The conservative lending and underwriting standards at Guatemala’s leading banks should keep the country’s financial system stable amid Covid-19, with few market distortions, according to S&P Global.
Nonetheless, higher credit losses stemming from the pandemic and tough competition are expected to squeeze banks’ profitability over the next year.
The Guatemalan economy relies heavily on its exports to, and remittance inflows from the US. The better-than-expected recovery in the US is expected to boost trade activity while keeping remittances high, and consequently boosting private consumption.
Non-performing loans did not increase last year mainly because of forbearance and relief programmes, but S&P Global forecasts asset quality metrics to deteriorate in 2021–2022.
However, it expects that Guatemala’s largest banks have enough capital to absorb the likely larger credit losses.
“The banking system relies on a large, stable and diversified funding base that provides the banks with solid liquidity flexibility,” according to Erick Rubio, an analyst at S&P Global.
Gross total loans at Guatemala’s three largest banks held steady last year, rising to $8.13bn at Banco Industrial and $4.64bn at Banco de Desarrollo Rural, and falling slightly at G&T Continental to $3.29bn, according to The Banker Database.
The rating agency forecasts Guatemalan credit growth to decrease slightly compared to 2020, as many customers in the corporate sector drew down pre-existing credit facilities last year to cope with their liquidity needs.
A significant proportion of the Guatemalan population lives on very low-income levels and have low access to banking, limiting the population’s debt capacity.
Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4,000 of the world's leading banks in 190 countries. Contact us.
