The International Banking Center (IBC) recorded accumulated net profits, as of March 2021, of USD 314 million, 32% less than that recorded in March 2020, as reflected in the Banking Activity Report of the Superintendency of Banks of Panama (SBP).
The report indicates that this underperformance is because of a significant contraction in the income obtained by international license banking, as the payment of dividends from its subsidiaries was deferred, a decrease in operating income (-14.5%) and, to a lesser extent, an increase in provisioning (+7%), as a consequence of the pandemic and the update of the expected loss models by some banks.
It was reported that operating expenses fell by 8%, due to the efficiency plans put in place by most of the banks in the market.
The COVID-19 pandemic and its effects on the economy have had a negative impact on the income-generating capacity of banks, as is happening in many economic sectors affected by the public health problem. The magnitude of the impact depends on each bank’s ability to gain efficiency or implement strategies to manage the expected negative effects.
It should be noted that despite the negative results observed, the sensitivity analysis conducted by the Superintendency of Banks show that the solvency and liquidity of the Banking System have not been affected, as a result of prudential regulations promoted by the regulator, both the provisions applied to loans, such as the capital requirement, have contributed to banking being in a stable financial condition compared to previous crises.
In this regard, the most recent capital adequacy ratio on risk-weighted assets is 15.9%, including capital requirements for credit, market and operational risks in response to Basel III, which markedly exceeds the regulatory minimum of 8% required by the Banking Law. On the other hand, the liquidity of the National Banking System reached to 62.7%, higher than the 30% established by regulation.
As of March 2021, the assets of the IBC amounted to USD 129.22 billon, which represents a 3.2% growth compared to March 2020.
Regarding the domestic loan portfolio, as of March 2020, banks showed a decrease of 3.1% to amount to USD 54.04 [billion].
For further information on the variables that explain the results of this report, please visit our website www.superbancos.gob.pa / Financial and Statistical.
