The liquidity of the banking system grew by 30% in the last twelve months, helped by the growth of liquid assets of banks and the extension of terms for external loans.
The report by the Central Bank concludes in its study on financial stability that the Salvadoran banking system continues to show a position of robust solvency in terms of liquidity levels which have been expanded in recent months.
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.
The Superintendency of Banks in Panama has taken over administrative and operational control of the bank due to its potential illiquidity and insolvency.
From a statement issued by the Superintendency of Banks of Panama:
Based on the provisions of Chapter XVI and Articles 131, 132 and related provisions of the Banking Act, by Resolution 097-2014 of 16 July 2014, the Superintendency of Banks of Panama has ordered the takeover of Administrative Control and Operations of ES BANK (PANAMA), SA effective from July 17, 2014 at 12:00.
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.
Simple transactions such as deposits, card payments and cash withdrawals will be able to be conducted in Panama in grocery stores, supermarkets or pharmacies.
Thanks to the 002-2012 agreement announced by the Superintendency of Banks of Panama (SBP), non-bank correspondents have been established, who will be able to perform some banking transactions such as making deposits, cash withdrawals or credit card payments at sites such as pharmacies, grocery stores, department stores, supermarkets and others.
A report from Fitch indicates that only in 2011 the Banks of Central America will reach profitabilitye levels that could be compared to those before the crisis.
Fitch thinks that the majority of Central America's banking systems will earn more profits than in 2009, but it will not be until 2011 when they reach profitability levels comparable to the ones they had before the crisis. The perspectives of financial performance for the Nicaraguan Banking System are less favorable than the rest of the region; meanwhile the possibility that results in Costa Rica surpass the ones in 2009'will depend basically on the evolution of the currency exchange rate.
Banks in Guatemala will have to increase their capital from 10% to 14% when granting loans in U.S. dollars to people with incomes in quetzales.
Banking Superintendent Edgar Barquín explained that the measure, which affects a third of the entire loan portfolio in dollars -$982 million-, will force banks in the system to increase their capital in $48 million.
There was an improvement in accident rates and operating performance in the Nicaraguan insurance sector in 2008, as reported by Fitch in a special report.
Thanks to the growth in insurance premiums in the period and progress in costs and accident rates, the sector was able to overcome the operating loss that occurred last year (especially the state insurance company), registering a combined index of 96.3% in 2008 compared to 103.7% in 2007. The good operating performance has enabled the sector to more than offset the decrease in net financial income contribution (by private insurance companies in particular) and impact on the greater overall profitability. The expected decrease in the level of economic activity and thus in the sales of insurances implies a major challenge for the sector and for protection of the progress achieved in the short term. At the close of the previous year, net insurance premiums totaled C$2.1 million, 14.0% above the amount registered in 2007. The faster growth in the case of private insurance companies (17.1%) is worth noting, taking into account the significant growth in premiums of Metropolitana Life Insurance Company (35.1%) and Lafise Insurance (25.7%). For its part, the INISER (Nicaraguan Insurance Institute) experienced a growth of 8.6%. The positive growth of the sector has been primarily in the business of auto and life insurance.
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