Nine of the eleven private banks operating in the market generated fewer profits in 2010 than in 2009.
The data published by the Superintendence of Financial Institutions (SUGEF), dos not provide information on Bansol, which began operations in November 2010.
"Private banks were mainly affected by the 9% drop of the dollar in 2010, as most of their assets are in that currency," reported the article in Nacion.com, "Since financial statements are done in Colones, transferring their assets from Dollars into Colones results in a lower valuation due to lost value in the price of the currency."
Following four years of continuous growth, net profits fell to $51.2 million in the first two months of 2010.
Data from the Banking Superintendence (SB) shows that in the first two months of 2007 banks made a profit of $37 million, $54 million in 2008 and $62.3 million in 2009.
Return over assets (ROA) grew from 0.32% in 2006 to 0.37 in 2009, but fell to 0.29% in 2010, the lowest figure in 5 years.
Salvadoran banks made a profit of $43.6 million in the first 9 months of the year, $75 million less than the same period 2008.
All the banks in the system fared worse than last year, with the exception of Banco Azteca and Citibank.
"Credit was down 9%, as there were less loans granted to the private sector", reported Elsalvador.com. "In September 2008, the loan portfolio summed $9.1 billion, but in the same date of 2009 it had dropped to $8.3 billion".
So far in 2009, profits at local commercial banks have dropped 21% in real terms.
From the entire national banking system, only 4 entities, all of them private banks, have reported real increases in their profits at the end of Setptember.
"There are two main reasons for this slowdown in the banking business: there is little growth in loan placement, and arrears have increased, forcing the banks to spend more in reserves", reported Elfinancierocr.com.
Up to June 30th, banks reported $33.7 million in earnings, 38.2% less than the same period of 2008, when they brought home $88.2 million.
Marcela Jiménez is the executive director of Abansa, the Banking Association of El Salvador. She assures local banks are committed to their projects in the country.
"Return over equity was 3.10% up to May 2009, while it was 14.72% in the same month of 2008", reported an article in Elsalvador.com.
At the end of the first quarter of this year, profits were $32 million, 39.1% less than during the same period last year.
This is the first time in the last ten years that the Honduran banking system has registered a decrease in profits.
Journalist Luis Rodriguez wrote on the El Heraldo website: "The institutions that closed their balance sheets in the red were international banks such as HSBC (-59.8 million Lempiras, $3.17 million) Bancovelo (-3.4 million Lempiras, $180 thousand) and ProCredit (-29.5 million Lempiras, $1.56 million). The remaining 14 banks reported profits, but lower than those observed in the first quarter of 2008.
In March 2009, the banks from the financial system recorded profits of $22 million, compared to $34.9 million for the same period last year.
Of the banks, Agricultural Bank was the one that registered the highest profits.
José Luis Henríquez Elsalvador.com wrote: "It is anticipated that with the loans contracted by the Government with multilateral organizations and the release of contingency reserves that the SSF forced banks to establish, interest rates will begin to go down gradually. Financial statements from newspapers also indicate that banks had a loan portfolio of $8.697 billion, lower than the $8.895 billion recorded by the Superintendent in March 2008."
In 2008, banking generated $128.3 million in earnings, $19.7 million less than the $148 million generated in 2007.
The statistics reported by the Salvadoran Banking Association indicated that the Industrial Bank was the one that had the most earnings last year, but it suffered a drop of $10 million in profits.
Elsalvador.com published a report which stressed that while the loan portfolio grew by 2.8%, delinquencies rose by 40%: “In 2008, the bank loan portfolio ended with a balance of $8.93 billion, an increase of 2.8 % when compared to 2007 when the loan balance was $8.69 billion.