the FDIC warned that the rise in longer-term rates since the end of the first quarter would likely reverse most of that improvement. Asset quality was broadly stable but uneven. The past-due and nonaccrual rate fell 1bp to 1.59%, below its pre-pandemic average of 1.94%, and the net charge-off rate fell 3bp to 0.67%, although that was still 19bp above its pre-pandemic average. The past-due and nonaccrual rate on commercial real estate portfolios was the highest since the fourth quarter of 2014, and banks with more than $250 billion in assets reported a 4.65% rate on non-owner-occupied commercial real estate loans, down from 4.75% but far above their pre-pandemic average of 0.59%. Provision expense of $22.5 billion exceeded net charge-offs by $1.2 billion, so reserves kept building. The number of problem banks fell by a net three to 63, and one bank failed in the quarter. The Federal Reserve's April 2025 Financial Stability Report said CET1 ratios had continued to rise on strong retained earnings, reaching the upper end of their 2010–2024 range across all bank sizes. The Deposit Insurance Fund rose $3.8 billion to $140.9 billion at 31 March 2025, and its reserve ratio rose 3bp to 1.31%. On 17 April 2025 the Federal Reserve Board proposed averaging stress test results over two consecutive years and moving the stress capital buffer's effective date from 1 October to 1 January, changes it said were not designed to materially affect overall capital requirements. The 2025 stress test covers 22 banks against a scenario in which unemployment peaks at 10%, house prices fall about 33% and commercial real estate prices fall 30%.
Canada: easing paused, buffers intact
The Bank of Canada cut its policy rate to 3% on 29 January 2025, when it also ended quantitative tightening, and to 2.75% on 12 March 2025. It then held at 2.75% on 16 April and 4 June 2025. At the June 2025 decision it reported first-quarter GDP growth of 2.2%, unemployment up to 6.9% and CPI inflation of 1.7% in April 2025, a reading lowered by 0.6 percentage points by the removal of the consumer carbon tax; excluding taxes, inflation was 2.3%.
The Bank of Canada's 2025 Financial Stability Report, released on 8 May 2025, found large banks well capitalised: their CET1 ratio averaged 13.3% in the first quarter of 2025, about 2 percentage points higher than in the fourth quarter of 2019. Their average liquidity coverage ratio was 133% in the fourth quarter of 2024, and their accumulated provisions were 8% higher than a year earlier and 26% higher than two years earlier. OSFI has kept the domestic stability buffer at 3.5%.
The report's main domestic concern is the interaction of trade disruption with household debt. About 60% of outstanding mortgages renew in 2025 or 2026, and roughly 60% of those face higher payments at renewal, although household debt has fallen from 179% to 173% of disposable income over the past 12 months. Loans to households and businesses in trade-sensitive industries or regions account for around 15% of bank assets. In an IMF stress scenario with a GDP contraction of about 5% and unemployment above 9%, large banks' capital would fall into the domestic stability buffer but stay well above regulatory minimums.
Royal Bank of Canada's net income rose 11% to C$4.4 billion in the quarter to 30 April 2025 and its CET1 ratio was 13.2%, but its ratio of provisions for credit losses to loans rose to 58bp, up 17bp on a year earlier. The bank attributed the rise mainly to less favourable macroeconomic forecasts and scenario weights reflecting the potential impacts of trade disruptions, including tariffs.
Brazil: tightening reaches 14.75%
Copom raised the Selic by 100bp to 13.25% on 29 January 2025 and by another 100bp to 14.25% on 19 March 2025, signalling in March a smaller move at its next meeting. On 7 May 2025 it raised the rate by 50bp to 14.75%, taking the increase since January to 250bp. At that meeting Focus survey inflation expectations were 5.5% for 2025 and 4.5% for 2026, and the Committee's own reference projection was 3.6% for 2026. Copom said the scenario called for a significantly contractionary policy for a prolonged period, and that the advanced stage of the cycle, with effects still to be observed, required additional caution and flexibility at its next meeting.
Credit has not yet slowed: the financial system's credit balance rose 0.7% in April 2025 to R$6.6 trillion, and 12-month growth accelerated to 11.5%. Borrowing costs rose: the average rate on new credit was 31.3% a year in March 2025, and the credit cost indicator for the whole portfolio was 22.8% in April 2025, up 0.8 percentage point over 12 months. Asset quality has started to turn. The share of loans more than 90 days past due rose 0.3 percentage point to 3.5% in April 2025, with free-credit delinquency at 3.1% for firms and 5.9% for households.
Brazil: credit growth and delinquency, financial system
| Indicator | March 2025 | April 2025 |
|---|---|---|
| Credit growth over 12 months, total (%) | 11.1 | 11.5 |
| Credit growth over 12 months, firms (%) | 8.8 | 10.2 |
| Credit growth over 12 months, households (%) | 12.5 | 12.4 |
| Loans more than 90 days past due (%) | 3.2 | 3.5 |
Source: Banco Central do Brasil, Estatísticas monetárias e de crédito: nota para a imprensa (dados de abril de 2025), 29 May 2025; Banco Central do Brasil, Estatísticas monetárias e de crédito: nota para a imprensa (dados de março de 2025), 30 April 2025.
The central bank's April 2025 Financial Stability Report concluded that there was no relevant risk to financial stability and that the system retained comfortable capitalisation and liquidity. It put the system's capital margin at R$477 billion, equivalent to 30% of aggregate regulatory capital, and found that entities with a return on equity above 10% held more than 90% of banking-system assets at the end of 2024. Banks retained only 34% of earnings in the second half of 2024, the lowest share in five years, because of dividend and interest-on-capital payouts. New methodologies for operational-risk weights and loan-loss provisions took effect in January 2025, and the central bank estimated that the regulatory changes would cut the system Basel ratio by 0.45 percentage point. The Financial Stability Committee kept the countercyclical capital buffer at 0%. Low earnings retention leaves less internal capital generation to absorb the regulatory changes and any rise in credit losses.
Mexico: steady 50bp cuts, solid capital
Banco de México cut its overnight interbank target by 50bp at each decision in 2025 so far: to 9.50% on 6 February 2025 by majority, to 9.00% on 27 March 2025 unanimously and to 8.50% on 15 May 2025, again unanimously. Headline inflation was 3.67% and core inflation 3.56% in the first fortnight of March 2025, while both measures were 3.93% in April 2025. The economy grew a seasonally adjusted 0.2% in the first quarter of 2025 after contracting in the previous quarter. The Board said it could continue calibrating its stance and consider adjustments of similar magnitude while keeping a restrictive stance, and it expects headline inflation to converge to the 3% target in the third quarter of 2026.
Banks enter the easing cycle with ample capital. The commercial banks' capitalisation index was 19.90% at the end of March 2025, with a basic capital ratio of 17.88% and a fundamental capital ratio of 16.45%, according to the CNBV. The supervisor said the banks designated as domestically systemically important met their systemic-risk capital surcharge. With the policy rate falling and growth weak, margin pressure rather than solvency looks the more relevant risk.
Colombia: a cautious cut amid commercial credit strain
The Board of Banco de la República cut the benchmark rate unanimously by 25bp to 9.25% on 30 April 2025. Annual inflation had fallen from 5.3% in February 2025 to 5.1% in March 2025 and core inflation from 4.9% to 4.8%. The central bank's April 2025 update of its Financial Stability Report flagged rising delinquency in the commercial loan portfolio, particularly in the commerce sector, and larger holdings of public debt that expose institutions to falls in bond prices.
Grupo Bancolombia reported first-quarter 2025 net income of COP1.7 trillion, up 4.5% on the previous quarter, and an annualised return on equity of 16.3%. Its gross loans of COP279 trillion were 7.7% higher than a year earlier but 0.3% lower than in the previous quarter; the 90-day past-due ratio was 3.17% and the annualised cost of credit 1.59%. Its basic and total solvency ratios were 11.16% and 12.91%. The quarterly fall in loans came from consumer lending, partly offset by slight growth in commercial and mortgage loans.
Chile: lending contracts, returns rise
Chilean banking-system loans fell 2.24% over the 12 months to March 2025, as commercial loans dropped 4.36% and consumer loans 0.52%, while housing loans grew 0.94%. Credit-risk indicators were mixed in March 2025: the 90-day delinquency ratio eased to 2.31% from 2.33% and the provisions ratio to 2.58% from 2.59%, but the impaired-portfolio ratio rose to 6.17% from 6.13%. The system earned CLP570,911 million (US$603 million) in March 2025, 17.16% more than a year earlier, with a return on average equity of 15.77% and a return on average assets of 1.33%. Shrinking loan books had therefore not yet weighed on Chilean bank earnings by March 2025.
Cross-country comparison
Americas banking monitor: system indicators (reference dates in brackets)
| Country | Capital | Asset quality | Profitability |
|---|---|---|---|
| United States | CET1 ratios at upper end of 2010–2024 range (April 2025 report) | Past-due and nonaccrual 1.59%; net charge-offs 0.67% (Q1 2025) | Return on assets 1.16% (Q1 2025) |
| Canada | Large-bank CET1 13.3% (Q1 2025) | Not available | RBC net income C$4.4bn (quarter to 30 April 2025) |
| Brazil | Capital margin R$477bn, 30% of regulatory capital (April 2025 report) | More than 90 days past due 3.5% (April 2025) | Entities with ROE above 10% hold over 90% of assets (end-2024) |
| Mexico | Commercial-bank capitalisation index 19.90% (March 2025) | Not available | Not available |
| Colombia | Bancolombia total solvency 12.91% (Q1 2025) | Bancolombia 90-day past due 3.17% (Q1 2025) | Bancolombia ROE 16.3% (Q1 2025) |
| Chile | Not available | 90-day delinquency 2.31% (March 2025) | Return on average equity 15.77%; return on average assets 1.33% (March 2025) |
Source: Board of Governors of the Federal Reserve System, Financial Stability Report, April 2025, 30 April 2025; Federal Deposit Insurance Corporation, FDIC Quarterly Banking Profile First Quarter 2025 (statement), 28 May 2025; Bank of Canada, Financial Stability Report—2025, 8 May 2025; Royal Bank of Canada, Royal Bank of Canada reports second quarter 2025 results (earnings release), 29 May 2025; Banco Central do Brasil, Relatório de Estabilidade Financeira, Volume 24, N. 1, Abril 2025, 30 April 2025; Banco Central do Brasil, Estatísticas monetárias e de crédito: nota para a imprensa (dados de abril de 2025), 29 May 2025; Comisión Nacional Bancaria y de Valores (CNBV), Comunicado de prensa No. 010: Índice de Capitalización Banca Múltiple al cierre de marzo de 2025, 20 May 2025; Bancolombia S.A., Grupo Bancolombia reports financial results for the first quarter of 2025 (Form 6-K), 5 May 2025; Comisión para el Mercado Financiero (CMF), Chile, CMF informa el desempeño de bancos y cooperativas supervisadas a marzo de 2025, 30 April 2025.
Capital positions look comfortable wherever data are available. The asset-quality signal to watch is Brazil, where the 90-day ratio rose 0.3 percentage point in April 2025, while Chile's impaired-portfolio ratio also edged up in March 2025. Profitability measures differ in definition and period, so they should not be ranked.
Outlook risks
Trade policy is the common risk. The Bank of Canada's second scenario combines a recession in 2025 with inflation temporarily above 3% in 2026, and its Financial Stability Report puts loans in trade-sensitive industries or regions at around 15% of bank assets. In the United States, the FDIC's warning that higher longer-term rates since the end of the first quarter would likely reverse most of the fall in unrealised losses leaves securities portfolios sensitive, alongside commercial real estate. In Brazil, a 14.75% Selic and a 3.5% delinquency ratio in April 2025 make borrower credit quality the indicator to follow. Mexico and Colombia are easing, but Banco de México is cutting into an economy that grew 0.2% in the first quarter of 2025, and Colombia's commercial portfolio was already under strain in April 2025.
What to watch
- June 2025: the Federal Reserve publishes its 2025 stress test results for 22 banks.
- 30 July 2025: the Bank of Canada's next rate announcement and Monetary Policy Report.
- Comment period on the Federal Reserve's stress capital buffer proposal: comments are due 60 days after publication in the Federal Register.
- Year-end 2025: the FDIC expects the Deposit Insurance Fund reserve ratio to reach the statutory minimum of 1.35%.
Primary sources: Federal Deposit Insurance Corporation, FDIC Quarterly Banking Profile First Quarter 2025 (statement), 28 May 2025; Banco Central do Brasil, Copom eleva a taxa Selic para 14,75% a.a. (270ª reunião), 7 May 2025; Banco de México, Monetary Policy Statement, Press Release, May 15, 2025, 15 May 2025; Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement (7 May 2025), 7 May 2025; Board of Governors of the Federal Reserve System, Financial Stability Report, April 2025, 30 April 2025; Bank of Canada, Financial Stability Report—2025, 8 May 2025; Comisión Nacional Bancaria y de Valores (CNBV), Comunicado de prensa No. 010: Índice de Capitalización Banca Múltiple al cierre de marzo de 2025, 20 May 2025; Banco Central do Brasil, Estatísticas monetárias e de crédito: nota para a imprensa (dados de abril de 2025), 29 May 2025; Comisión para el Mercado Financiero (CMF), Chile, CMF informa el desempeño de bancos y cooperativas supervisadas a marzo de 2025, 30 April 2025; Banco Central do Brasil, Copom eleva a taxa Selic para 13,25% a.a. (268ª reunião), 29 January 2025; Banco Central do Brasil, Copom eleva a taxa Selic para 14,25% a.a. (269ª reunião), 19 March 2025; Banco de México, Monetary Policy Statement, Press Release, February 6, 2025, 6 February 2025; Banco de México, Monetary Policy Statement, Press Release, March 27, 2025, 27 March 2025; Bank of Canada, Bank of Canada reduces policy rate by 25 basis points, announces end of quantitative tightening (29 January 2025), 29 January 2025; Bank of Canada, Bank of Canada reduces policy rate by 25 basis points (12 March 2025), 12 March 2025; Bank of Canada, Bank of Canada maintains policy rate (4 June 2025), 4 June 2025; Bank of Canada, Bank of Canada maintains policy rate (16 April 2025), 16 April 2025; Banco de la República (Colombia), Quarterly Update of the Financial Stability Report - April 2025, 8 April 2025; Board of Governors of the Federal Reserve System, Federal Reserve issues FOMC statement (19 March 2025), 19 March 2025; Banco de la República (Colombia), The Board of Directors of Banco de la República unanimously decided to reduce the benchmark rate by 25 basis points (bps) to 9.25%, 30 April 2025; Board of Governors of the Federal Reserve System, Federal Reserve Board requests comment on a proposal to reduce the volatility of the capital requirements stemming from the Board's annual stress test results, 17 April 2025; Board of Governors of the Federal Reserve System, Federal Reserve Board releases the hypothetical scenarios for its annual stress test, 5 February 2025; Royal Bank of Canada, Royal Bank of Canada reports second quarter 2025 results (earnings release), 29 May 2025; Banco Central do Brasil, Estatísticas monetárias e de crédito: nota para a imprensa (dados de março de 2025), 30 April 2025; Banco Central do Brasil, Relatório de Estabilidade Financeira, Volume 24, N. 1, Abril 2025, 30 April 2025; Bancolombia S.A., Grupo Bancolombia reports financial results for the first quarter of 2025 (Form 6-K), 5 May 2025.