Uruguay, where GDP growth last year hit a five-year average of
6.1%, is the envy of many larger economies in the region. Yet
the greater dynamism in its economy reflected in its recent
investment grade rating, however, has not yet translated into
greater competition in its banking sector. While the likes of
Santander and HSBC have units that have gained in size, the
government bank still dominates the system.
With a share of assets above 43%, it is hard to ignore Banco
de la República Oriental del Uruguay and its place in
the country¹s system. It continues to dominate most areas
of business, and has yet to be seriously challenged by any of
the private banks.
The state-owned bank says its main strategy is to extend
universal access to financial service offerings to every corner
of the country. It is aiming to grow in the microfinance
sector. Banco de la República has opened its first
microfinance business República Microfinanzas
a business specializing in products and services in the
microfinance sector with operations starting in 2010 and
generating since then, adding a large number of clients and
volume of credits in the local market.
Assets under management were $12.07 billion pesos at
mid-year, up from $11.38 billion pesos the same period last
year, and representing 43% of the system. Deposits grew to
$10.4 billion pesos versus $9.73 billion pesos. The bank has a
45% of market share in deposits.
The positive trends for Uruguay, and for Banco de la
República look set to continue. Banking activity
continues to grow along with the economy, Fitch says, and
credit quality remains at historically high levels. Banking
institutions are characterized by solid levels of liquidity and
The profitability of Uruguayan banks has not been as
positive as other indicators, Fitch says. This is thanks to low
international interest rates reducing margins, exchange rate
fluctuations and inflation.
However, Banco de la República posted a return on
equity of 28.1% for the 12 months though to June and return on
assets of 2.9%, up from 12.5% and 1.4%, respectively from the
corresponding period one year before. This compares to a 9.9%
ROE and 0.8% ROA average for the system.