Banorte

Banks in Latin America are proving their mettle in very difficult operating environments. 

The Covid-19 pandemic has hit Latin America hard, adding to the region’s woes after years of sluggish growth. According to the World Bank, its gross domestic product contracted by 6.5% in 2020, with its four biggest economies — Brazil, Mexico, Argentina and Colombia — seeing drops of 4.1%, 8.3%, 9.9% and 6.8%, respectively. For Argentina, it was the largest retraction since 2002, at the height of the country’s economic crisis.

Despite difficult operating environments, Brazilian and Mexican banks continue to dominate the leading positions in The Banker’s latest ranking of Latin American banks by Tier 1 capital, occupying nine of the top 10 spots. Bancolombia is the only outsider for the second year in a row; however, it has slid down one position to 10th, overtaken by Santander’s Mexican subsidiary.

Brazilian banks comfortably hold onto the top five places for another year. Itaú Unibanco remains the largest bank in the region for the eighth year running. However, it saw a 17.4% drop in Tier 1 capital in 2020, to $26.4bn. Banco do Brasil, in second place, was the only Brazilian bank in the top five to record a growth in Tier 1 capital, reporting a 6.3% increase.

Of the 29 Mexican banks in the 2021 ranking, 18 increased their Tier 1 capital

The top four Mexican banks all expanded their Tier 1 capital, with Grupo Financiero Banorte leading the way with a 21.6% increase. Of the 29 Mexican banks in the 2021 ranking, 18 increased their Tier 1 capital, whereas only four of the 41 Brazilian banks managed to do the same. Impressively, all 19 of Argentina’s banks in the ranking improved their Tier 1 position, including the country’s largest lender, Banco de la Nacion Argentina (BNA), which added 76.0% to its base.

Profits proved difficult to generate in 2020 in Latin America, as in other regions of the world. Only 34 banks out of 200 in the 2021 ranking managed to increase their pre-tax profits, while 16 moved from profit to loss. Mexico’s Grupo Financiero BBVA Bancomer posted the greatest profits, just north of $3bn; however, this was a drop of 26.9% compared to 2019.

We also applied our best-performing bank methodology to the top bank-holding companies (not foreign-owned subsidiaries) in Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico and Peru.

In Argentina, BNA moved from fifth position in 2020 to top the country league table this year. The state-owned lender outperformed its four largest peers in four of the eight metrics: growth, profitability, operational efficiency and return on risk. BNA was instrumental in helping the Argentine government in the rollout of its Covid-19 support packages. It reported pre-tax profits of $515m in 2020, after recording a loss of $28m in 2019.

Bolivia’s Banco Solidario (BancoSol), the country’s fifth-largest bank, comes out on top for the second year running, ranking in first place among its peers in soundness, leverage and operational efficiency, with the best cost-to-income ratio improvement. Impressively, BancoSol managed to increase its Tier capital by 41.5% in 2020.

Another repeat performance comes from Banco BTG Pactual, which is crowned best-performing bank in Brazil for the second year. This year it managed to come out on top in six metrics — two more than last year.

Likewise, Banco de Bogotá outshone its Colombian rivals again this year, taking top positions in five categories: growth, profitability, operational efficiency, return on risk and liquidity. Colombia’s second-largest lender by Tier 1 capital has one of the highest return-on-capital ratios in the country, of 17.1%.

Banco BICE in Chile retains is premier position, topping the table in profitability and return on risk, while Peru’s Banco de la Nacion keeps its pole position ahead of two rivals, topping the table in five of the eight metrics.

In Mexico, Banco Inbursa jumped from fifth place in 2020 to first in this year’s ranking. Inbursa topped the table in profitability, operational efficiency and return on risk. Ecuador also has a new performance leader, Banco Diners Club, which leapt into first place from outside the top five last year. It has unseated the country’s second-largest lender, Banco del Pacifico, which drops to third place.

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