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.
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.
Reports have been made that the Canadian bank could be analyzing the conditions for bidding by units for Citi's consumer banking operations in Costa Rica and Panama.
The group may be analyzing a Canadian bid for the operations of Citigroup in Costa Rica and Panama, two countries in Central America where it already has a presence.
Between 2011 and 2014 the number of people with bank accounts grew in all Central American countries, with noteworthy growth in El Salvador of 23%.
In Guatemala bankariztion grew by 19% in the period in question, reaching 9.2 million people with at least one bank account. In Honduras' growth was 11%, Costa Rica's 14%, Panama's 19%, and in Nicaragua, the increase was only 5%.
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":
Costa Rica:
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 banks Davivienda and Grupo Aval, already present in Central America, could be in talks with Citi to acquire its consumer banking operations in the region.
The sale of assets of Citigroup in 7 countries in Latin America represents an expansion opportunity for Colombian banks. Bloomberg reports cited by Elfinancierocr.com note that in the case of Banco Davivienda, it's interest is soley in the consumer banking units in Peru and Guatemala.
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.
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.
The group has announced that as part of its long-term strategy it will withdraw from the consumer banking business in Costa Rica, El Salvador, Panama, Guatemala and Nicaragua.
Extract from a statement issued by Citigroup:
Citigroup today announced strategic actions to accelerate the transformation of its Global Consumer Banking (GCB) to focusing on those markets where it has the largest scale and growth potential.
In the last year, the sector was characterized by lower loan growth, lower returns and higher funding costs.
Fitch has presented its Special Report on the Central American Banking System, which analyzes the performance of the sector in the period between July 2012 and June 2013.
The rating company highlights:
Low Credit Growth:
The loan portfolios of most banking systems in Central America slowed their growth rates in 2013, in line with the downward revision of the region's GDP. In June 2013, the annual growth of loan portfolios of five Central American countries stood in the range of 6% to 12% in real terms, although it was only 2.2% in Honduras. According to Fitch Ratings, loans in the region will close 2013 with real growth of about 7% (2012: 8.9%). Panama will lead the growth of the loan portfolio, but inflationary pressures throughout the region will be an additional limit to real credit expansion.
The Panamanian bank is continuing its expansion plans in Central and South America.
Multibank, an entity founded on Panamanian capital, intends to consolidate and expand its share of the banking sector in Colombia and Central America, where it has already acquired full control of Macrofinanciera SA (Colombia) and the incorporation of the company Multi Resuelve (Costa Rica), focused on financing the purchase of cars.
Fitch Ratings believes that improving the level of efficiency in the banking system would result in a notable increase in profits.
The required improvements in efficiency in the banking systems in Central America could have a positive impact on earnings, on the internal generation of capital and, ultimately, on risk ratings, according to a report by Fitch Ratings.
A Fitch Special Report indicates better positioning in the face of external uncertainty.
SUMMARY
Strengthened Financial Performance:
The banking systems of Central America and the Dominican Republic (hereinafter the region) will continue to strengthen their financial performance as the region continues to recover its rate of GDP growth, estimated at about 4% by 2012 under Fitch’s baseline scenario.