Fitch foresees returns for Nicaraguan banks, however the result will not be as good for the banking industry in Panama, Guatemala or El Salvador.
From Fitch's report "2017 Outlook: Central American and Dominican Republic Banks"
The 2017 Central American bank rating outlook is stable for 2017, reflecting slight changes in growth and financial performance, according to a new Fitch Ratings report. The evolution of some factors, such as interest rates and private investment, or the emergence of events that could increase reputation risk could alter the banking outlook.Stable Rating Outlook: The ratings of most banks in the region have a stable outlook, reflecting the fact that their credit profile will not undergo significant changes in Fitch's base scenario.Movements in the ratings will be derived mainly from adjustments in ratings of parent banks or sovereign ratings, or of unanticipated events.
Moody's warns of the risks faced by banks in Central America in the context of a rising trend in interest rates and dollarization of their loan portfolios.
From a report by Moody's:
Mexico, September 14, 2016 -- Banks in Central America face rising asset risks as interest rates look set to rise in the region, pushing up debt service costs for borrowers, according to a report from Moody's Investors Service.
The company Financiera de Inversión has received authorization to start operating as a private bank in the country.
With capital of $15 million, the company which has so far only operated in the financial segment will start providing banking services under the brand Banco INV, and will be subject to the regulation required of participants of the banking system.
Without disclosing the amount of the transaction, the Canadian bank has announced the acquisition of Citigroup's operations in personal and commercial banking in both countries.
From a statement issued by Scotiabank:
Scotiabank will acquire Citigroup's personal operations and commercial banking operations in Panama and Costa Rica
SAN JOSE, July 14, 2015 - Scotiabank announced today that it has reached an agreement to acquire Citigroup's personal and commercial banking operations in Panama and Costa Rica, subject to regulatory approval. The core category 1 capital ratio of Scotiabank will be affected by approximately 15 basis points.
The Colombian Bank which already has a presence in Central America said it is still interested in a possible acquisition of the assets of Citi's consumer banking operations in Central America.
A Spanish bank was the first entity to be interested in acquiring the consumer banking operations belonging to Citi in the region, however the negotiations did not come to fruition and now it has been reported that the Colombian bank, which according to reports has been interested from the beginning, is in talks with Citi ombudsmen over the possible purchase of its regional operations, estimated at $1.5 billion.
Citigroup could be soon finalizing the sale of its consumer banking operations in Central America with Bank of Spain, which could be paying $1.5 billion.
A report on Bloomberg.com noted that negotiations between the US bank and the Spanish bank are very advanced, and only the only thing left is to define the final value of the transaction, which could amount to $1.5 billion, according to unnamed sources cited by Bloomberg.
Slow growth is projected in El Salvador, very good performance in Nicaragua, stability in Panama, more competition in Guatemala and moderate growth in Costa Rica.
From a report by Fitch Ratings entitled "2015 Perspectives: Central American Banks":
Fitch Ratings has revised the outlook for the sector from positive to stable, because the agency does not anticipate substantial improvements in respect to the previous year. The system's profitability will remain low, with less than 1.0% ROAA. The results are limited because of the high dependence on net interest margin (NIM) and additional expenses in provisions for loan losses, due to regulatory changes that established gradual constitutions of general provisions for the best qualified loans. In addition, Fitch does not anticipate improvements in revenue diversification and also foresees a significant revenue exchange rate differential. This last factor has a significant influence on the results of the banks in Costa Rica.
Analysis by Fitch Ratings projects that banks in the region will maintain strong balance sheets and have stable profitability in 2014.
Excerpted from Fitch Ratings:
Differential Growth and Opportunities: Low financial depth, in most systems, continues to provide significant opportunities for expansion of bank balance sheets; although this is limited by low average income levels. In 2014, assets in the region could increase about 10%, mainly driven by higher portfolios. Central American banking portfolio growth will reach double digits, except for the systems in El Salvador and Panama, which will grow at a slower pace.
Local financial groups are interested in negotiating with the U.S. company in order to acquire the consumer banking operation in Nicaragua.
The consumer banking business that will be left behind by Citigroup could return to the hands of Central American companies, as some have expressed interest in acquiring the operation in Nicaragua, although it is not yet known who the interested parties are.
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