Turning developments in the region and even Panama’s own political crises to good advantage, Banistmo won The Banker’s Bank of the Year award, having retained its position as Panama’s leading private bank over the past two decades. It has also grown into central America’s biggest private banking group.
The institution – formerly called Banco del Istmo – had total assets at the end of the first quarter of $8.8bn, almost double the $4.5bn it had in 2003, a spurt in growth that reflects an intense campaign of mergers and acquisitions.
In the most recent takeover, completed this February, Banistmo bought 54% of the shares of Inversiones Financieras Bancosal, El Salvador’s third biggest bank involved in remittances, credit cards and investment banking.
Regional growth
Alberto Vallarino, a former Banistmo board member, took over as CEO and president on the back of a crisis, leading the bank’s acquisitive push in the region which anticipated the potential for growth in many national banking markets in central America, especially in consumer banking in Honduras, Costa Rica and Panama. Acquisitions also took place in the Bahamas and in Colombia.
It was shortly after the bank’s manager had disappeared, literally, and a few months before the US invaded Panama in 1989, toppling Manuel Noriega’s volatile regime.
“It was a full-blown crisis. All the banking operations in Panama had halted and the manager decided to leave the country and settle in Miami,” Mr Vallarino told The Banker.
“The rest of the board members decided I was the only one with any banking experience, so I took the job.”
Now the 54-year-old Vallarino – who is not one for false modesty – thinks his limited banking experience (one year at Citibank) and varied professional background (a degree in industrial engineering; being manager of a Panamanian plastics company, and involvement in construction and real estate) were beneficial.
“It made me take risks and I could bring more imaginative solutions to problems than if I had been a conventional banker,” Mr Vallarino says.
Panama’s private banks also had to “graduate in adversity”, according to Mr Vallarino, as a result of exposure to foreign bank competition without, what he calls, any “protection” from the government. “International and foreign banks taught us to develop first-class banks. We had to become sophisticated to survive.”
Banistmo, with the most extensive private branch network in Panama, reported total deposits of $4.3bn and net income of $115m in 2005, compared with deposits of $3.9bn and net income of $104m in 2004.
Over time, however, Panama’s once multiple-competitive advantages as an international banking centre for foreign banks declined, with the development of electronic banking, worldwide branch networks and an international crackdown on money laundering, to the point where the country now has 70 banks, down from a peak of 120 in the mid-1980s.
Over the same period, the proportion of foreign-based banks also dropped from 90% to 54%.
But as some international banks bailed out, Panamanian banks, forced to find economies of scale as margins shrank, filled the vacuum.
In this way Banistmo acquired the assets and liabilities of ABN AMRO’s Panamanian operations in 2001, which was followed in 2003 with the acquisition of Citibank’s operations, also for an undisclosed sum.
Foreign interest
Meanwhile, with the prospects of more business in the region following the Central American Free Trade Agreement (Cafta); a potential trade agreement between the US and Panama; and major projects, such as the expansion of the Panama Canal, a new layer of foreign banks have started to invest in Panama, ratcheting up the competition not only in foreign business but also in the local consumer credit and corporate markets.
Interest in Panamanian banks is also growing. For instance, a few months ago rumours swirled in Panama City that HSBC, which only a couple of years before had bought Chase Manhattan’s Panamanian operations, was interested in buying Banistmo. Mr Vallarino quickly denied the rumours, saying Banistmo “is not for sale”.
However, in a statement in January he admitted: “It’s logical that we should be seen by international financial entities as a very attractive group because of our undisputed leadership in the central American region.”
Mr Vallarino – who also has political ambitions and may run for president in Panama’s next elections in 2009 – recognises his central American acquisitions strategy is near completion. He sees Guatemala as the bank’s last target market in the region, while mentioning Ecuador and Peru as potentials further down the line.
