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From growth stories to dividend plays

The mood among bankers attending Felaban’s annual conference in November was conspicuously relaxed. Why relaxed? Well, business is good

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The collapse in the number of bilateral correspondent banking relationships in recent years – driven by anti-money laundering and compliance and a key focus of the Latin American banking federation (Felaban) meetings – has now stabilized. 

It may have thinned out some of the delegations to the annual get-together from the smaller banks in the smaller markets, but those that still come seem comfortable about the emergent status quo.

More to the point, the business environment for the region’s banks is increasingly healthy. Funding options remain cheap, and there is abundant liquidity thanks to the continued strong appeal of emerging markets to international investors. 

Profitability is also up from already high levels, and even the region-wide need to improve digital platforms is being contained in terms of operating expenses. Provisions have peaked and asset quality is improving.

Revenues are also set to rise. Economies are growing across the region, driven by recoveries in Brazil, Argentina and, to a lesser extent, Peru and Colombia. Mexico remains positive, too, despite the negative impact of big political risk.

Banks in the region will face growing demand for credit next year as GDP improves.

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