Latin America has rebounded after a difficult 2020. In 2021, the region’s gross domestic product (GDP) grew by 6.8% after a 6.5% contraction the previous year, according to the World Bank. Most countries made up for their losses: Brazil’s GDP expanded by 4.6%, Mexico’s by 4.8%, and Argentina’s and Colombia’s by around 10% each.
Brazilian and Mexican banks still occupy the leading positions in The Banker’s ranking of Latin American banks by Tier 1 capital. The ranking, based on 2021 financial results, also sees the top Colombian lenders improve their positions. Bancolombia moves up one place to ninth and Banco Davivienda rises nine places to 18th. The latter added almost 50% to its Tier 1 capital.
In 2021, seven of the 10 biggest banks increased their Tier 1 capital, the exception being Banco do Brasil (-0.39%), Banco Santander Brasil (-7.53%) and Grupo Financiero Citibanamex (-8.78%). Itaú Unibanco, which remains the largest bank regionally, increased its Tier 1 capital by 1.86% to $26.9bn. Brazil’s Caixa Econômica Federal reported the greatest increase in Tier 1 capital within the top 10 at 21.43%.
With regards to pre-tax profits, there was an increase across the board for the top 20 banks, with the exception of Mexico’s Grupo Financiero Santander, which saw a 20.63% drop.
A closer look
Taking the results on a country-by-country basis, differences start to emerge which tell a different story to the regional picture.
In Argentina, 14 out of 20 banks saw a decrease in pre-tax profits. Three of them – Banco Supervielle, Banco Itaú Argentina and Banco Hipotecario – reported a loss.
In Brazil, the top 20 banks all saw pre-tax profits grow aside from BNP Paribas Brasil, Banco Inter and Credit Suisse Brazil. The latter incurred a loss of $47m.
In Colombia, Banco Scotiabank Colpatria, Banco Itaú CorpBanca Colombia and Banco Caja Social managed a return to profit in 2021. Citibank Colombia saw the largest drop in profits, with a 66.41% decrease. Banco GNB Sudameris and Banco Popular also saw small decreases, albeit less dramatic.
The top 10 Mexican banks managed to increase their profits, with the exception of Grupo Financiero Santander. In ninth place overall, Banco Azteca returned to profit last year.
Assessing performance
The Banker also examined the best-performing among locally owned banks in Argentina, Bolivia, Chile, Ecuador and Peru.
In Argentina, Banco Macro was the best-performing bank after placing third last year. The lender, the third biggest in the country, excelled in soundness and leverage. Its Tier 1 capital increased by 30.8% to just under $2.14bn.
In Bolivia, Banco Solidario again ranks first this year, outperforming competitors in profitability, return on risk, soundness and leverage. The microfinance institution and fifth largest lender in the country had the highest capital assets ratio among its peers at 11.38% and increased assets by 9.6%.
In Chile, Banco Falabella is the best performer, joining the top five banks after overtaking Banco Security and Banco BICE in Tier 1 capital. The lender added 24.34% to its Tier 1 capital and reported pre-tax profits of $322.2m, an increase of 27.05%. The bank rose two places to become the country’s seventh largest.
In Ecuador, Banco Diners Club consolidates its position as performance leader, followed by Banco Guayaquil and Banco Bolivariano. At 15.87%, Diners Club reported the highest capital assets ratio in the country at the end of 2021.
Panama’s biggest lender, Banco General, tops the best-performing table, reporting pre-tax profits of $433m, a growth of 41.1%. The bank outperformed peers in four of the eight metrics: profitability, operational efficiency, return on risk and soundness.
Banco Internacional del Perú, also known as Interbank, ranks first in Peru, thanks to an impressive 383.83% increase in pre-tax profit to $397.13m. The lender, which ranked second in the previous ranking, has the best scores in most of the categories including profitability, operational efficiency, return on risk, asset quality, soundness and leverage.
Please visit The Banker’s Top 1000 World Banks to see the best-performance results for Brazil, Colombia and Mexico.
Methodology
The Banker’s global and regional rankings are industry-standard measures of bank size by Tier 1 capital. While the current rankings include some additional data to give an overall impression of bank performance, they use only a fraction of the very detailed analysis undertaken by our research team.
Knowing which bank is biggest, or has grown fastest, is useful but what people really want to know is “which bank is the best performer?”.
We have developed a model that scores and ranks banks in eight key performance categories, using 17 ratios, and assigns an overall best-performing bank score and ranking.
The key requirement of the model was that it could be used to identify the best performers in any sample group, be it an existing global, regional or country ranking or custom peer group such as global systemically important banks.
The model only uses performance ratios, and year-on-year percentages and basis points changes, so the size of a bank has no influence on its best bank ranking position.
The performance categories and indicators are:
- Growth – Annual percentage growth in assets, loans, deposits and operating income.
- Profitability – Return on assets, return on equity, profit margin, asset utilisation (and annual basis points [bps] change in these ratios).
- Operational efficiency – Cost-to-income ratio (and annual bps change in these ratios).
- Asset quality – Allowance for loan losses to gross total loans, non-performing loans, impairment charges to total operating income (and annual bps change in these ratios).
- Return on risk – Return on risk-weighted assets (and annual bps change in this ratio).
- Liquidity – Loans-to-assets ratio, loans-to-deposits ratio (and annual bps change in these ratios).
- Soundness – Capital assets ratio (and annual bps change in this ratio).
- Leverage – Total liabilities to total assets (and annual bps change in this ratio).
When the peer group data is imported, the model assigns a score for each indicator based on the relative distribution of values. Thus a bank that significantly outperforms on a particular indicator will receive a proportionately higher score. The maximum possible score for each category is 10 points and the maximum overall score is 80 points.
The model is neutrally weighted so that the underlying ratios and annual bps changes are of equal significance. Each performance category receives equal weighting. We plan to produce an online version of the benchmarking tool, which will allow users to assign data point and category weights according to their own preferences.
