The Central American banking industry showed accelerated growth between December 2010 and June 2012, according to a recent report by the U.S. risk rating agency Fitch Ratings.
The study recognizes that credit performance has been strengthened in the post-crisis stage, registering a double-digit growth in all countries except El Salvador.
Most countries had a credit increment of around 20%, while deposits grew at a decent 15%.
This behavior is explained by the improved economic performance of the region in times of international crisis.
The report also mentions the higher profitability of banking systems in the region, which are "driven by lower expenses for provisions and higher interest margins."
In the case of Panama, its "profitability is based on its outstanding efficiency, high volume of business and good quality loans."
The margins have also been favored by the growing deposit base at a relatively low cost, a situation that will be prolonged due to the elevated liquidity in the systems.
Beyond the optimistic results, Fitch observed an opportunity to continue increasing banking in the region. "The systems have room to continue expanding their volume of business and income generation, given the shallow financial depth prevalent in most countries, especially in Guatemala."
Panama is a leader
Panama is by far the most important system in the region, given its status as a banking center. In June, the assets of the Panamanian system (taking into account only the general license banks) exceeded $67 billion, while the rest of the systems in the region put together amounted to almost $81 billion.
Costa Rica (where the majority of the assets are state-owned) is the next highest, and then Guatemala. Nicaragua is the smallest.
Panama also stands out as the fastest growing economy and with the best prospects for 2012 and 2013. It is the most efficient banking system in the region and has the highest growth in the deposit base, which increased by $8 billion during the period analyzed, almost four times more than the growth experienced by countries like Guatemala, Costa Rica and Honduras.
Panama is also the system with the least banking concentration. The five largest banks take up about 50% of the market, whereas in other countries it is around 80%.
The good performance of the Panamanian system is reflected in the credit ratings its members receive. In November, Fitch Ratings did not alter its rating of the National Bank of Panama (Banconal) and Credicorp Bank, both with a stable outlook.
Banconal continues with the "BBB" rating based on its "robust capital, ample liquidity, stable deposit base, good asset quality and increasing profitability."
Credicorp Bank, meanwhile, kept the local rating "A (pan)", a reflection of the good quality of its assets, its financial position, improved financial performance and good position of liquidity, in common with their Panamanians peers, as stated in the report.
However, the scale of operations and the relative concentration in the biggest depositors and in biggest debtors limit the rating.
Participation and delinquency
of Costa Rican assets belong to government banks. It is the only country dominated by public entities.
according to Fitch, Central American banking has successfully reduced its delinquencies to a 1.6% of loans.