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2014 Performance of the Banking Center
Gustavo Adolfo Villa, Jr. Secretary General
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Outline
Economic environment and Strategic Plan Pillars
2014 Performance of the Banking Center
Institutional Issues and Challenges
Regulatory Road Map.
2 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Economic Environment and Strategic Plan Pillars
3 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
2011 2012 2013 2014
10.8 10.2 8.4 6.2
Panama: Real Economic Growth Economic Context
Stable economic fundamentals.
GDP grew 6.2% in real terms;
inflation, 2.6%; unemployment,
5.1%; NFPS Deficit, 4% of GDP.
Favorable economic perspectives.
Although the fiscal position has a
slightly unfavorable impact, its
short- and medium-term
management does not appear to
impact economic performance.
Source of growth came from:
Exports of goods and services
such as transportation,
finance sector, tourism,
Panama Canal activities and
agricultural products.
Consumption and investment:
wholesale and retail,
construction, electricity.
4
0.0
2.0
4.0
6.0
8.0
2010 2011 2012 2013 2014
Inflation (CPI)
2010 2011 2012 2013 2014
6.8 4.7 4.2 4.3 5.1
Unemployment
Panama: Recent Economic Performance
Economic Development
Logistics
Agriculture
Tourism
Mining
Social Development
Improve quality of
life
Human Development
Human capabilities
Infrastructure
Connectivity
Environment
Sustainability
Governance
Institutional strengthening
5
Panama: Economic Plan Pillars for 2015 - 2019
6
2014 Performance of the Banking Center
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Sound capacity for generating equity Equity
• Capital adequacy index on risk assets of 14.8%
• Anticyclical provisions are introduced to reinforce soundness of the System
Stable funding base Liquidity
• Current stability of international interest rates favors the liquidity of the System.
Domestic credit with healthy indicators and collateral. Credit
• Total delinquency (30+ days) of Domestic credit is 2.6%
Normal for the economic cycle Growth
Good capacity for generating income. Profitability
• Efficiency of 1.8 for income over operating expenses.
7 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Summary of the 2014 Banking Center Performance
8
Banking Center 2013 2014 2014 /2013
% Var. Average Balance 2014 /2013
% Var. December December 2013 2014 Liquid assets 17,322 21,346 23.2% 16,091 18,793 16.8% Loan portfolio 60,612 66,040 8.9% 60,227 63,305 5.1% Securities investment 16,245 17,594 8.3% 15,376 17,069 11.0% Other assets 3,743 3,681 -1.6% 3,403 3,484 2.4%
Total assets 97,922 108,661 10.9% 95,097 102,651 7.9% Deposits 70,110 78,163 11.4% 68,602 73,988 7.9% Obligations 14,978 16,361 9.2% 13,690 15,045 9.9% Other liabilities 2,827 2,766 -2.1% 2,873 2,844 -1.0% Equity 10,007 11,371 13.6% 9,931 10,774 8.5%
Banking System 2013 2014 2014 /2013
% Var. Average Balance 2014 /2013
% Var. December December 2013 2014
Liquid assets 14,193 17,560 23.7% 12,697 15,137 19.2% Loan portfolio 49,798 55,453 11.3% 49,924 52,553 5.3% Securities investment 12,820 13,975 9.0% 12,307 13,584 10.4% Other assets 3,362 3,208 -4.5% 2,929 3,045 3.9%
Total assets 80,173 90,196 12.5% 77,857 84,319 8.3% Deposits 59,487 67,052 12.7% 58,504 62,981 7.7% Obligations 10,100 11,621 15.0% 8,675 10,147 17.0% Other liabilities 2,616 2,449 -6.3% 2,641 2,603 -1.4% Equity 7,970 9,074 13.8% 8,037 8,588 6.9%
Panama: Balance Sheet of the Banking Center and Banking System
(in millions of USD)
9
G. Bancolombia
Banco General
Banco Nacional
Grupo Aval
BLADEX
Global Bank
Banesco
Banco de Crédito del Perú
Bank of China
Multibank
-50%
-30%
-10%
10%
30%
50%
70%
90%
110%
130%
150%
170%
0% 2% 4% 6% 8% 10% 12% 14% 16%
Gro
wth
Market Share
G. Bancolombia Banco General Banco Nacional Grupo Aval
BLADEX Global Bank Banesco Banco de Crédito del Perú
Bank of China Multibank
IBC: 12-month Percentage Asset Growth and Market Share
10
Banking Center Jan. – Dec. 2013 Jan. – Dec. 2014 2014/ 2013 % Var.
Net interest income 1,982 2,147 8.3%
Other income 1,876 1,889 0.7%
Operating income 3,858 4,036 4.6%
General expenses 2,182 2,219 1.7%
Income before provisions 1,676 1,817 8.4%
Provisions expenses 255 268 5.1%
Income 1,421 1,549 9.0%
Banking System Jan. – Dec. 2013 Jan. – Dec. 2014 2014/ 2013 % Var.
Net interest income 1,811 1,965 8.5%
Other income 1,466 1,485 1.3%
Operating income 3,277 3,450 5.3%
General expenses 1,964 1,927 -1.9%
Income before provisions 1,313 1,523 16.0%
Provisions expenses 226 246 8.8%
Income 1,087 1,277 17.5%
Panama: Income Statement of the Banking Center and
Banking System
11
G. Aval Banco General
G. Bancolombia
BLADEX
Banco Nacional
Global Bank
GNB Sudameris
Multibank
Banesco
Credicorp Bank
-40%
-20%
0%
20%
40%
60%
80%
100%
0% 5% 10% 15% 20% 25% 30%
Gro
wth
Market Share
G. Aval Banco General G. Bancolombia BLADEX Banco Nacional
Global Bank GNB Sudameris Multibank Banesco Credicorp Bank
IBC: Percentage Growth of Profitability and Market Share
12
11.7%
8.0%
4.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2012/Dec 2013/Mar 2013/Jun 2013/Sep 2013/Dec 2014/Mar 2014/Jun 2014/Sept 2014/Nov 2014/dic
Loans to Private Sector Private Domestic Deposits MIEA
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
NBS: 12-month Percentage Variation of Private Sector Loans and Deposits
Quarterly: Dec. 2012 – Dec. 2014
13
Description Dec. 14 / Dec. 13 Var.
Dec. 13 Dec. 14 Total % TOTAL 37,061 40,352 3,291 8.9%
Public sector 1,822 998 -824 -45.2% Private sector 35,239 39,354 4,115 11.7% Commerce 10,313 10,959 646 6.3% Colon Free Zone 2,598 2,461 -137 -5.3% Wholesale 1,903 1,637 -266 -13.9% Retail 1,787 2,227 440 24.6% Services 4,025 4,634 609 15.1% Residential mortgages 8,814 9,957 1,143 13.0% Preferential Interest rates 3,079 3,572 493 16.0% From 0 - 40,000 1,287 1,176 -111 -8.6% From 40,000.01 - 80,000 1,603 1,910 307 19.2% From 80,000.01 - 120,000 189 486 297 157.1% Non-preferential interest rates 5,735 6,385 650 11.3% Commercial mortgages 1,218 1,414 196 16.1% Construction 3,697 4,450 753 20.4% Personal consumption 7,110 7,894 784 11.0% Personal loans 4,917 5,329 412 8.4% Car loans 962 1,165 203 21.1% Credit card 1,231 1,400 169 13.7% Agriculture 1,351 1,479 128 9.5% Others 2,736 3,201 465 17.0%
NBS: Balance of Domestic Loans to the Private Sector
(in millions of USD)
1.7% 1.7% 1.5% 1.5%
1.0% 0.9% 0.9% 1.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2011-dic 2012-dic 2013-dic 2014-dic
National Banking System
Moroso Vencido
1.4% 1.3%
1.1% 1.0%
0.7% 0.6% 0.8% 0.7%
0.0%
0.5%
1.0%
1.5%
2.0%
2011-dic 2012-dic 2013-dic 2014-dic
Panamanian Private Banking
Moroso Vencido
2.1% 2.2%
2.1%
1.6%
1.2% 1.2% 1.2% 1.4%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2011-dic 2012-dic 2013-dic 2014-dic
Foreign Private Banking
Moroso Vencido
NBS: Domestic Credit Quality Indicators
NBS: Domestic Loan Quality Indicators by Sector (in percentages)
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
0.7%
0.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
2011-Dec 2012-Dec 2013-Dec 2014-DecMortgage
Personal consumption
Commercial
Other sectors
Specific regulatory provision / Domestic portfolio (right axis)15 Ref. No.: SG-TRAD-201500081
Prepared by: S. Lara Date: March 11, 2015
NBS: Balance of Secured Domestic Loan by Sector (in millions of USD)
16
Consumption Mortgage Commercial Other sectors
2,363
11,094
6,690
9,043 5,531
277
4,270 5,158
7,894
11,371 10,960
14,201
Secured loans Unsecured loans Total
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
NBS: Domestic Portfolio Classification (in percentages)
17
95.4%
2.8%
0.7%
0.8%
0.3%
Normal Special mention Substandard Doubtful Unrecoverable
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
NSB: Domestic Loan Classification of Doubtful and
Unrecoverable Portfolios by economic activity
Doubtful Portfolio USD208.8 million Unrecoverable Portfolio USD137.5 million
18
31.8%
16.9% 16.0%
9.7%
9.0%
7.4%
3.6% 3.6%
1.1%
0.8%
Residential mortgage Credit card
Commerce Other sectors
Personal loan Agriculture
Construction Car loan
Commercial mortgage Industrial
23.3%
20.0% 16.5%
14.0%
9.8%
5.6% 4.6% 3.7%
1.5%
0.9%
Residential mortgage Personal loan
Commerce Agriculture
Other sectors Construction
Credit card Car loan
Commercial mortgage Industrial
NBS: Collateral and Specific Provision
Doubtful and Unrecoverable Portfolios (in millions of USD)
0
100
200
300
400
500
2011/Dec 2012/Dec 2013/Dec 2014/Dec
406.9 456.8 498.7
299.8
226.2 224.9 261.6
208.8
85.4 93.3 102.8 77.2
Doubtful Portfolio
0
50
100
150
200
250
300
2011/Dec 2012/Dec 2013/Dec 2014/Dec
162.8 156.1 163.9
289.2
82.4 76.8 80.3
137.5
45.1 42.4 56.6 68.2
Unrecoverable Portfolio
Collateral value Unrecoverable balance Specific provisions19
20
NBS: Balance of Doubtful and Unrecoverable Portfolios (in millions of USD)
4
1
1
2
2
4
6
7
11
14
14
25
30
58
45
32
- 20 40 60
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1
1
1
2
1
5
3
5
7
11
7
16
20
28
23
11
- 10 20 30
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Doubtful Portfolio Unrecoverable Portfolio
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
21
Banking System
Mortgages: Loan – Collateral Relationship
01,0002,0003,0004,0005,0006,0007,000
Lessthan50%
From51% to
60%
From61% to
80%
From81% to
99%
Over100 %
689 560
2,490
6,099
1,368
Initial Loan Value by Range December 2014 (in millions of USD)
RANGE
Dec-13 Dec-14
Initial Value (MM USD)
Collateral Loan / Collateral INITIAL VALUE
(MM USD) Collateral
Loan / Collateral
Less than 50% 636 1,761 36% 689 1,888 36%
From 51% to 60% 536 949 56% 560 994 56%
From 61% to 80% 2,281 3,155 72% 2,490 3,441 72%
From 81% to 99% 5,309 5,782 92% 6,099 6,626 92%
Over 100 % 1,098 1,000 110% 1,368 1,280 107%
Total 9,860 12,647 11,207 14,228
54% 22%
12% 6% 5%
From 81% to 99% From 61% to 80%
Over 100 % Less than 50%
Loan Distribution by Loan – Collateral Range
22
Banking System
Car Loans: Loan – Collateral Relationship
Loan Distribution by Range December 2014 (in percentages)
RANGE
Dec-13 Dec-14
INITIAL VALUE (MM USD)
Collateral Loan / Collateral Initial Value (MM USD)
Collateral Loan / Collateral
Less than 50% 168 462 36% 29 302 10%
From 51% to 60% 42 75 56% 35 62 56%
From 61% to 80% 234 326 72% 228 315 72%
From 81% to 99% 410 455 90% 566 624 91%
Over 100 % 496 361 137% 728 620 117%
Total 1,351 1,680 1,586 1,923
0
200
400
600
800
Lessthan50%
From51% to
60%
From61% to
80%
From81% to
99%
Over 100%
29 35
228
566
728
Initial Loan Value by Range December 2014 (in millions of USD)
46%
36%
14% 2% 2%
Over 100 % From 81% to 99%
From 61% to 80% From 51% to 60%
Less than 50%
23
NBS: Balance of Normal Portfolio and Dynamic Provisions
by type of Banking (millions of USD)
55 55 55 58
184 184 184 226 254 254 290 349
493 493 529 633
0
200
400
600
800
Sep-14 Oct-14 Nov-14 Dec-14
Dynamic Provisions
State-owned Panamanian private banking Foreign private banking Banking Sector
4,679 4,689 4,731 4,714
20,245 20,678 21,122 21,273 27,376 27,596 28,019 28,126
52,300 52,963 53,872 54,113
0
10,000
20,000
30,000
40,000
50,000
60,000
Sep-14 Oct-14 Nov-14 Dec-14
Balance of Normal Portfolio
State-owned Panamanian private banking Foreign private banking Banking Sector
NBS: Profitability Indicators
Indicators 2011 2012 2013 2014
Net interest income / General expenses 0.96 0.96 0.92 0.97
Operating income / General expenses 1.81 1.81 1.67 1.82
ROAA 1.76% 1.81% 1.47% 1.57
ROEA 14.10% 15.56% 13.80% 14.99
NIM 2.77% 2.70% 2.66% 2.41%
0%
2%
4%
6%
8%
2011 2012 2013 2014
NBS: Assets Profitability
Interest income/ Credit portfolio
Investment income / Investment
Deposit income / Interbank deposits
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
2011 2012 2013 2014
Funds Cost
Intereses pagados / DepósitosComisiones / Obligaciones
24
58.3%
45.2%
59.3%
81.0%
30%
40%
50%
60%
70%
80%
90%2
01
3-D
ec
20
14
-Jan
20
14
-Fe
b
20
14
-Mar
20
14
-Ap
r
20
14
-May
20
14
-Ju
n
20
14
-Ju
l
20
14
-Au
g
20
14
-Se
p
20
14
-Oct
20
14
-No
v
20
14
-De
c
NBS Panamanian Private Foreign Private State-owned25 Ref. No.: SG-TRAD-201500081
Prepared by: S. Lara Date: March 11, 2015
National Banking System
Average Liquidity Index: In percentages
NBS: Liquid Assets Portfolio
57.9% 59.5% 65.1% 67.4%
23.7% 23.3% 18.9% 18.7%
18.4% 17.2% 15.9% 13.9%
0%
20%
40%
60%
80%
100%
2011-Dec 2012-Dec 2013-Dec 2014-Dec
Cash and bank deposits Securities investment Cash flow
26 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
27
15.7% 15.8% 15.3% 15.4%
14.8% 15.0% 14.9% 14.3%
14.8%
0%
5%
10%
15%
20%
20
12
-Dec
20
13
-Mar
20
13
-Ju
n
20
13
-Sep
20
13
-Dec
20
14
-Mar
20
14
-Ju
n
20
14
-Sep
20
14
-Dec
Range Number of
Banks
Adequacy over
17 15
Adequacy
between 17
and 12
23
Adequacy
below 12 4
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
NBS: Capital Adequacy
28
Institutional Issues and Challenges
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
• Inclusion of crimes according to international standards in offense categories, including both Money laundering and the Financing of Terrorism
Criminalization of Money laundering and Terrorism
financing crimes
• Establishing a legal framework and mechanisms for the automatic freezing of assets pursuant to United Nation Resolutions 1267 and 1363
Implementing an appropriate legal
framework to freezing terrorist assets
• Broadening Designated non-financial business or professions (DNFBP)
• Requiring Enhanced Due Diligence measures for high-risk sectors and categories (ZLC)
• Extending Enhanced Due Diligence to trust services; supervise other complementary services offered by trust companies
• Law 47 grace period on bearer shares
Establishing effective measures for due
diligence and knowledge of the ultimate final
beneficiary to strengthen transparency
29
Panama: Summary of the Main Elements of the Action Plan
Panama: Summary of the Main Elements of the Action Plan
• Appropriate human, financial and technological resources to meet new responsibilities on accessing information on additional entities requiring reporting
• Strengthen legal framework to allow the FAU to access DNFBP’s information.
Operational strengthening of the Financial Analysis
Unit (FAU)
• Scope of the Suspicious Operations Report for all Financial Sector entities and DNFBP according to international standards
• Strengthening the quality of the Suspicious Operations Reports
Broadening and strengthening suspicious
operations reports for financial sector institutions
and designated non-financial businesses and
professions
• Ensure legal mechanisms and procedures for cooperation, even in the absence of treaties
• Broaden FAU Memorandums of Understanding
Ensure effective legal mechanisms for
international cooperation
30
Panama: Main Actions to be Delisted from FATF List
Strengthening FAU
Human, financial and technological resources;
Technical assistance
New guidelines on Suspicious Operations Reports
New Memorandums of Understanding
Bill on the Prevention of Money Laundering, the Financing of Terrorism and the Financing of the Proliferation of Weapons of Mass Destruction
New supervisory and regulatory institutional
supervision for preventing AML/FT
Broadening of entities requiring reporting; FAU
powers
Terrorist assets freeze, United Nations
Resolutions
Due diligence and ultimate final beneficiary
Financial Sector and DNFBP; including high-risk sectors, Trust funds
Bill on the Reforms to the Criminal Code; Bill on International Cooperation (Prosecutor General’s Office)
Piracy Forgery and
counterfeiting Smuggling
International Cooperation procedures
31 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Panama: Schedule for Delisting from FATF List
Submittal of new developments: Beginning of April 2015
Acts on the Prevention of AMLFT and from the Prosecutor General’s Office, including main regulations
International cooperation
FAU
GAFILAT and Review Group Meeting: May 2015
Review meeting on Panama’s actions
FATF Plenary: June 2015
Approval onsite visit
Onsite visit: August – Sept. 2015
FATF Plenary: October 2015
Announcement – delisting from FATF list
32 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
33
Regulatory Road Map for 2015
Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Main Regulations for 2015
Risk-weighted assets (Standardized Basel II)
Compliance Officer
Securities Investment Classification (IFRS update)
Anti money laundering and CFT updated
34 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015
Thank you!
35 Ref. No.: SG-TRAD-201500081 Prepared by: S. Lara Date: March 11, 2015