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Panama Best Bank: Banco General

Nov 1, 2012

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 player.

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 conservative policies.

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

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