TEXT - Fitch says Central American banking experiencing double-digit credit growth
(The following statement was released by the rating agency)
Nov 15 - A relatively better economic environment has accelerated positive credit growth across the Central American banking industry, according to Fitch Ratings. 'Central American banks have room to increase volume and income generation given the shallow financial depth prevalent in most of the countries. Fitch expects a double-digits average credit expansion in the short term, which will benefit the banks' income generation capacity,' said Rene Medrano, Senior Director of Fitch's Financial Institutions. A well-diversified domestic deposit mix continues to finance credit expansion at low cost. Ample liquidity in local markets, coupled with opportunities for greater geographic coverage and banking services diversification, will continue favoring the growth of low cost funding. Central American banks have been relatively successful in stabilizing impaired loan ratios at a sound 1.6% of gross loans. Reserve coverage ratios are adequate and supported by conservative provisioning rules. A special challenge for non-dollarized countries will continue to be managing credit risks associated with FX lending to non-U.S.-dollar generators. Most of the banking systems boast adequate capital ratios. Whereas El Salvador has an outstanding equity base, Guatemala and Nicaragua display metrics at the lower end of the scale. Although Fitch expects capital ratios to remain sound in the short term, these metrics could be slightly pressured by the higher expected asset growth. Panama's banking assets will continue to comfortably exceed the rest of the Central American systems given its regional financial hub nature. Assets in Guatemala (including offshore banking assets) and Honduras are approaching their closest peers, respectively, Costa Rica and El Salvador. The Nicaraguan banking sector will remain as the smallest. Fitch does not anticipate material changes in the ownership structure of banks, with El Salvador maintaining a high level of foreign ownership and significant state ownership in Costa Rica. (Caryn Trokie, New York Ratings Unit)
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