LatinFinance - November/December 2013 - 62

62 LATINFINANCE.COM - November/December 2013

Sound financials
The Baa3/BB rated bank is LatinFinance's
Bank of the Year Guatemala for having
strengthened capital, maintained a low
rate of non-performing loans, and for its
bond market debut.
In line with Guatemala's other big
banks, Industrial's profitability fell over
the period under consideration. Yet its
core capital grew by four basis points, to
6.96%, over the 12 months to June 2013. At
the same time its assets expanded 12.5%, to
40.4 billion quetzals ($5.1 billion). Its bad
loan ratio rose 20 basis points, but at 0.8%
remained minimal.
As investors and borrowers across
Latin America come to terms with a
new capital markets environment based
on an eventual turn in US monetary

policy, Prado says he is relaxed about the
implications for his bank. Industrial's
domestic market is not susceptible to
large outflows as the US winds down
quantitative easing, he says.
"Guatemala has never had volatile
flows of speculative money into the
country," says Prado. "The Guatemalan
exchange rate has been stable over the
past 15 years, and we've maintained stable
flows of foreign currency - from exports,
remittances, tourism and FDI. So we don't
expect it to have any impact."
Additionally, Prado says the bank has
a conservative stance when it comes to
investing.
"We don't speculate on bond prices,"
he says. "That protects us a lot in times of
volatility. Our portfolio is concentrated
in fixed income, in sovereign bonds
from Guatemala and the region. They
have remained pretty stable. So we don't
foresee any negative impact."

Jun-2013

Dec-2012

Growth ahead
With a low rate of banking penetration,
Guatemala offers banks plenty of scope to
grow, says Prado. Domestic credit to the
private sector is around 32% of its GDP,
according to World Bank data. "That tells
you the country offers growth potential by
entering under-banked sectors, which is
exactly what we have been doing," he says.
For the moment, the bank has ample
funding to cover lending growth. As well
as its dollar bond sale, it has been in the
markets this year with a dual-tranche
securitization, part of a strategy to
lengthen the bank's funding, and diversify
its investor base. The
$400 million deal
Better quality
was placed privately
Evolution of non-performing loans in Guatemala by lending type
in the third quarter
10%
of 2013.
Large companies
Micro-credits
9%
Prado is optimistic
Mortgages
Small companies
about growth over
8%
Consumer loans
the year ahead, but
7%
says there are no
6%
more debt market
5%
sales planned for the
moment.
4%
"We've raised an
3%
important amount
2%
of funding over the
1%
past 10 months,"
0%
says Prado. "That
shows there is strong
appetite for the risk
of Guatemala, and of
Superintendencia de Bancos de Guatemala
Banco Industrial." LF

Dec-2011

Guatemala's Banco Industrial set a Central
American landmark in October 2012, when
it sold a $500 million cross-border bond.
The deal was the largest of its kind from a
non-sovereign issuer in the region.
The 10-year bond, sold during a period
of intense interest from international
investors in strong-yielding Latin American
debt, drew $4.5 billion in orders from
over 250 accounts. That encouraged the
bank to increase the deal, which pays a
5.5% coupon, from the $300 million first
planned.
For Banco Industrial, the deal was the
first step in a strategy to draw in further
international investors. As the Central
American banking landscape changes -
with global banks retrenching and regional
players, notably the Colombians, entering
- Banco Industrial hopes to increase its
own stake in the region.
"The growth opportunities are there
today, and if we don't take advantage of
them then other banks certainly will," Luis
Prado, the bank's international division
manager, tells LatinFinance.
Banco Industrial operates outside its
home market already, with subsidiaries
in El Salvador and Honduras. A regional
presence is not so much an option - more,
an obligation, says Prado.
"Our clients operate across Central
America," he says. "There is a lot of trade
across the region, so we're interested in
offering such regional infrastructure."
For now, Industrial's priority is
consolidating the Salvadorian and
Honduran operations. The bank says it will
consider acquisition opportunities that
present themselves in those markets, to
take a larger foothold.
Its second priority is to enter new
markets like Costa Rica and Panama over
the medium term. Meanwhile, the bank
says it's "very comfortable" in its home
markets and is unlikely to make any
acquisitions in Guatemala.
The ambitious regional strategy is

Dec-2010

Central America's shifting
landscape for banking offers opportunities for local
participants

Dec-2009

Banco Industrial

likely to demand more capital. For that,
Industrial is looking at a public listing.
An IPO is not an "immediate" likelihood,
but an option for the medium term, says
Prado.
"It's matter of finding the right timing,
because these are deals that transform an
institution," he says.
The bank has already sounded out some
investors about a possible IPO. Issuing
debt in the international market has
helped the process by raising the bank's
profile globally.
"Our group has exceptional
international financial relationships," says
Prado. "That set of institutional accounts,
investment funds, will help us when we
bring other transactions, such as when we
take the decision to open the capital base."

Dec-2008

BANK OF THE YEAR GUATEMALA
http://www.LATINFINANCE.COM
LatinFinance - November/December 2013

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