The x of the region continued in 2022 consolidating the recovery that began in 2021, after a year marked by the covid-19 pandemic, thanks to credit growth and the increase in the generation of their income or profitability.
“In general, these groups maintain fairly solid capital and liquidity indicators and the main challenges they have been working on are controlling the quality of the loan portfolio, because there was pressure for deterioration due to the pandemic,” says Rolando Martínez, Senior Director of Financial Institutions for Latin America of the risk rating agency Fitch Ratings.
Once the pressure on the quality of the loan portfolio had diminished, the financial conglomerates began to increase their business volumes and this behavior has depended on the markets where they are located.
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The market that grew the most was Honduras, explained Martínez, who also pointed out that Guatemala maintained a good growth rate because it was the country least affected by the pandemic. “But the other countries also increased their pace. Countries like El Salvador, which traditionally have low credit growth, below 5%, as of November had a growth close to 9%, in 11 months,” he highlighted.
Among the various factors that contributed to this stabilization is mainly the economic recovery, although the measures implemented by the banks to control the quality of their credit portfolios also had an effect and, in addition, helped the stability of their deposit bases.
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The prospects for 2023 suggest that banks will continue to implement “conservative and prudent strategies,” according to the director of Fitch. This prudence in the past refers to this management of the quality of the loan portfolio. Banks are aware of greater uncertainty in international markets, he explained, which could lead to an international economic slowdown and, in turn, slow down lending in the region.
“We believe it is very probable that GDP growth (gross domestic product) throughout the region will be lower in 2023 compared to 2022,” Martínez predicts.
On the other hand, banks are adopting strategies to protect their interest margins, as a result of upward trends in local interest rates.
“Although international interest rates began to rise months ago, there has been a lagging effect in the Central American region at different levels. We believe that this generalized pressure will begin to be felt in all countries and banks will have strategies to face this upward adjustment of rates”, he notes.
This has to do not only with the rises in interest rates by the United States Federal Reserve (Fed), but also with the increase in interest rates in Europe and, in general, internationally. Banks have experienced a rise in the cost of their external funding and are beginning to pass this on to local interest rates.
Decrease in acquisitions and mergers
“In this period, we have seen lower appetite around M&A,” Martinez says, as banks were more concerned about leaving the effects of the covid-19 pandemic behind. But when the fall-recovery effect caused by the health crisis ends, that appetite will increase; In his opinion, mainly in Panama, where there are a greater number of banking entities and the competition is very high.
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In Panama, “banks operate with very narrow margins and it is, therefore, where it makes the most sense to make these acquisitions,” he assesses, although he does not rule out that other financial groups make acquisitions in the region, and this type of operation would happen above all with small banks.
New products
Digitization. That is the key word to talk about the general trend on an international scale in terms of new financial products and services.
Banks have been strengthening their systems in the last year as a result of quarantines and forced closures due to the covid-19 pandemic.
In this sense, alliances with Fintech companies have gained a lot of interest, especially to facilitate payments and transfers for customers.
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The BAC conglomerate continues to occupy the first position in terms of total assets, while Corporación BI is in second place and Bancolombia occupies third place, according to the ranking of conglomerates prepared by Pacific Credit Rating, which includes data up to September. of 2022.
BAC added $39,374.6 million in assets, which means a growth of 5% compared to September 2021; those of the Guatemalan BI conglomerate totaled $22.4592 million, registering an increase of 19%; and those of Bancolombia totaled $22,359.1, which translates into an increase of 8%.