LatinFinance - November/December 2013 - 59

citing sustained macroeconomic
underperformance relative to its peers and
protracted high fiscal deficits. The country's
debt to GDP ratio was 56.7% in 2012, well
above the 39% median in the BB class.
Despite the difficult environment, Banco
Agrícola has performed well: its assets grew
to $3.8 billion in June - up from $3.7 billion
a year earlier - and it maintained a capital
ratio of just over 14% over the period.
The bank brought down non-performing
loan levels by a fifth, to 1.96%, and increased
provisioning rates against bad credits.
It posted a return on average assets
(ROAA) of 2.4%. Though a small decrease
from previous years, it still compares
positively to the local banking system at
1.6%. Lending margins stood at 2.5% versus
the average of 1.7% as of June.
Agrícola's main strategy remains targeted
toward universal banking services with
a loan portfolio balanced between retail
(55%) and corporate lending (45%). Agrícola
expects to increase market share in credit
cards in the short term and develop mobile
applications to enhance electronic banking
systems.
Cartagena says Agrícola is likely to
continue growing modestly.
As a strategically important subsidiary for
Bancolombia - it was acquired in May 2007
- it provides a recurring share of revenues
to its parent and an important holding in
Central America.
Colombian banks such as Davivienda and
BAC have entered the country as Europeans
have left and now hold half of Salvadorian
assets, Cartagena says. Despite competition,
Agrícola still holds the highest market share
at 27.8%. LF
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BANK OF THE YEAR PANAMA

Banco General
Opportunities abound for
banks in in Panama, with
a fast-growing economy
and regionalizing banking
system
For Panama's banks, it has long been a
familiar refrain: the foreigners are coming.
For years, international investors have
been drawn to Central America's most
sophisticated banking sector. Vying for
regional expansion, global banks entered
the market, including HSBC, which in 2006
snapped up Panamanian lender Banistmo.
The global banks have since retreated in
the face of tightening global regulation and
more stringent capital requirements - but
the foreign incursions have hardly let up.
Just as HSBC withdrew, Colombia's two
largest lenders made moves into Panama.
Bancolombia in February paid $2.1
billion cash for HSBC's Panama operations,
in a deal that instantly made it the number
two bank in a fast-growing market. Grupo
Aval, owner of Banco de Bogotá, agreed this
year to buy BBVA's Panama operation for
$646 million in cash and a dividend.
Raúl Alemán, chief executive of Banco
General, Panama's largest bank by assets, is
undaunted by the shifting dynamics.
"The international flavor has changed,"
says Alemán, whose bank's assets were
$10.38 billion as of June. "It's going to be
more of a regional center. Those banks
will support Colombian companies in
the region. They are good banks, so
competition is going to be as tough as it was
with other international banks."
Panama's breakneck growth will keep
foreigners coming, he says. Panama grew
at 11% in 2011 and again in 2012, according
to the World Bank, and is forecast to grow
around 7% this year. The pace has varied in
recent years - as low as 4% in 2009 - but
Alemán expects that growth will smooth
out in the next few years.
"The economy should continue
growing at a good pace, 5% to 7%," he says.
There is still a lot of canal expansion and
related building to be done. In addition
to construction, there is some potential
from Venezuelan businesses reestablishing

themselves in Panama. Mostly, Alemán
says Banco General will continue to focus
on expanding products with its existing
customer base in the short term.
Banco General is our Bank of the Year for
Panama. It is the country's most diversified
and profitable lender and its growth has
been formidable; its assets grew 13.5%
over the year to June 2013. The bank also
increased revenues by 5.3% in the first six
months of 2013, compared to a year earlier.
Still, it has challenges ahead: profits fell
by nearly 4% and the bank's equity growth
did not keep pace with the expansion of the
balance sheet.
Panama's banking regulator is
introducing tougher risk standards. These
include changing capital calculations and
introducing a through-the-cycle system of
allocating reserves for bad loans, known
as dynamic provisioning. But Alemán does
not expect his bank to need to raise capital
as a result, calling the regulatory changes
"minor".
Expensive values
A regional acquisition of its own is possible,
too. "We are looking at opportunities
in the region," Alemán says. "If a good
opportunity comes that make sense to us
we will do it."
General already has representative
offices in Central America and Mexico.
Alemán singles out Guatemala, in
particular, as a good, growing economy
where the bank could expand.
But even though European banks are
pulling out, this may not be the right time
for M&A in Central America. At the time of
HSBC's sale, analysts calculated the deal
cost around three times net asset value and
around 16 to 17 times earnings.
"The Colombian banks have been raising
the prices for operations," Alemán says.
"We feel they are too expensive." LF

RAÚL ALEMÁN, BANCO GENERAL

"THE INTERNATIONAL FLAVOR HAS
CHANGED. IT'S GOING
TO BE MORE OF A REGIONAL CENTER. COMPETITION IS GOING TO
BE AS TOUGH"
November/December 2013 - L ATINFINA NCE.COM 59
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