Panama has a deserved reputation as having Central
America¹s most dynamic banking sector and recent
economic growth has meant there has been even more room for
expansion. But this growth has, as yet, to lead to major
changes in market share, with Banco General still the dominant
The bank, as Panama¹s largest locally owned bank,
possesses one of the largest branch networks in the country,
significant market share and a reputation for consistency and
³Banco General has consistently executed a conservative
strategy, building on its strengths and cautiously yet
decidedly approaching new business initiatives,² says
Diego Alcazar, an analyst at Fitch.
³You don¹t see rapid growth such as you see in
Peru and Colombia, but Banco General has steady margins, a well
diversified portfolio and the largest market share in
mortgages. It has been able to solidify its corporate lending
and consumer lending with a conservative approach.² The
bank had $9.88 billion in total assets as of mid-year, up from
$8.97 billion the year before. Its market share in loans was
17.9% and deposits 24.9% keeping it at the top of the banking
system. Profitability remained about the same, with return on
assets of 2.77% up from 2.64% the year before and return on
equity of 21.48% down slightly from 21.76%.
Because of its slippage as the market leader for loans and
deposits, the bank¹s strategic plan for 2012-2014 involves
bolstering its competitive position, as it bets on sustained
economic growth rates.
But the country¹s banks need to be careful: while
economists are sanguine on growth, inflation is threatening to
hit 6% this year higher than the government would like.
Fears that authorities may be overspending have stoked fears of
imbalances ahead that could hurt growth.
³There are hiccups, yes, but Panama has a stable
economic environment and that consistency is reflected in the
overall stability of the country,² says Alcazar.
Banking sector growth is expected to be mainly in the retail
sector, where Banco General has been cautiously seeking to
increase its market share.
Expansion abroad albeit organically also remains
a goal, says Fitch.
Banco General operates in Mexico, Guatemala, El Salvador,
Colombia and Costa Rica. But strategic acquisitions are also
possible, the ratings agency says.
The cost of credit should gradually increase as the bank
enters riskier markets and promotes riskier products, says
Fitch. But given the bank¹s risk-averse culture, the
dangers of such a move are likely to be limited with the
rewards, ultimately, significant. LF