Latin Finance - November 2008 - 38

of the 2008 State-backed Banco Nacional de Costa Rica (BNCR) remains the nation’s most profitable financial institution, with net Best Bank – Banco Agrícola income of 21.3 billion colones ($38.2 million) for first half of 2008, compared to the nearest competitor Banco de Costa Rica’s (BCR) 14.9 billion colones. BNCR also leads in assets (2.86 trillion anco Agrícola is the centerpiece of colones), and boasts ROA of 2.0% and ROE Bancolombia’s strategy to establish a of 18.3%, compared to a system wide 1.7% meaningful presence in Central America. and 15.7%.The dominant position is likely The May 2007 purchase earned the to remain, earning it again the title of Colombian powerhouse a solid footprint LatinFinance Bank of the Year. in a highly sought after region, and just “This year we’ve adopted a very in time. With Citi having wrapped up its conservative position, to shield ourselves acquisition of Cuscatlán the same month from the international crisis,” says BNCR and HSBC less than a year earlier buying CEO William Hayden. There has been little Banistmo, owner of Banco Salvadoreño, impact on the public and private banks in CentAm’s banking industry has been Costa Rica, he explains, but there may still pretty much sewn up and rebranded be one, especially on assets in dollars. with generic, global logos – the financial While banks reorient lending towards world’s answer to the golden arches. consumption-based sectors and businesses, But Bancolombia, which appears to Hayden says this might not be ideal for have plucked the region’s jewel, has not long-term gains, but it is safer short term. Costa Rica yet done away with the homegrown BNCR lending growth should only be Best Bank – Banco Nacional de Costa Rica name. Agrícola, El Salvador’s largest about 21% this year, versus 56% last year, bank by assets and branches, enjoys the and Hayden sees the same deceleration country’s most recognizable and happening to the banking system as a desirable financial brand, claim its whole. It is impossible to know what executives. operating conditions will be like, but the Indeed, the brand is so valuable – it bank is eyeing 30% growth in lending in apparently has sentimental value for 2009, and about 26% expansion in assets. Salvadorans –that the Colombians, The crisis is not all bad news for BNCR’s owners of an increasingly distinguished orsening global conditions in the past efforts to defend market share against brand, are still struggling to decide foreign banks with regional aspirations – year have done little to shake up the whether or not to keep it. “We don’t plan Costa Rican banking landscape. Lenders like Citi, Scotia and HSBC – that have been on changing the name of the bank,” says are taking a conservative stance until the building up in neighboring countries. Those Joaquín Rivas, Agrícola’s full impact is known, particularly regarding banks still lack market share, Hayden says, communications chief. and mergers are not easy to fund at the the vital tourism sector. There is, however, a very deliberate moment. Costa Rican banks have been plan already in motion to get Agrícola’s “For another year at least, at Banco redirecting resources to commercial loans, performance in line with its new parent’s, says Fitch, as credit growth has been Nacional we aren’t worried about this says Pablo Rivas, director for corporate competition,” says Hayden. As for domestic slowed by inflation and other macro development. An aggressive timeline has players, he says that a long-talked about factors. The agency expects profitability to been established to get ROE up to 25.00% be lower this year versus last. union of the three state-owned commercial by 2010. In June, Agrícola’s ROE stood at Standard & Poor’s lowered Costa Rica’s banks – BNCR, BCR and BanCredito – is 19.24%, compared to Bancolombia’s still under consideration. “It is a project outlook to stable from positive in October, ROAE of 29.5%. largely on concern about external effects on they are studying,” says Hayden. “It could Asked how this can be achieved, happen or not. The decision is up to the its financial system. The agency finds that Joaquín Rivas says the bank plans to government.” the system is vulnerable due to high levels grow by offering new products, targeting of dollarization and exchange-rate Though BNCR has no official position the employee retail market, as well inflexibilities, as well as the current account on such a combination, Hayden says there catering to higher income clients. He would be positive economies of scale and deficit, which could reach 8% of GDP in adds that Agrícola is not worried about competitive advantages. But there would 2008. Economic growth could decelerate hitting the target, since it has always toward 3% in 2008, S&P says, and inflation also be governability and concentration met strategic objectives in previous might reach 14% this year before declining risks in an institution that would end up years. with about 52% of the system’s assets. LF in 2009. El Salvador Bridge to Salvador B In ROE, the bank posted 21.81% in 2007, up from 21.00% in 2006. It fell slightly from year-end 2007 to June 2008 because turmoil in the international markets forced the bank to raise cash in the local Salvadoran markets, which carry higher interest rates, says Pablo Rivas. That pushes up overall costs for the bank, depressing ROE, he notes. The bank also has to lower its efficiency ratio to under 40%. Today that figure is already around 41%, says Pablo Rivas. Efficiency is measured as total operational cost divided by revenue. ROA has remained constant over the past year. In June 2008 it stood at 2.00%, up slightly from 1.97% in June 2007. For Bancolombia, the deal has helped triple its dollar-denominated assets, bringing in a fresh $4.3 billion from the dollarized economy. LF Bigger Fish, Shrinking Pond W 38 LATINFINANCE November 2008

Latin Finance - November 2008

Table of Contents for the Digital Edition of Latin Finance - November 2008