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Emerging Market Banks: All set for recovery

Times may be tough in emerging markets but strong banks are doing more than just surviving. Experienced in dealing with volatility, many banks are both withstanding the shocks and positioning themselves for the next upturn. By Brian Caplen.

The most important factor in Latin America's avoidance of Asia-style problems has been the resilience of its banks. While Asian financial systems cracked under the strain of currency turmoil and capital outflows, Latin American ones held firm. With a past history of volatility, banks have discovered the hard way that cautious lending and strong capital support are essential to survival.

This year's table, compiled by Fitch IBCA, brings together banks with equity bases ranging from $300 million to over $10 billion. It illustrates the relevance of healthy capital support even though many other factors such as asset quality ultimately affect performance.

At the top of the table Brazilian and Chinese banks dominate. Three Brazilian banks are in the top 10 and their identities show the changing nature of Brazilian banking. In fourth place is Bradesco, the country's largest private bank, with shareholders' equity of $5,479 million, assets of $55 billion and net income of $783 million. Two places behind is the state controlled Banco do Brasil and in ninth position is Banco do Estado de São Paulo (Banespa) which is due to be privatized. That restructuring is going on is shown by Banco do Brasil's shift from a minus 134.58

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