With an economy affected by the COVID-19 pandemic and the rise of the unemployment rate and the informal employment, the performance of the loan portfolio will be a challenging feat for 2021, explained the Superintendent of Banks, Amauri A. Castillo, during the presentation of the 2020 results of the International Banking Center (IBC).
During the event entitled: “Banking Sector Results 2020 in an Environment Affected by the Pandemic,” the Superintendent stressed that the sectors most affected by this unprecedented year were commerce, construction, real estate, tourism and its ancillary services. Furthermore, the increase of the unemployment rate to 18.5%, the highest rate in 20 years in Panama, while informal employment grew to 52.8% directly affect the performance of the loan portfolio.
Mr. Castillo reiterated that when the COVID-19 pandemic was officially declared, the financial fundamentals of our banking system remained sound and stable, characterized by healthy liquidity ratios and sound solvency levels. Notwithstanding the foregoing, when the lockdown was declared, the banks that make up the national banking system decided to significantly increase their liquidity and solvency ratios to face any short-term contingency.
This financial prudence behavior is more relevant now, when the industry has not been able to disburse the usual level of loans, the main source of income and the key factor in profit generation. This behavior is shown when the profit level of the International Banking Center demonstrated a significant decrease of USD 839 million or 45% less than that of December 2019.
As for the legal liquidity ratio, which as of December 2019 recorded 57%, as of the end of 2020 it was close to 63.5%, driven by the increase in deposits placed by the State in state-owned banks, as well as for the rise of customer deposits. While the capital adequacy ratio on risk-weighted assets for the International Banking Center reached 15.88%, almost twice the minimum legally required of 8%.
On the other hand, the domestic loan portfolio totaled USD 54.30 billion, 53% correspond to retail banking and the remaining 47% to financing, both for corporations and the public sector.
The total assets for this period reached USD 130.36 billion, a 4.3% growth when compared to 2019, being the domestic item with the highest growth.
The new loans granted in 2020 declined considerably to 40%. As of September there is a rebound in loans granted, which correlated with the resuming of the different economic activities.
It should be noted that more than one million loan operations were benefited by the financial relief measures adopted by the Superintendency, by means of Rule 2-2020, which means that a significant number of debtors have renegotiated their terms and conditions and would be paying what was agreed, in accordance with the new terms and conditions.
Regarding total deposits, they have maintained a sustained upward trend throughout the year as they rose to USD 95.20 billion or 8.1% when compared to December 2019. This performance is due to increases in domestic deposits, which, if compared to 2019, grew above USD 7 billion or 12.7%, mainly influenced by funds obtained by the national government, which had a positive difference of 25%, as well as, the individual and corporate deposits, the most important sector within the total of domestic
deposits, which represent 75% and grew by USD 3.43 billion or 8% in relative terms.
Superintendent Castillo participated the regulatory roadmap based on international standards and the progress towards complying with FATF recommendations on matters related to anti-money laundering and terrorism financing, among others.
Another topic of utmost importance is the transformation and modernization of our financial system, which consists of the gradual implementation of the Real-Time Gross Settlement (RTGS) system. In this regard, Superintendent Castillo said that we continue working on the effective implementation of this system that will place Panama on equal competitive conditions with other financial centers worldwide and will bring great business opportunities to the Panamanian financial system.
Mr. Castillo reiterated also the commitment of continue protecting the legal balance between the banking system and its clients, as well as to continue protecting the best interests of depositors, maintaining the reliability and the financial stability of the IBC.
The event was attended by over 500 participants, including government authorities, banking and financial institutions, regulatory and supervisory bodies, correspondent banks, risk rating agencies, diplomatic corps, Panamanian Foreign Service and media.
For further information on this report, please visit our website www.superbancos.gob.pa / Financial & Statistical.
