Two-thousand and nineteen looks set to be an interesting year for Panama, with general elections taking place in May and its offshore jurisdiction under ongoing scrutiny. Since the Panama Papers scandal in 2016, the country's government has vouched to improve transparency and prevent accusations of tax evasion and money laundering.
Panama’s banking sector remains the largest in Central America, accounting for 42 of The Banker's Top 100 Central American Banks ranking. They represent more than half of the Tier 1 capital in the region.
The group is led by BAC Panama, which reported Tier 1 capital of $2.25bn in 2017, an increase of 16.65% on the previous financial year. It is followed by three other Panamanian names – Banco General, Bancolombia Panama and Bladex – all of which have also increased their Tier 1 capital at rates ranging from more than 5% to nearly 11%.
Colombian influence
There continues to be a strong Colombian influence across Panama’s top names. BAC Panama, which is a credit card specialist, is part of Colombia’s Grupo Aval, the owner of Banco de Bogotá, while Bancolombia Panama belongs to Grupo Bancolombia. Central America’s fastest growing bank, also based in Panama, is part of another Colombian group, Banco Davivienda Panama, which tops both the most improved Tier 1 capital table and the most improved assets table.
Panama’s banks continue to be profitable too, with an aggregate return on capital of 16.2% in 2017, and pre-tax profits more than one-fifth larger than the previous year. Scotiabank Panama tops the return on capital table with a 77.78% ratio on $48m in Tier 1 capital and $3.29bn in assets. Panamanian efficiency stands out too, with eight out of the top 10 names in the cost-to-income table from the country.
Some way behind Panama, Costa Rica and Guatemala are the respective second and third largest banking markets in Central America. Costa Rica has a total $4.04bn of Tier 1 capital and $46.93bn in assets in 2017, while Guatemala had Tier 1 capital of $3.22bn and $41.32bn-worth of assets. Guatemala’s largest bank, Banco Industrial, comes fifth in the Top 100 ranking with $938m in Tier 1 capital. Costa Rica’s biggest lender, Banco Popular, is sixth in the overall ranking with $931m in Tier 1 capital.
Nicaraguan profits
A Guatemalan bank, Banco Azteca Guatemala, tops the return on assets table, followed by Banco Azteca Honduras and Nicaragua’s Banco Produzcamos. Costa Rica’s Banco CMB is second in the return on capital table after Scotiabank Panama, and is followed by BAC Nicaragua.
The second smallest banking market in Central America after Belize, Nicaragua appears particularly lucrative as it is the most prominently featured country in both the return on capital and return on assets tables. One of its lenders, Banco Produzcamos, has also made it into the efficiency table, which is otherwise dominated by Panamanian names. The only other exception in that ranking is Costa Rica’s BAC San Jose.
