Panama is fractionally ahead of Brazil as the most profitable Latin American banking market. Based on 2013 full-year results, return on assets for Panama came in at 8.81%, five basis points ahead of Brazil. Even at the other end of the top 10 performers in Latin America, Colombia recorded return on equity of 6.51%, well ahead of the US or any EU country.
Brazil’s strong performance reflected higher economic growth in 2013, whereas the country has suffered two quarters of year-on-year economic contraction in 2014. The deteriorating economy was already showing up in credit quality in 2013, with total impairment charges at 22.13% of total operating income, fractionally ahead of Mexico. This may, however, demonstrate the higher degree of real economic lending activity in those two countries. Chile, the most developed economy in the region, also has a relatively high impairment rate. By contrast, Panama is a regional centre for private wealth management, presenting a different kind of loan book – impairment charges are only 7.8% of total operating income.