Amid difficult operating conditions, Panamanian banks are forecast to suffer larger-than-expected credit losses over the next 12 months.
Despite the government efforts to offset the impact of social-distancing measures, the higher unemployment rate and longer-than-expected lockdown have significantly destabilised Panama’s economy.
Lending contracted 2.2% in 2020 and is expected to recover gradually over the next two years, according to S&P Global.
Among the Panamanian banks that have seen problem loans rise, MMG Bank Panama saw its non-performing loan (NPL) ratio rise from 0.01% in 2019 to 12.8% in 2020, while the NPL ratio at Canal Bank maintained an upward trajectory last year, reaching 9.9%, according to The Banker Database.
Of the larger Panamanian banks, the NPL ratio at Banistmo crept up to 3.42% last year and reached 2.9% at Scotiabank Panama.
Panama does not have a central bank, which acts as a formal lender of last resort, or an effective deposit insurance system to support distressed financial institutions. However, the government has relied on state-owned lender Banco Nacional de Panama to provide additional liquidity to the domestic financial sector, corporations, and small and medium-sized enterprises during the Covid-19 pandemic.
Trends identified using The Banker Database, an online database providing comprehensive financial data and insight for 4000 of the world's leading banks in 190 countries. Contact us.
