Though the Central American banking sector shows some mixed results, The Banker's ranking demonstrates just why the region's leading banks are drawing global attention.

Looking at some banks’ growth in Central America it is clear why neighbouring Colombian lenders are so interested in expanding outside of their national borders.

Last year, BAC Credomatic, a leading banking franchise in Central America, was bought by Colombia’s banking conglomerate Grupo Aval for $1.9bn. BAC has operations in Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, Panama and Mexico, and has a total of $5.1bn in loan assets and $5.5bn in deposits, according to its previous owner, the finance unit of General Electric. As of the end of 2009, BAC’s operations had combined pre-tax profits of almost $210m, the second largest in Central America, while its $725 Tier 1 capital makes it the third largest banking operation in the region.

A credit card specialist, BAC controls 65% of the acquiring business - the credit card network - in Central America and about 33% of the card issuance business.

Bancolombia, Colombia’s largest bank, is also interested in further expanding its existing Central American operations. Its purchase of Banagricola in El Salvador was particularly successful as the bank keeps on performing well and closed 2009 with a pre-tax profit of $55m. Banagricola tops El Salvador’s ranking by Tier 1 capital, with $388m, a 3.88% increase from the previous year, and sits in eighth position in the regional ranking by the same parameter.

Mixed results

Not all Central American banks have grown or become more profitable, however. As an inevitable result of the global economic downturn, the region closed 2009 with lower profits than in 2008. The only countries where banks had better results were Honduras and Guatemala, with a banking sector profit growth of about 14% and 10%, respectively. The worst performer was Nicaragua, where profits were down by 77.2%.

The main international players are Citi and HSBC. HSBC Bank Panama tops the regional ranking by Tier 1 capital. The group’s combined pre-tax profits – reported under HSBC Bank Panama – stand at about $150m. Beside Panama, HSBC has operations in Honduras, Costa Rica and El Salvador. The HSBC group’s performance gave it third position in the pre-tax profits regional ranking.

Despite this slowdown in profitability, Central America is set to grow and to continue attracting foreign interest. The challenge is to find good opportunities to get into the market and to operate efficiently across several small markets. For those already there the outlook for the next few years is brighter as markets recover after the downturn.

Pre-tax profits, Tier 1 capital
Top Central American Banks
Top 25 Central American Banks

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