Latin Finance - November 2008 - 46

of the 2008 Dear Prudence by Lucien Chauvin rudent. That is the word used most often to describe Peru’s banking system by people both inside and outside the sector. And it is being heard almost daily as the international financial crisis deepens and authorities try to gauge the impact on the country’s banks. “Our bankers are very prudent. The international exposure is relatively low,” finance minister Luis Valdivieso said in late September. The minister, however, says the government is closely watching for signs that this might change, in order to be able to act accordingly. Two areas being monitored very closely are the currency and local bourse. The sol, thanks to interventions from the Central Bank (BCR), has remained relatively stable, depreciating just 1.1% in September, compared to the Chilean and Colombian pesos, which depreciated 7.7% and 12.8%, respectively, that same month, according to BCR data. The BCR sold more than $3 billion in September and early October – the one-day record is $443.8 million, unloaded on October 2 – to expand liquidity. The stock market is a different story, losing 15.3% in September and continuing the trend in early October, down nearly 16% at the start of the month. Valdivieso said in early October that government frugalness gives it around $3 billion to inject into the economy if the crisis worsens. Peru also has $35 billion in foreign reserves, compared to $28 billion in foreign debt, so there are additional cushions. A cautious attitude should help Peruvian institutions withstand the financial imbroglio, but it is also one of the principal reasons why Peru’s banking system remains relatively small despite significant growth this decade. “Peru is in good shape to weather this storm. The banking sector is solid, bad loans are in low proportion to overall loans, P Expansion in Peruvian retail banking will likely be slowed by the global meltdown. But a rise in thrifts opens up new frontiers to offset contraction. Peru Best Bank – Banco de Crédito banks are liquid and reserves are very high, There really are no weak numbers,” says Pedro Rubio, head of the corporate and business division of Banco de Crédito (BCP), Peru’s largest financial institution. There are 15 banks in the system, up from 10 just one year ago, serving the country’s 28 million people. The top four dominate the sector, controlling 87.3% of deposits and 82.8% of loans. from $13.3 billion in 2003, according to the Banking, Insurance and Pension Fund Superintendent (SBS). The same is true for loans, which have risen to $25.7 million in July, compared to $10.3 billion five years earlier. Consumer loans are up four times and mortgages have more than doubled since 2003. More importantly, past-due loans have fallen from above 10% of total at the start of the decade to 1.2% today, says the SBS. The average ROA in the system in July was 28.6% and the ROE was 2.4%, according to the SBS. The top banks performed near or above the averages, with BCP’s ROE at 30.5%, Continental at 35.97% and Scotiabank at 29.38%. The ROA through July for these banks was 2.3% at BCP, 2.7% at Continental and 2.9% at Scotiabank. Scouring New Markets The leading banks do not expect growth to slow, even though the international financial system is teetering. “The Peruvian market has been expanding for 10 years and at an accelerated pace for the past four years. This growth is higher than in other Latin American countries, which is encouraging for foreign investors looking for new markets,” says Carlos GonzálezTaboada, CEO of Scotiabank in Peru. Scotia knows a fair amount about expansion in Peru, having rapidly grown its participation in the local market this decade, particularly over the last three years. In May the bank bought the 20% it did not already own of Wiese Sudameris. It also announced the purchase of Banco de Trabajo from Chile’s Altas Cumbres. Accelerated growth, says González-Taboada Growth in the past few years followed the country’s economic boom, which has seen GDP double to $105 billion. Deposits have more than doubled since 2003, when the economy began expanding rapidly, hitting $29 billion in July, up 46 LATINFINANCE November 2008

Latin Finance - November 2008

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