No growth, big profits
Banistmo (pictured), and Brazilian Bicbanco, climbed 27 places to 74 and 89, respectively, on this ranking.

Banistmo (pictured), and Brazilian Bicbanco, climbed 27 places to 74 and 89, respectively, on this ranking.

6th August 2014

The 100 biggest banks in the region did not increase their total assets in 2013, but reported a 7.6% increase in net revenues. The reasons behind this financial paradox.
By Santiago Gutierrez
It might come as a surprise to many, but Latin American banks did not grow in 2013. The 100 biggest banks in the region had combined assets of $3.86 trillion in 2013, $4 billion less than in 2012. On the other hand, net revenues jumped to $50.9 billion in 2013, from $47 billion in the previous year, a significant 7.6% increase.
There are two main explanations behind these two seemingly conflicting results. The reason for the freeze on asset growth was last year’s economic slowdown, especially in Brazil. The region grew 2.6% in 2013, well below the 3% expectedin mid-2013, and Brazil had an even lower GDP growth rate of 2.3%.
The key to understanding the increase in profits is obvious to those familiar with the history of Latin banks. It has almost been a constant pattern that banks’net revenues increase on the first year of economic downturns. That makes sense, because non-financial corporations tend to increase their loan demand as consumption and investment decrease. After all, they still have to pay their employees and their fixed costs. As the economy weakens and demand for loans grows, interest rate marginstend to increase.
Lower provisions to cover non-performing loans also play a part in last year’s results. Now prudent Latin American banks did learn the lesson from 31 …

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