Banks are performing well, but the regional economy is not doing well either.
Overall, it was a good year for Latin American economies. Tailwinds that helped lift economic activity in the region to better-than-expected levels included lower interest rates in some of the region’s largest economies, such as Brazil, Mexico and Chile, and rising trade amid near-term economic growth. boom in formwork coming from the USA.
However, the decline in commodity prices throughout the year; persistent inflation in Argentina, Colombia and other key regions; ongoing political uncertainty; and the strong base effect from 2023 has somewhat balanced the situation towards a decrease in GDP.
According to the International Monetary Fund (IMF), the region’s economy (including the Caribbean) grew by about 2.5% last year, lagging the global economic growth rate of 3.1% in 2023.
Despite the unstable situation, the region’s banking sector has held its own, demonstrating above-average growth. This was primarily due to an improvement in non-performing loans in the second half of the year, reflecting lower interest rates and robust activity across the investment banking spectrum.
Mexican banks recorded another year of record profits, generating nearly $13.33 billion, representing an effective annual increase of 10%, according to Banco de Mexico.
In the region’s largest market, Brazil, the country’s five largest banks posted a strong 1.9% year-on-year increase in profitability, amounting to a staggering profit of approximately US$19.35 billion. However, falling earnings at historic giants such as Bradesco and Santander have led to mixed overall forecasts. Elsewhere in the region, results were mixed, with above-average profitability in Argentina helping offset sharp declines in Chile and Colombia.
| The best banks in Latin America | |
|---|---|
| Argentina | Banco de Galicia |
| Bolivia | Banco Mercantil Santa Cruz |
| Brazil | BTG Pactual |
| Chile | Banco de Chile |
| Colombia | Banco de Bogota |
| Ecuador | Produbanko |
| Mexico | Banorte |
| Paraguay | Banco Itau Paraguay |
| Peru | Banco de Credito del Peru |
| Uruguay | Banco Itau Uruguay |
| Venezuela | Mercantile, California, Banco Universal |
Regional leader
Despite the difficulties of an unstable year, BTG Pactual, our winning bank in the region and in its home country of Brazil, performed exceptionally well. The giant achieved strong profitability growth of 25% YoY, which is above average. The bank reported best-in-class growth across key business lines during the year, with new client acquisitions in its corporate and retail businesses, new product lines and record investment banking revenues helping to pave the way.
On the back of these gains, BTG’s corporate and SME lending business grew approximately $1 billion in sales in the fourth quarter, up 88% year-over-year. The loan portfolio reached approximately $34 billion, of which $4 billion was in lending to small and medium-sized enterprises (SMEs).
In its investment banking portfolio (the bank’s historical cornerstone), BTG ranks number one in terms of M&A activity in Brazil and Latin America. It also became the leading bank in the region over the year in terms of equity capital market created.
The bank achieved a return on average equity (ROAE) of 22.7% and adjusted net income reached approximately $2.8 billion, reflecting growth of 61% compared to the prior period. The Brazilian giant’s impressive year saw assets under management reach approximately $288 billion, with strong net inflows of $36.9 billion in 2023.
Large economies
Amid an impressive year for Mexico’s banks, Banorte outperformed its competitors, demonstrating growth in almost all of its loan portfolios. As a result, its profits exceeded $9.5 billion in 2023, up 15% from 2022. At the same time, net interest income increased by 18% year-on-year to $6.4 billion, and non-financial income increased by 19% to $895 million.
Strong demand for loans driven by the near-shoring boom added to Banorte’s results. The bank’s mortgage loans grew 12% annually, reaching $14.6 billion; while auto loans increased by 32% with a balance of approximately $2.4 billion.
Moreover, the bank strengthened its digital leadership, ending the year with 8.7 million digital customers. As a result, product sales through the bank’s digital channels increased from 7% of the total in 2020 to 44% in 2023.
In Argentina, amid an inflationary nightmare and political instability, the role of commercial banks could not be more important to the functioning of the economy.
Providing stability to our clients during this period, Banco Galicia has achieved impressive growth in all key aspects of its business.
At the end of the year, the bank reported a 25% increase in net profitability, compared with a 5% increase in the previous quarter. This resulted in an annual average asset return of 3.5% and an ROAE of 17%.
The above-average performance was also driven by Grupo Financiero Galicia’s fintech and digital payments subsidiary, which reported four-digit YoY growth in net profitability.
Due to the slow economic growth in Chile and the deteriorating labor market situation, Banco de Chile wins the award for best-in-class sustainability. While the overall average industry profit in the country fell 20.7% for the year, Bank of Chile took the lead with best-in-class financial planning and net income of $1.4 billion.
In Colombia, banks found it even more difficult to ensure profitability amid a nearly 50% year-on-year decline in revenue. This trend was mainly due to slower economic growth and an increase in non-performing loans. On this background Banco de Bogota, winner of Best Bank in Colombia, earned a hefty $248 million. At the same time, the bank’s assets and consolidated loan portfolio grew over the year by 5.4% and 10.8%, respectively.
Developing economies
Banco Itau Uruguay And Banco Itau Paraguay receive our awards as the best banks in these countries. Both are our winners for the second year in a row, demonstrating their continued commitment to increasing their combined market share in Brazil’s neighboring economies.
In Paraguay, the bank’s overall profitability was 36.2% of the total market, an impressive jump from the 26.9% recorded in 2021. Among the bank’s key initiatives last year was the introduction of PIK, a payment solution offering SMEs as well as independent professionals and entrepreneurs. , a simplified digital payment method.
In Uruguay, Itaú took advantage of the strong growth of the country’s banking industry to continue to strengthen its leadership, growing its client portfolio by 15% over the year.
In Bolivia, banks’ loan portfolio fell by 2.5% compared to 2022, primarily due to rising levels of non-performing loans, which jumped from 2.1% in 2022 to 2.8% in 2023. profitability and liquidity indicators.
On this background Banco Mercantile Santa Cruz maintained its leadership in the country, increasing its total assets to $6.1 billion, up $2.2 million from 2022. This represents a dominant gross portfolio market share of 14.4% and 15.5% of deposits in the country.
Peru’s 17 banks operating in the country recorded an 8.8% drop in profits at the end of 2023 compared with the previous year, according to Peru’s Banking, Insurance and Private Pension Funds Authority. Despite this, Banco de Credito del Peruwinner of the Best Bank in Peru category, demonstrated record profitability for the year with a stable return on assets of 2.6%.
Venezuelan banks were able to achieve an impressive 8.9% increase in profitability over the year. Among the hot market, Mercantil Banco Universal stepped up its game in the savings account segment late in the second half of 2023, increasing its market share in the country from 13% to 16.1%. Moreover, according to the latest financial report, during the same period the institution distinguished itself by almost doubling its loan portfolio, achieving a staggering growth of 98.1%.
In Ecuador, increasing political turmoil led to a difficult year for economic activity, with GDP missing estimates despite growing at an annual rate of 1.3%. Against this background, the best bank in the country, Produbanko, has been able to leverage its penetration of the commercial lending spectrum to increase its offerings. As a result, Produbanco’s total assets increased 7.1% above average compared to the previous year.