Numbers game: A rundown of the top players’ recent performance

As in any mature banking sector, a small group of large banks dominate the market in Panama. By assets held in the third quarter of 2013, the five largest banks operating in Panama were Banco General, HSBC, Banco Nacional de Panama, Bladex and Bancolombia. Only Bancolombia does not operate in the national banking system (NBS), as it has an international licence. Banco Nacional de Panama is an official bank and the other three operate with general licence. Bancolombia began to operate in the NBS in 2012, and holds only $246m in assets. However, having bought HSBC’s operations in Panama, Bancolombia will have its general licence bank in second position and the bank with an international licence in fifth. Thus, there will be two Colombian banks among the top five, two Panamanian (Banco General and Banco Nacional de Panama) and one that is supranational (Bladex).

Big Guns

The largest bank, Banco General, had $10.9bn in total assets in September 2013, 4% more than the second largest, HSBC ($10.4bn). Their shares in the total assets of the International Banking Centre (IBC) are 11.1% and 10.7%, respectively. While Banco General’s assets have been growing, the last time HSBC saw a rise was from the fourth quarter of 2011 to the first quarter of 2012. In March 2012 the difference between their total assets was more than $2bn, with HSBC 19% larger. The difference has been decreasing since, and the constant reduction of assets is related to HSBC’s decision to cease its operations in Panama. Banco Nacional de Panama is the third-largest bank, with assets of $8.1bn, less than $1bn more than Bladex, the next-largest ($7.6bn). They hold 9.3% and 7.8% of IBC’s assets, respectively. The fifth-largest bank is Bancolombia, holding $4.7bn, or 4.9% of total. Corina Grimaldo, former director of financial studies at the Superintendency of the Banks of Panama (Superintendencia de Bancos de Panama, SBP), believes there will be no major movements for the consolidation of the market. “Large Panamanian banks are not aggressive,” she told OBG. “They grow naturally, through an increase in operations year by year, not by the acquisition of other banks.” However, Luis Hurtado, general manager of the Banco Hipotecario Nacional, thinks there could still be some consolidation.

Movers & Shakers

From the third quarter of 2012 to the third quarter of 2013, Bancolombia overtook Banco de Crédito de Peru (BCP) and Global Bank, and rose from seventh to fifth place. BCP saw a reduction of 12% on assets and Global Bank a rise of 18%. Bancolombia saw 34% growth. Despite the strong performance of Bancolombia and Bladex (19% growth), the three largest banks registered below-average growth. While IBC’s assets grew by 12.3%, Banco General grew by 11.8% and Banco Nacional de Panama by 11.7%, and HSBC fell by 7.9%. The value of their combined deposits was $29.8bn, and the drop of 1.8 percentage points is explained by the decrease of 5.7% in HSBC’s deposits.

HSBC has the largest credit portfolio, at $7.4bn in the third quarter of 2013, a share of 11.8%. Banco General’s share is 11%; Bladex has 9.8% of the total; Banco Nacional de Panama, 5.7%; and Bancolombia, 3.6%. Their share was 42% of total credit in the third quarter of 2013, a drop from 43.4% in the third quarter of 2012. This may be explained by the smaller growth (8.7%) of their combined credit portfolio compared with the performance of the sector as a whole (12.5%). HSBC’s credit portfolio was reduced by 1.5%, Banco Nacional de Panama had a rise of 5.6% and Banco General was also below the average, with a rise of 11.6%. Bladex and Bancolombia were the ones with better performance: their credit portfolio grew 13% and 36%, respectively.

Bancolombia had the highest profit among the top five banks, $165.8m, representing 17.8% of the IBC’s profits in the third quarter of 2013. Banco General and Banco Nacional de Panama had profits of $145.9m and $90.6m, respectively, 15.7% and 9.8% of the total. Bladex had a profit of $67m (7.2% of total) and HSBC sustained losses of $26m. Bancolombia also had the highest increase, from the third quarter of 2012 to the third quarter of 2013 (42%), Banco General saw its profits rise by 8.5%, Banco Nacional de Panama by 18%, Bladex by 21%. HSBC saw a drop of 5.7%.

Profitability

These results are reflected in the profitability indicators. Bancolombia was the only bank whose return on assets (ROA) grew in the period, and it had the highest, 5.36%, well above the 1.59% of the IBC as a whole. Banco General also had an above-average ROA, 1.89%. Bladex had an ROA of 1.28% and HSBC of -0.32%. There was no data available for Banco Nacional de Panama in the period. Bancolombia was also the only one with a positive variation from the third quarter of 2012 to the third quarter of 2013 in terms of return on equity. In the later period, it stood at 30.7, far higher than the IBC’s indicator of 14.6. Banco General also had above-average ROE (20.1), while Bladex (10.7) and HSBC (-2.8) were below the average.

The only change in the top five banks by assets is the “replacement” of Bancolombia with Global Bank, which held $4.2bn in assets in the third quarter of 2013, 4% of the IBC’s total assets. In the third quarter of 2013 these banks together held 51% of the NBS’s total assets, down from 54% a year previous.

Selling Up & Moving On

One important development in the sector in 2012 was the ceasing of operations of the largest bank in Panama, HSBC, when the bank’s operations were bought by Bancolombia.

However, this had less to do with the situation in Panama than with HSBC’s strategy of leaving Central America. As Javier Motta, director of financial studies at the SBP, told OBG, “It is a corporate decision, as HSBC’s operations in Panama were profitable.”

BBVA is another non-Latin American bank that is leaving the country. In July 2013 the company sold its operations to Colombia’s Grupo Aval.

Although the nationality of a bank is not as important as its soundness and strength, such changes may have implications for the IBC. Jose Abbo, financial advisor and member of the board of directors of the Panamanian Sovereign Wealth Fund (Fondo de Ahorro de Panama, FAP), said this change may represent a new chapter for the Panamanian banking system.

“After 2008 the whole world changed and banks from developed countries had to retreat for a variety of reasons. The interconnectedness is now with developing countries,” he told OBG. “Although there are strong banks from the region, this also poses some risks to the system that did not exist before, since developing countries have soft currencies, and may be more prone to instabilities such as capital flow reversals and commodities prices cycles.”

Core Markets

For Christopher Schech, the chief financial officer for foreign trade at Bladex, this may be a broader trend, not only for HSBC but also for others, of abandoning the idea of being a global bank and focusing on their core markets. He said that is also happening with the concept of offshore banks applied to private banking and wealth management.

“With the harmonisation of compliance and corporate governance standards around the world it appears that this model for private banking and wealth management is becoming outdated,” Schech told OBG.

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The Report: Panama 2014

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