Brazil proves its regional preeminence as its five largest lenders retain the top slots in The Banker’s Latin American ranking, despite experiencing a drop in Tier 1 capital. Simon Duffy reports.

In spite of Brazil’s sluggish economic performance in 2018, the country’s five largest lenders have maintained their hold on the top positions of The Banker’s latest ranking of Latin American banks by Tier 1 capital. Accounting for 52% of the Latin American banking sector's total assets, 49% of its Tier 1 capital and 46% of its pre-tax profits, Brazil’s banking sector remains the undisputed dominant force in the region.

Itaú Unibanco leads the ranking with $33.9bn in Tier 1 capital, followed by Banco do Brasil, Banco Bradesco, Caixa Econômica Federal and Banco Santander Brasil, respectively. While there was no movement among the top five from the previous year, all five banks saw their overall Tier 1 capital shrink, with Itaú Unibanco losing 8.39% and Banco do Brasil 14.41%, respectively, from their Tier 1 capital.

Indeed, nearly every Brazilian lender in the 2019 ranking experienced a reduction in Tier 1 capital. The country’s fragile economic state during the review period did not help. Brazil’s gross domestic product at the end of 2018 grew by a meagre 1.1%, well below government forecasts, in the wake of a two-year recession during 2015 and 2016 that shrunk the economy by almost 7%.

Small success

Some smaller Brazilian lenders fared better, such as Banco Intermedium, a digital bank. Banco Intermedium enters the Latin American ranking for the first time, in 149th position, and is the second fastest growing bank in the region by Tier 1 capital, with a rise of more than 103% to $238m in 2018.

While Brazil stagnates, Argentina is faring much worse. South America’s second largest economy contracted by 2.5% in 2018 – a year marked by the collapse of the peso to about half of its value against the US dollar – and inflation rose to nearly 48%. The monetary crisis forced president Mauricio Macri to secure a $57bn bailout package from the International Monetary Fund. The country is now at risk of default. 

Given the backdrop of Argentina's escalating financial woes, it is unsurprising that most of its banks listed in the regional ranking endured double-digit declines in Tier 1 capital. Posting a reduction of 29.9%, the country’s largest lender, Banco de la Nación Argentina, slips four places in the regional ranking to 20th position.

Outside of the main ranking, Banco Sabadell Mexico tops the tables for growth in both Tier 1 capital and assets, reporting an increase of 137% and 344%, respectively. Colombian lender Banco Popular ranks first for profit growth, with an increase of more than 155%, and Citibank Argentina takes the lead for return on assets. Other notable improvements come from Peruvian lender Banco de la Nación, which scoops the top spot for highest return on capital in a ranking dominated by Argentine lenders, which, amid the country’s economic gloom, continue to display high profitability ratios.

Latam rankings 2019

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