Domestic players make mark in Central American ranking

As in previous years, HSBC Bank Panama tops the ranking of Central American banks by Tier 1 capital, with a total of $1.14bn. HSBC Bank Panama is the holding that each of HSBC's Central American operations report to and so its financial success is a reflection of the size and performance of not just the bank's Panama operation but also its operations, in other Central American countries. HSBC’s dominance is, however, very likely to change in 2013’s ranking, as the UK-based bank has recently announced the sale of its Costa Rica, El Salvador and Honduras operations to Colombia’s Banco Davivienda for $800m. HSBC will retain its operations in Panama.

Colombia calling

Aside from the presence of international groups – such as HSBC, Citi, Scotiabank and others – the participation of Colombian lenders has been steadily increasing in the region. This is reflected in the high positions held by banks owned by Colombian groups. Beside HSBC’s Central American operations, at the very top of The Banker’s regional list, Bancolombia Panama and Banco Agricola are the highest foreign-owned subsidiaries in the ranking, in fifth and eighth places, respectively. Both lenders belong to Colombia’s Bancolombia. Bancolombia Panama’s Tier 1 capital is $628.31m, up almost 20% from its previous figure, while Banco Agricola’s Tier 1 capital is $414.24m, up 7%.

Another leading regional player, BAC, was purchased by Colombia’s largest banking conglomerate, Grupo Aval, in 2010. The deal was worth $1.9bn. Banco de America Central Panama (identified in The Banker's previous rankings as BAC International) still holds third place in the regional list. The ranking in 2013 will reflect the change of ownership and classify BAC as foreign-owned.

Locally owned banks continue to score well too. Panama’s Banco General and Banco Latinoamericano de Exportaciones have retained their second and third place, respectively, in the regional ranking. Banco General increased its Tier 1 capital to $1.03bn, up almost 10% from 2011's rankings. Its assets also grew, up by 5.6% to $8.64bn, as did its pre-tax profits, which were up by an impressive 13.4% to $244.32m. Trade finance specialist Banco Latinoamericano de Exportaciones, or Bladex, also displays good figures – although its pre-tax profits declined by 23% to $42m. Bladex’s Tier 1 capital was $701m, up 3.2%, and its assets were $5.1bn, up 31.5%.

Panama dominates

Panama has the largest banking sector in the region, with 39 lenders included in The Banker’s Top 100 Central American banks. These banks have the highest aggregate Tier 1 capital – $7.37bn – and have combined assets of $78.1bn and aggregate pre-tax profits of $1.28bn. Panamanian banks also continue to hold the top five places in the regional ranking list. Panama’s expanding banking sector continues to play an important role in the local economy, one of the fastest growing in Latin America.

The Panamanian banking system also displays solid financial ratios. The average capital-to-assets ratio for the system is among the region's highest, at 9.44%, surpassed only by El Salvador’s 11.11% and Belize’s 28.07%.

Belize’s small banking market is represented by only three lenders in the regional ranking list. The top two, nonetheless, have displayed good capital growth. BCB Holdings’s capital-to-assets ratio is close to 34%, up from 24.57% the previous year, and the bank’s Tier 1 capital has grown by more than 40% to $402.7m. Scotiabank Belize also displays a high capital-to-assets ratio of 20.57%, up from its previous 17.04%. Its Tier 1 capital is the second largest in the country but is much smaller than BCB’s, at $69.57m.

Pockets of profit

Banks in Belize also show the highest return-on-assets ratio in Central America, at 2.67%. Panamanian banks’ profitability ratios are good, but not overly impressive, and the country’s average return-on-assets ratio stands at 1.64%. Panama’s profits-on-average-capital ratio is 17.33%, lower than that of Guatemala, Honduras and Nicaragua, which averaged 18.65%, 19.17% and 21.97%, respectively. Although Panama’s average profitability ratios are not record-breaking, the five largest profits in the region were recorded by banks based in the country. Banco General, the most profitable, had pre-tax profits of $244.32m, a 13% increase from 2011's rankings.

The second largest region for banking in Central America is Costa Rica. Its top performing bank, Banco de Costa Rica, climbed up the ranking to sixth place, one position higher than it in 2011’s regional ranking. The second largest bank in the country, Banco Nacional de Costa Rica, retains its 10th place in the overall list. On an aggregate basis, the country’s top 13 lenders display a total Tier 1 capital of $2.04bn, assets of $21.97bn and profits of $254.08m.

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