Latin American financial institutions are outperforming their Chinese and broader Asian counterparts in return on equity (ROE), driven by specialized operating models designed to manage high-risk environments, according to a study by McKinsey & Company. Data from McKinsey Panorama and S&P Capital IQ reveals that LatAm banks achieved an average ROE of 16.1% in their wholesale banking segments between 2021 and 2024. In contrast, China recorded a 9.3% average ROE, while the rest of Asia trailed at 8%. This marks a significant reversal from the 2000–2020 period, during which Chinese and Asian lenders consistently outpaced their Latin American peers.
McKinsey attributes this current outperformance to LatAm banking models that inherently lean into risk through structured lending and active portfolio monitoring, allowing wholesale banking returns to scale faster than in most other global regions. Rather than viewing credit recovery purely as a defensive mechanism, these institutions treat asset recovery as a primary profit driver. In Brazil, for instance, the special situations market is estimated to be worth between $28.89 billion and $38.53 billion (BRL150 billion to BRL200 billion), generating up to 15% of total profits for established lenders. To capture this revenue, leading regional banks maintain dedicated special-situations divisions that integrate credit, legal, restructuring, and sector-specific intelligence. While global banks possess similar units, McKinsey notes that they play a far more central and systemic role in Latin America due to frequent economic stress cycles and intricate local restructuring frameworks.
Top wholesale institutions across Latin America construct their operations under the assumption that financial instability is a baseline condition, using this perspective to dictate balance sheet management, credit structuring, and client relationships. A June 2026 report highlights that corporate loans in the region are predominantly collateralized, rely on conservative leverage ratios, and feature shorter maturities. These defensive characteristics enable banks to dynamically rebalance their exposures, reprice risk, and restructure facilities on the fly, which ultimately curbs loss volatility and minimizes the regulatory capital needed to support their credit portfolios.
Strong client retention also underpins regional profitability. In Brazil, 75% of major corporations direct a substantial portion of their operational transaction flows through a highly concentrated group of core banking partners. Furthermore, because Latin American capital markets remain relatively shallow and private credit markets are still maturing, commercial banks retain a highly central position in corporate financing. This structural dependence ensures that corporate and investment banking yields over 37.5% of total banking revenues in Latin America, with top-performing institutions maintaining a robust profitability baseline of approximately 20%.
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