Mergers in the past decade have seen Guatemala¹s banking system come to be dominated by its two largest banks, Banco Industrial and Banco G&T Continental. Against this backdrop however, well managed Banco Rural (Banrural) has grown quietly, but with vigor.
Banrural¹s assets stood at 35.48 billion quetzals ($4.53 billion) at mid-year, up from 30.35 billion quetzals the year before and just 24.31 billion quetzals three years ago, according to central bank data. It has nearly caught up to second-placed G&T Continental¹s 35.91 billion quetzals, and has become the second largest by deposits. That said, catching Banco Industrial¹s 50.11 billion quetzals of assets is still a tall order.
A focus on consumers and micro and small enterprises has served Banrural well. Its profitability compares favorably with the country¹s two largest banks. And it posted a return on equity of 23.9% as of mid-year, second only to Continental, which it bested in terms of return on assets of 2.7% to 1.95%.
Banrural efficiency ratio dipped over the awards period a concern for analysts given the bank¹s size and consumer lending concentration from 40.1% to 39%. Yet despite ³weak² efficiency metrics, the bank ³compensates with high margins,² says Edgar Cartagena, an analyst at Fitch Ratings.
Still, the focus of its lending, and a more limited revenue diversification than the big banks, could leave it vulnerable to any economic downturns. The bank is mainly geared towards financing consumption, as well as micro, small and medium companies, with a smaller share in corporate lending.
Guatemala¹s economy grew at 3.9% in 2011, and the growth rate should average 3.3% between 2012 and 2014, according to Fitch. Among today¹s chief sources of concern are the country¹s high crime rate and social instability, as well as in the prospect of a downturn in the US economy.
But Banrural¹s sound local franchise, high profitability, strong capital metrics and ample deposit base, as well as its improving capital ratios over the past five years (which have stabilized over in the last two fiscal
years) have left the bank on a relatively sound footing. The bank¹s core capital to risk weighted assets stood at a high of 15.1% this June, well above the average of the Guatemalan banking system. LF