Latin America's Business Information Leader
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Banking Perspectives - a weekly summary
January 9 - January 15 2010
Click to read the online version:
http://www.bnamericas.com/perspectives_home.jsp?idioma=I§or=3&id_email=170275539
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In this issue:
* Weekly Wrap
* Q & A:BancoSol takes top spot in microfinance clients, sticks to its roots
Kurt Koenigsfest
CEO
BancoSol
Peru
* Coming Up
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** WEEKLY WRAP **
The biggest stories this week in banking all had public sector or macro roots.
IDB and the World Bank pledged aid to Haiti following the 7.0-magnitude earthquake that devastated Port-au-Prince on Tuesday (Jan 12), as did other entities, government and a number of private sector banks, including Citibank, whose office in the Haitian capital collapsed in the quake. Visa, MasterCard, American Express and Discover all announced they would waive transaction fees on money sent to the country, while MoneyGram International and Western Union said they would offer significantly lower or zero transfer fees.
Although the extent of the damage is not yet fully known, it is clear that it will be a significant amount of time before any kind of services, let alone the country's limited financial services, come back online.
The government of Honduras, meanwhile, announced early in the week that it officially stopped repaying its US$407mn debt with the Central American Bank for Economic Integration (Cabei), and would move forward with a lawsuit against the entity.
The presidents of Cabei member countries voted formally for a pause in lending to Honduras in September, after the bank stopped disbursing funds as a result of the country's coup on June 28.
Cabei CFO Hernán Alvarado said the bank expects the incoming government of Porfirio Lobo, who is due to take over as president of the country on January 27, to want to resolve the situation, leading to a resumption of both lending and payments.
And in Argentina, bank stocks took a dive due to uncertainty stemming from President Fernández's attempted firing of central bank head Martín Redrado after he resisted releasing US$6.57bn in reserves for the government to pay off public debt.
Bank stocks rallied somewhat later in the week due to speculation that the conflict would be resolved, but more volatility is likely. After Fernández fired Redrado, a judge ordered the official's reinstatement and temporarily blocked the president's plan to use the reserves, pending review by congress.
Also in Argentina, economy minister Amado Boudou said Thursday the government will meet with creditors next week regarding the planned exchange of US$20bn in defaulted bonds, which should happen by the end of February.
Also this week in Banking:
Uruguay
- The imminent sale of the local unit of France's Crédit Agricole has reportedly been pushed back for another two weeks.
UK bank HSBC, Brazil's Itaú Unibanco and Spain's BBVA presented their bids in the last days of December, and the French company must now choose between the offers.
Chile
- The country became the Organization for Economic Co-operation and Development's (OECD) 31st member and the organization's first in South America
In recent months, and as part of the OECD accession process, competition laws, consumer protection and financial system transparency in the country have been strengthened, and public pension coverage extended.
Venezuela
- The government integrated seized bank Banorte Banco into the operations of new state-run bank Bicentenario Banco.
Bicentenario was opened in late December, the result of a combination of a number of small banks recently intervened in by the government.
Regional
- Global microfinance nonprofit organization ACCION International received a three-year grant of US$5.8mn from the Gates Foundation to work with microfinance institutions BancoSol in Bolivia, Finamerica in Colombia and Credi Fe in Ecuador to offer savings account products tailored to their clients.
RESULTS & FIGURES
Bancolombia will likely post 2009 earnings in the range of 1.11tn-1.25tn pesos (US$565mn-637mn), or 3-15% less than in 2008.
Brazil's total vehicle loan book hit 156bn reais (US$88.3bn) at end-November, up 12% from 12 months prior.
Retail credit demand in the country dropped 1.2% in 2009, but was up 4.5% in the second half of the year after falling 6.8% in the first six months.
Brazilian federal savings bank Caixa Econômica Federal (CEF) upped its housing loan disbursements by 112% last year to 45bn reais.
Federally controlled Banco do Brasil (BB) increased its disbursements of agricultural credit by 19% in the second half of 2009 over the same period in 2008, totaling 21.8bn reais.
Also, BB as of end-November had 34.4% of Brazil's consignado payroll-linked loan market, which totaled 105bn reais, after growing its payroll-linked loan book by 4.3% in the month, compared to market growth of 1.6%.
Mutual fund assets under management in Mexico increased 22.2% in 2009 to 944bn pesos (US$74.3bn) at the end of the year.
Mexico's largest mortgage lender Infonavit issued 447,481 loans worth a total 144bn pesos last year, down from a record 494,073 loans worth 152bn pesos the prior year.
Bolivia's BancoSol saw profits of US$12.1mn and its loan portfolio grow just under 20% to some US$350mn in 2009.
And lastly, El Salvador brought in US$3.47bn in remittances in 2009, 8.5% less than in 2008, and accounting for 16.1% of the country's estimated GDP in the year.
By William Schatz
Related Companies
* Banco do Brasil S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=11525§or=0
* Banco Bilbao Vizcaya Argentaria S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=11834§or=0
* Banco Central de la República Argentina - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12050§or=0
* Inter-American Development Bank - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12225§or=0
* The World Bank Group - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12283§or=0
* American Express Company - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12289§or=0
* MasterCard Incorporated - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12306§or=0
* Western Union Company - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12328§or=0
* Citigroup Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12333§or=0
* HSBC Holdings plc - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12442§or=0
* Banco Centroamericano de Integración Económica - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12745§or=0
* Bancolombia S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12835§or=0
* Crédit Agricole S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12885§or=0
* Organisation for Economic Co-operation and Development - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=12971§or=0
* Caixa Econômica Federal - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=13925§or=0
* Visa Inc. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=17044§or=0
* Instituto Fondo Nacional de la Vivienda para los Trabajadores - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=17568§or=0
* Credi Fe Desarrollo Microempresarial S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=784394§or=0
* Itaú Unibanco Holding S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=792759§or=0
* Banco Solidario S.A. - http://www.bnamericas.com/factfile_detail.jsp?idioma=I&documento=845812§or=0
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** Q & A **
* BancoSol takes top spot in microfinance clients, sticks to its roots
Kurt Koenigsfest
CEO
BancoSol
Peru
Bolivia has long been a global leader in microfinance, along with its neighbor Peru, consistently at the top of rankings on microfinance sector health and maturity.
Within Bolivia, which is known for particularly low lending rates, banks BancoSol and Banco Los Andes ProCredit lead the sector, while there are also five non-bank deposit taking institutions and a foundation.
These entities, all members of the country's microfinance association Asofin, held US$1.53bn in gross loans and US$1.47bn in deposits, while serving 549,206 loan clients and 1.65mn deposit customers at end-November.
To find out more about the developments at BancoSol and the microfinance last year and what to expect in 2010, BNamericas talked to BancoSol CEO Kurt Koenigsfest.
BNamericas: What did BancoSol see for growth and profits in 2009?
Koenigsfest: 2009 was very positive for BancoSol. We had growth close to 20% in our loan portfolio including a non-performing loan [NPL] ratio of 1.2%. In terms of number of clients, we reached 130,000 borrowers and 258,000 depositors, during the year becoming the bank with the most clients in the Bolivian financial sector. The growth in public deposits was 22% in the year. Profit was US$12.1mn for the year.
BNamericas: Which of your products increased during the economic downturn? Did the structure of your loan book change?
Koenigsfest: No, the structure has remained the same, with our individual loans for working and investment capital being the largest products.
BNamericas: According to some figures I saw recently, 91% of the population in Bolivia has no or limited access to financial services and there are currently two bank branches for each 100,000 people in the country. What are your plans to increase your current footprint of eight cities and 100 branches and help improve those numbers?
Koenigsfest: The Bolivian microfinance industry reached US$1.6bn and 550,000 borrowers by the end of 2009. If we measure that against the commercial banks, which have a combined portfolio of US$3.2bn, we can see the penetration of microfinance in the country.
Also, in terms of branches, microfinance operators' 590 branches already are more than those of the commercial banks. For 2010 we will continue expanding, using new methods. At BancoSol for example we will use our mobile branches that travel outside of the cities to reach the unbanked.
BNamericas: Given that you passed Banco Los Andes for the number one spot in clients in the microfinance industry, do you think you can do the same in your loan book and overall assets in the near or medium term?
Koenigsfest: We consider ourselves different from the majority of participants in the microfinance market in Bolivia. If you look at the breakdown of the loan portfolios of the different MFIs [microfinance institutions] in our market, we are the one reaching the smaller customers and doing the smaller loans: 93% of our portfolio goes to credit operations of US$20,000 and less.
Some of our competitors have gone upwards and are serving the SME market as well, we have not. BancoSol's finishing 2009 with the largest number of clients is aligned with our vision and mission.
BNamericas: How did you increase ROE to 26% by end-November while it was dropping significantly at most other microfinance institutions?
Koenigsfest: The ROE that we had for December was 38%. We reached that based on the volume of our operations, quality of our portfolio and efficiency in our operating costs. Let's consider that the MFIs in Bolivia operate at the lowest margins in the region, with operating expenses/assets of 7.19% and NPL ratio of 1.05% in our case. We have also reversed some voluntary provisions that given the quality of our portfolio we considered excessive.
BNamericas: How were you able to hold down the increase in NPLs in the year? And given how little your NPLs have increased, why are provisions still so high?
Koenigsfest: We think that keeping our NPLs low is a two way street. On one side, we are very active collecting early and understanding the market and clients we reach. On the other side, our customers are doing well. With the combination we are in the best position. We have high coverage because of a very conservative approach that we use in managing the bank. By the end of 2009, coverage dropped to 563%.
BNamericas: Another factor for the solid results in 2009 was lower financial expenditures, what caused that drop?
Koenigsfest: Bolivia today is very liquid, the large and midsize corporations have not been investing, or expanding their operations. So the commercial banks are flooded with cash that does not go back to the market in the form of credit. From the deposits side we've taken advantage of that liquidity and exchanged higher cost liabilities for lower cost.
BNamericas: Speaking of that, how do the costs of financing through the financial markets, such as your recent boliviano-denominated issue, compare to the costs of other types of financing like deposits?
Koenigsfest: Today our liabilities side is diversified. We have international financing as well as local, and we are very active in getting deposits from the public. We used to finance our operations mainly from international agencies and multilateral banks.
Now we're very active in the local markets as well, and taking advantage of the very liquid market I spoke about before. Today we pay 1.5% for a 360-day US [dollar]-denominated CD, and 0.3% in a dollar-denominated saving account. We also believe that our AAA rating from Moody's helps.
BNamericas: Is micro insurance profitable for you, abroad or domestically?
Koenigsfest: Micro insurance is a value that we add to our deposits and lending products. Even with low profitability, we will continue to offer the service because we've seen the difference it can make in the lives of our clients.
BNamericas: What is the average interest rate of your credit products? I believe the market average is about 20%.
Koenigsfest: For 2009 we finished with an average of 19.87%, same as the market. But again, with loans of lower value.
BNamericas: Has it helped the financial industry to have a more stable political environment in recent years?
Koenigsfest: Yes, the banking system has recorded level deposits, good returns, good indicators in general, but for commercial banking the liquidity could become a problem. For the microfinance industry it has been a very positive couple of years.
BNamericas: Finally, what results do you expect for the industry in 2010?
Koenigsfest: Loan growth could be around 20% this year for the whole industry. Profits will drop because of lower margins and lower loan quality.
About Kurt Koenigsfest
Kurt Koenigsfest has held a number of management positions in the Bolivian banking industry since 1989. Prior to joining BancoSol, Koenigsfest's roles included nine years at Banco Nacional de Bolivia, the country's largest private bank.
He is currently vice chairman at Bolivian private banking association Asoban and chairman of the Accion Network and the Micro Finance Network, and previously was chairman of the country's microfinance institute association Asofin.
A native of La Paz, he has a degree in business administration from the University of North Texas.
About the company
BancoSol is a private Bolivian commercial bank that provides loans to low-income microentrepreneurs in Bolivia.
The bank started as an NGO, and incorporated as a fully-fledged bank in 1992 in order to meet the growing demand for micro loans on a self-financing basis.
BancoSol is the largest microlender in terms of borrowers and second largest in terms of loan book in Bolivia.
By William Schatz
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** COMING UP **
January 17, 2010:Second round of presidential election.
Chile
January 18, 2010:Martin Luther King, Jr. Day, US markets closed.
Regional
January 27, 2010:New president Porfirio Lobo to be sworn in.
Honduras
February 01, 2010:New rules starts under which all foreign-contracted derivative products must be registered in the country with an approved clearinghouse.
Brazil
February 07, 2010:Presidential and congressional elections.
Costa Rica
February 15, 2010:Washington's Birthday/Presidents' Day, US markets closed.
Regional
February 17, 2010:Dutch financial services group ING to release financial results for the fourth quarter of 2009.
Regional
ING Group
April 02, 2010:Good Friday, most markets closed.
Regional
May 31, 2010:Memorial Day, US markets closed.
Regional
July 05, 2010:US holiday marking Independence Day.
Regional
September06, 2010:Labor Day, US markets closed.
Regional
October 03, 2010:Presidential elections.
Brazil
October 06-07, 2010:Midsize bank Daycoval to end buyback program of 1.56mn preferred shares or 2.8% of such shares in circulation.
Brazil
November 01, 2010:All Saints Day, most Latin American markets closed.
Regional
November 25, 2010:Thanksgiving Day, US markets closed.
Regional
December 24, 2010:Christmas holiday (observed), US markets closed.
Regional
Click here to view the most important conferences and events in your sector of interest. http://www.bnamericas.com/conferences_home.jsp?idioma=I§or=3
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