Complex Scenario for Banks in Guatemala

A concentrated banking system with weak capital indicators faces the challenge of reducing past-due loans, which in large banks have grown from an average of 1.1% in 2013 to 2.3% this year.

Thursday, October 12, 2017

From a report by Fitch Ratings:

Loan Performance Adequate but Impaired:   The behavior of loans has been affected in the last 4 years; in the second half of 2017 (2Q17), non-performing loans (arrears of greater than 90 days) for the largest banks averaged 2.3%, from 1.1% in 2013. In general, this trend was due to the fact that the default of some large creditors from different sectors affected the banking system, as well as the gradual increase in consumer loans.  The temporarily established credit card law, which limited interest rates and collection practices in 2016, did not have an immediate impact.  Current indicators are adequate.   

Weak Capital Indicators: Guatemalan banks continue to show depressed capital metrics, compared to other regions in Latin America. In 2Q17, Fitch Base Capital of the large banks averaged 12%.  However, banks are comfortable with their current levels that prevail despite aggressive dividend-sharing policies.   

Read full release (in Spanish).

More on this topic

Nicaragua: Prospects for Banking in 2018

January 2018

Fitch Ratings forecasts that the performance of the banking system will remain stable in 2018, despite the expected slowdown in credit growth.

From a statement issued by Fitch Ratings:

Fitch Ratings-San Salvador-23 January 2018: Fitch Ratings has maintained its stable outlook for Nicaragua's banking system, considering that its financial performance is expected to remain adequate in 2018 despite the anticipated slowdown in credit growth. Banking system performance has proven to be consistent, benefiting from the positive trend of the local economy. On average, Nicaragua's real GDP growth was 5.2% between 2012 and 2016 while credit growth was 21.5%. However, since 2016 there has been a slight slowdown in the economy and in the main credit segments (commercial and consumer loans). Fitch expects the country's economic growth in 2018 to reach 4.5%. This would imply a lower dynamism for the banking sector, with credit growth expected below 15%.

Nicaragua as seen by Fitch Ratings

August 2017

The rating agency highlights growth at rates of 5% achieved in the last five years, but estimates that in 2017-18 this will fall to 4.5%, partly due to the effect of a reduction in financial flows from the program with Petrocaribe.

From a statement issued by Fitch Ratings:

Central American Banks: Outlook 2015

January 2015

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 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.

Nicaragua: Microfinance Sector Facing Increasing Challenges

September 2009

The Fitch report notes that the negative effects of the global crisis have intensified in Nicaragua.

Fitch Ratings – San Salvador/San José, September 24, 2009. The risks faced by microfinance institutions worldwide have aggravated over the past year. The lesser favorable economic conditions have deeply impacted the populational sectors in developing countries that have managed to overcome poverty and compose an important segment of microfinance institutions.

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