Country Awards for Excellence 2014: Central America

Costa Rica Best bank: Scotiabank Costa Rica

Costa Rica’s sale of a 30-year bond in April this year raised some eyebrows, given the country has big fiscal challenges; the timing was before a new government had been formed and articulated its economic strategy to the market. However, strong demand for the issue shows the economy’s good fundamentals, and the new president could be successful in delivering renewed GDP growth.

The performance of Scotiabank Costa Rica gives its management hope that it can build a strong franchise in the country. The bank grew profits by 66% and reported market-leading improvements in return on equity (10.2% – up from 6.2% the previous year) and return on assets (1.57%, up from 1.04%). The bank’s efficiency ratio remains weak but that is due to its relatively small scale; future growth should enable an improvement on the current 76.8% (down from 80% for the year ending March 2013).

Dominican Republic Best bank: BanReservas

The Dominican Republic’s public bank BanReservas is undergoing a revolution. The bank’s CEO, Enrique Ramírez, was appointed by the country’s president Danilo Medina as a key part of his economic strategy. The bank is importing the best practices of the private sector to boost its partnership with key export industries, in a bid to help private industry grow. The bank is also overhauling its retail and SME businesses and shaking up the banking sector. However, BanReservas is keen to increase its key ratios to private-sector levels rather than pressure its competitors through low margin segments. The early signs point to success: exports are growing and the bank’s return on equity rose 15 percentage points to 29.6% in 2013, up from 14.2% in 2012. Return on assets increased to 1.9% from 1.5% and retail banking activity leapt: for example, credit-card revenues grew 38% (market share rose 4.3 percentage points to 34.8%). The bank’s growth has come alongside better risk management practices, which caused NPLs to fall from 5.6% to 1.9%

El Salvador Best bank: Banco Agrícola Comerical de El Salvador

El Salvador is the smallest country in central America by geography, yet it has the fourth largest economy. The economy has been unable to break out of a narrow band of about 2% GDP growth for the past few years, and this weak macro-economic environment has fed into modest growth for its leading banks. Of these, Banco Agrícola Comerical de El Salvador continues to consolidate on its leading position, reporting net income of $91 million, a 2.1% increase on the previous year and representing a market share of 42.6%. The bank’s scale in the small market enables it to post unrivalled return on equity of 17.4% and return on assets is 2.4%.

Guatemala Best bank: Banco Industrial

Guatemala is the most populous country in central America and it is poor: GDP per capita is roughly half the Latin American average. However, GDP growth in recent years has been solid, if unspectacular, and the largest bank in the country, Banco Industrial, has performed well. The bank grew total assets by 14% – above the banking sector average of 12%. Loans increased 15.5% (against the average 12.5%) – boosted by a 21.4% jump in retail loans. Despite growing more quickly than the competition, the bank posted much lower NPLs – 0.5% compared with an average of 1.2%. The bank’s net income rose 9.6% to Q805 million ($103 million). The bank’s return on equity is 20% and returns on assets are 1.4%.

Nicaragua Best bank: Banco de la Producción

The Nicaraguan economy has been slowing in recent years: from GDP growth of 5.7% in 2011 to 5% in 2012 and 4.6% in 2013 – but it remains one of the fastest growing economies in the region. Meanwhile, inflation has also decreased for three consecutive years, hitting 5.7% at the end of 2013. In the last year the finance industry grew total assets by 11.8% (up from 2.5% in 2012) and credit growth was 15.5%. Banco de la Producción is the biggest bank in the country, with a 31.2% share of the financial system (32.5% share of loans and 27.1% share of loans). The bank grew its loan portfolio by 16.4% in the past year, while lowering NPLs to 0.4%, which is below the industry average. Net profit increased 11.3% and return on equity rose to 21.8%.

Panama Best bank: Banco General

The days of double-digit GDP growth might be over (Panama grew by 10.8% and 10.7% in 2011 and 2012 respectively), but the country still notched a regional high with a 7.5% increase in GDP in 2013. This strong economic base has made Panama an attractive banking market, and Banco General has been able to take advantage of its strong rating and low cost of capital to outperform its peer group. In 2013 the bank increased net income by 4.2% to $272.6 million. Total assets grew 9.9% to $11.8 billion and the bank achieved very strong operational performance, with a return on assets of 2.4%, return on equity of 19.7% and an operating efficiency ratio of 37.3%.

Puerto Rico Best bank: Santander Puerto Rico

Puerto Rico’s once vibrant economy has suffered four years of GDP decline. However, despite this difficult operating environment, Santander Puerto Rico’s business has grown its attributable profit by 40%.

By focusing on the more profitable business segment, as well as benefiting from the divestiture of a consumer-finance business to a local rival, the bank generated €77 million returns for the Santander group (up from €55 million in 2012) and narrowed its focus to deliver a smaller but more efficient and profitable business in the coming – and challenging – years ahead.