Panamanian banks have topped The Banker’s Central America rankings, notching up over half of Tier 1 capital. Meanwhile, Colombia-owned lenders grew their presence in the region. Silvia Pavoni analyses the data.

Despite being rocked by an international data leak scandal in 2016, which ignited the debate over the dangers and merits of offshore financial centres, Panama remains the largest and most solid Central American banking hub.

Out of the 100 banks in The Banker’s Central America ranking, 41 are Panamanian and account for more than half of the total Tier 1 capital and assets in the list. Their presence is even heavier in the top 10 of the ranking, with six names based in the country.

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BAC Panama, a credit card specialist part of Colombia’s Grupo Aval, the owner of Banco de Bogota, tops the ranking with a $1.91bn Tier 1 capital and $18.72bn in assets. Locally owned Banco General is second, followed by Bancolombia Panama and local trade financing lender Bladex, at third and fourth, respectively. Among the top 10, it is Guatemala’s Banco Industrial, however, that has improved its regional standing the most, moving to eighth place from 15th, thanks to an improved $629m Tier 1 capital.

Nicaraguan profitability 

Nicaraguan banks appear more prominently in the profitability ranking, occupying first, third and fourth places by return on capital, with Banco Lafise Bancentro in the top spot. Meanwhile, a Honduran bank –  Banco Azteca Honduras – heads the return on assets ranking, followed by Banco Azteca Guatemala. Both are part of Mexican group Banco Azteca.

As for the most improved bank, BAC Guatemala’s Tier 1 capital was 158.05% larger than in last year's ranking, Banrural Honduras expanded its assets by an impressive 285.99%, and Panama’s Caja de Ahorros displayed the largest pre-tax profits growth in the region at 122.84%. It was closely followed by Banco Lafise Honduras with 120.1%.

When it comes to efficiency, the standard is yet again set by Panama. Lenders from the country occupy all but one place in the cost-to-income table, which is led by BCP Panama, part of Banco de Credito del Peru group, with an exceptionally low 5.73% ratio. It is followed by locally owned GNB Sudameris Bank and Bank of China Panama, which also scored highly in the return on capital table. Bladex also scores well in efficiency, taking fourth place with a 28.16% ratio. The only non-Panamanian lender in the list is Banco Produzcamos, Nicaragua’s development bank, in fifth place with a 29.2% ratio.

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Colombian expansion

Aside from their strength and cost effectiveness, Panama’s banking sector displays another clear trend: a growing Latin American ownership, led by Colombian groups.

Colombia’s presence in Panama has been steadily expanding over the past few years, in stark contrast to the gradual withdrawal of some international players. Notably, HSBC’s sale of its regional operations outside of Panama to Banco Davivienda in 2012 cleared the way for BAC Panama’s ascent.

The London-based group subsequently sold its Panama unit to Banistmo, also part of Bancolombia. The Colombian group has kept this business separate both in terms of branding and financial reporting, and while Bancolombia consolidates all its other Central American operations under the Panama unit, Banistmo stands on its own.

The practice of consolidating regional reporting under the Panama unit has also helped BAC Panama’s standing in the list. Grupo Aval’s other operation in the country, Banco de Bogota Panama, also features in the ranking, separately from BAC, in 73rd place.

Bogotá-based Davivienda is also present in Panama, with operations that rank 40th in the overall list. Its other units in Central America, in El Salvador, Costa Rica and Honduras, are scattered across the ranking, with El Salvador’s the highest at 24th.

The Banker’s Central American rankings is based on 2015 annual financial statements, the latest available data for these banks.

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