Latin Finance - November/December 2011 - 54

2011

sectors has kept a cap on proﬁts. Still, it has low funding costs thanks to inexpensive foreign deposits, says Moody’s. “In the corporate sector competition is ﬁerce,” adds Azconegui. “Often they will ﬁght over 10 basis points.” LF

Venezuela
Best Bank: BBVA Provincial

Remaining Resilient
enezuela’s BBVA Provincial has remained resilient in what has been a tough environment for banks, showing that it can still post some of the most solid results in the country. This comes amid threats of nationalization after the administration of President Hugo Chávez accused the bank of failing to allocate funds to government-sponsored housing projects. Venezuelan banks continue to face internal challenges, which include a complex set of controls and regulations limiting operations, lower economic activity, high inﬂation and state intervention in most economic sectors, says Fitch. Despite these challenges, Banco Provincial has maintained its stable outlook, reﬂecting its above average performance in a highly unstable operating environment in Venezuela. “We view BBVA Provincial as a solid bank in a weak market,” says Theresa Paiz Fredel, senior director at Fitch Ratings. “We expect this to continue given the strength of management and corporate governance rules aligned with those mandated by its parent company.” Spain’s BBVA controls about 54% of Provincial’s equity, with Grupo Polar being the second largest shareholder with a 26.44% stake. Despite the challenging environment, Provincial has been able to post solid and adequate results that compare well with the best institutions in the country. The bank can boast good proﬁtability, controlled asset quality ratios, and a strong capital base, Fitch says. As of August 31, 2011 BBVA Provincial

had a return on assets (ROA) of 4.91%, compared with 4.31% as of September 2010. The bank also saw a return on equity (ROE) of 44.64% and non performing loans of 1.21% for the year. Provincial’s above 40% return on average equity is considered overestimated, Fitch says, however, because it only considers non-inﬂation adjusted ﬁgures. The bank has pursued its aggressive growth strategy well into 2011, which was balanced by di erent products. Consumer loans have also seen their weight increase in the product mix. Considered Venezuela’s third-largest bank, BBVA has an 11.2% market share in terms of total assets. The bank has a strong market share in most domestic business segments and has assets of more than $10 billion, Fitch says. Consumer lending has been the backbone of Provincial’s strategy for many years, while its market share among large companies helps to diversify its risks, the agency adds. With an average operating proﬁt to average assets ratio above 5% over the past four years, Provincial has become one of the most proﬁtable banks in its segment, a trend that Fitch ratings expects to continue. Its performance continues to reﬂect its association with larger parent BBVA. LF

On Solid Footing

6% appreciation of the colon versus a year earlier also boosted the sector’s performance in dollar terms Bankers will be closely watching the colon this year, as its strength can crimp the performance of Costa Rica’s vital tourism sector, says Naranjo, who expects the currency to depreciate another 3% or 4% next year, which will beneﬁt exports in general. “The exchange rate has hit the ﬂoor compared to where it was for many months,” Naranjo tells LatinFinance, pointing to a possible lack of international liquidity to help dent the robust colon. Naranjo says Costa Rica’s economic outlook is bright, boding well for the banking sector. GDP expansion this year should be around 4%-4.5%, with inﬂation of 5%-6%. A similar growth outlook for next year, coupled with falling inﬂation, will be part of a scenario where ﬁnancials continue to recover from the global ﬁnancial crisis, which could lead to an increase in outstanding loans in some tourist-area real estate projects. “It has been a di cult year due to the issue of the increase in arrears, but it’s still within reasonable limits,” Naranjo says. He adds that next year should be better as the economy improves – barring major shockwaves from abroad. “We’re expecting with economic activity beginning to accelerate a bit more, credit for the coming year could grow 12%-15% … and indices of nonperforming loans will tend to diminish a Best Bank – Banco Nacional de Costa Rica bit,” says Naranjo. “We don’t see delicate problems in the ﬁnancial system,” says Naranjo, pointing to stable growth and falling unemployment. “The delicate problem in the Costa Rican economy this year and for a good part of next year is the ﬁscal problem.” n spite of a complicated year for Costa The government deﬁcit is seen around Rica’s banks and concerns about the 4.5% of GDP this year, though a ﬁscal government deﬁcit, the state-backed reform package should address the issue ﬁnancial system is on solid footing with encouraging economic indicators expected by next year, he adds. Costa Rica’s top bank says focusing this year, says Banco Nacional de Costa on services for its 1.6 million clients Rica’s CEO Fernando Naranjo. has been key to success. Bank services With almost $7 billion in assets for small businesses run by women has through June 2011, Banco Nacional de been a positive addition, says Naranjo. Costa Rica remained the country’s top Expanding banking services through bank by assets compared to Banco de 2,000 retail outlet branches has also Costa Rica’s near $5 billion in assets. Aside from good local growth, the roughly helped it consolidate its presence.

Costa Rica

54 LATINFINANCE

November/December 2011

Latin Finance - November/December 2011

Table of Contents for the Digital Edition of Latin Finance - November/December 2011