Latin Finance - November/December 2010 - 56

Staying in the Game E

and another 2.4% in 2011. In 2009, the economy contracted by 3.3%. Among signs of growth already taking Best Bank – Banco Agrícola place is an increase in remittances, which according to the local central bank totaled $293 million in July, a 2.3% year-overyear improvement. July was the ﬁfth consecutive month showing an increase in remittances, according to the central l Salvador’s Banco Agrícola, part of bank. This ﬂow helps the bank obtain more Colombia’s Bancolombia since 2007, is deposits and enhances loan demand, says expected to end this year with results that Restrepo. compare favorably with those obtained at Besides being assisted by growth in the end of 2009, says Fitch, which has an the economy, it also helps that Agrícola AA+ (stable) local rating on the bank. is the largest bank in El Salvador, with So far, so good. As of August, the bank 28.7% market share by assets. Its closest was able to increase its return on average competitor, Citi, has some 17.8%, equity (ROAE) to 16.3% from 9.8% a year according to data from the Salvadoran earlier, according to company information. bank association Abansa. It also grew return on average assets However, non-performing loans (NPL) (ROAA) to 2.1% from 1.2% in the same at the bank have been increasing since period. These are the highest ROAE and 2008. As of March 2010, NPLs at Banco ROAA in the Salvadoran banking sector, Agrícola represented 2.9% of total loans. according to the local banking association, That is up from 1.9% in March 2009 and Abansa. 1.8% in March 2008. For instance, as of August, Abansa data To be fair, this trend is also observed show that Scotiabank had ROAE of 3.9% in other banks locally. For example, Citi and ROAA of 0.4%. HSBC had ROAE of saw NPLs rise to 5.7% in March 2010 6.27% and ROAA of 0.8% while Citi claims from 4.1% a year before. Fitch points out ROAE of -13.8% and ROAA of 0.2%. that the average NPL/total loan ratio in Moreover, according to Fitch, the average El Salvador’s banking system was 4.0% in ROAE of Salvadoran banks is 6.9% and June. average ROAA 0.9%. Agrícola forecasts continued expansion. Agrícola’s better performance comes Restrepo notes that since Bancolombia despite a weak economic situation in took over the bank, it has been able to El Salvador, says the bank’s chairman provide commercial credit to companies Sergio Restrepo. “Like other countries in in Guatemala and Costa Rica, where he the region, El Salvador was negatively expects the bank to continue the build. LF impacted during the ﬁnancial crisis, mostly because of its close relationship with the US,” he tells LatinFinance. Restrepo adds that the slowdown Best Bank – Banco de Costa Rica caused remittances from the US to drop signiﬁcantly and exports to the US to dwindle. As the local economy begins showing signs of growth, Restrepo expects the bank’s performance to continue improving. “Remittances are picking up tate-controlled Banco de Costa Rica and jobs [related to exporting companies] has gained market share through the are once again being created. We expect ﬁnancial crisis, growing the loan portfolio El Salvador’s economy to grow,” Restrepo and expanding facilities. The future looks says. even brighter now that Moody’s has Walter Molano, head of research at anointed the sovereign with investment BCP Securities, forecasts that El Salvador grade. will see GDP rebound by 1.5% in 2010 “The future of the bank looks

EL SALVADOR

positive,” says Mario Rivera, general manager of Banco de Costa Rica, adding that the country’s GDP is expected to grow about 4% this year. “The rating upgrade and GDP growth could help reactivate the demand for credit locally. It could increase foreign investors’ conﬁdence in investing in the country,” he adds. Rivera expects the bank to grow organically and not by making acquisitions. “We plan to open ﬁve branches next year and to develop mobile banking services,” he says. The bank hopes to allow fund transfers using a mobile device. In early September, Moody’s raised Costa Rica’s government bond rating to Baa3 from Ba1. The agency says the move reﬂects its expectation that key government debt metrics will continue to be well-positioned relative to similarly-

Deposit Growth at CentAm Banks (%)
Nicaragua, Guatemala at a clip Jun 10 Guatemala El Salvador Costa Rica Panama Honduras Nicaragua
Source: Fitch

Dec 09 10.90 3.00 12.46 6.37 3.02 15.14

Dec 08 12.40 -1.24 28.01 21.72 6.09 7.14

10.50 1.08 3.73 -1.42 4.81 20.86

COSTA RICA

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rated peers. It also reﬂects Costa Rica’s ability to manage external shocks and avoid balance-of-payments crisis. The ratio of public debt to GDP dropped to around 43% in 2009, from more than 60% just a few years ago. Rivera expects the government’s own investment plans will help reactivate credit. This should beneﬁt not just Banco de Costa Rica, but also the two other state-controlled banks, Banco Nacional de Costa Rica and Bancrédito. “The government has plans to invest around $6 billion in infrastructure projects. Out of that total, about 25% could be ﬁnanced by the three local state-owned banks. We could syndicate loans for the government,” Rivera explains.

56 LATINFINANCE

November/December 2010

Latin Finance - November/December 2010

Table of Contents for the Digital Edition of Latin Finance - November/December 2010