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El Salvador Best Bank: Banco Agrícola

Nov 1, 2012

Despite an uptick in GDP growth, the competitive balance between El Salvador¹s banks is little changed from 2011.

Banco Agrícola remains the largest and strongest bank in the country. Its $3.07 billion in assets at mid-year are up from $3.54 billion 12 months earlier, according to the bank, and are nearly double the second place bank, according to regulatory data.

Banco Agrícola is also the most profitable. It posted a return on average assets of 2.54% as of mid-year, as head of the banking system, and its return on average equity of 17.64% was second highest.

The bank¹s financial performance have been driven by declining credit costs, gradually rising margins and a slight growth in its loan portfolio. Banco Agrícola¹s market share in terms of assets at year end was 28.2% and deposits 27.2%.

Its business, as of mid-year, is split between its commercial operations, accounting for 46% of its business, consumer banking, 40%, and mortgage lending 14%.

The bank represents a strategic presence for Bancolombia, which acquired the bank in 2007, in the country as well as in Central America. El Salvador has seen little other foreign competition since then.

As with the dominant banks in many of Latin America¹s smaller economies, Banco Agrícola¹s size leaves it in the safest position to withstand an economic downturn that might threaten asset quality.

This is particularly important in El Salvador this year. The economy, closely tied to that of the US, continues to slow while fiscal pressures and increasing public debt leave it vulnerable to external shocks.

Fitch forecasts GDP growth of 2% for 2012 and 2.3% for 2013. Foreign competitors, such as Citi, HSBC, Banco G&T Continental and Scotia have yet to match Agrícola¹s numbers, and should find it difficult to do so given the prospect of continued slow growth. LF

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