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News through May 6

Banking Essentials Newsletter - November Edition

University Essentials | COVID-19 Economic Outlook in Banking: Rates and Long-Term Expectations: Q&A with the Experts

Estimating Credit Losses Under COVID-19 and the Post-Crisis Recovery

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity


News through May 6

S&P Global Market Intelligencepresents the week's latest news and trends in Latin American banking.

Provisions and profits

* Itaú UnibancoHolding SA posteda 9.9% year-over-year drop in recurring net income for the first quarter, fallingto 5.24 billion Brazilian reais, as its provisions for loan losses jumped 31.1%higher to 7.23 billion reais. During a conference call to discuss its first-quarter results, CFO Eduardo Mazzilli DeVassimon said that the company will have to see far stronger signs of a recoveryin Brazil's economy before it pulls back on its provision expensing.

* Similarly, BancoDaycoval SA posted an 18.9% annual drop in first-quarter profit as the company bumped up itsprovision expenses significantly. Daycoval booked 164.0 million reais in loan lossprovisions for the quarter, up 44.2% from 113.7 million reais a year earlier. Thebank noted that it booked an expense provision for civil lawsuits amounting to 29.5million reais during the quarter.

* Also in Brazil, BancoPan SA posted a first-quarter netloss of 96.1 million reais, widening from the 73.5 million reais netloss booked in the year-ago period, as the bank's allowance for loan losses rose18% to 296 million reais. Gross income from financial intermediation, meanwhile,fell 17% year over year to 309 million reais.

* Bucking the trend in Brazil, Banco ABC Brasil SA showed first-quarter recurring net incomeof 95.5 million reais, up 19.1% from the year-ago period. The came as net interest income grew3.3% year over year, while banking services fees grew 23.8%. Loan loss provisionsfor the quarter ticked 13.1% higher year over year to 48.9 million reais.

* Elsewhere in Latin America, Credicorp Ltd., the holding company of Banco de Crédito del Perú, posted first-quarter net incomeof about 795.6 million Peruvian soles, down1.1% from 804.7 million soles earned a year earlier. The company noted that it incurredan after-tax translation loss of 27.6 million soles in the quarter. Adjusting forthat item, the company said that net recurring income rose 18.3% year over yearto 823.3 million soles.

Buying and selling

* After battling with a poor operating performance for some time,Banco Gerador SA reportedlyreached a deal to be acquiredby Agiplan Financeira following two years of negotiations. The head of Agiplan,Marciano Testa, reportedly said that the acquisition of the bank will help the financialgroup strengthen its loan portfolio and be a means to start attracting deposits.The new entity will be called Banco Agiplan.

* Republic FinancialHoldings Ltd. will soon launchan offer to buy out minority shareholders in Republic Bank (Grenada) Ltd. for an undisclosed cash consideration.Republic Financial currently holds a 51% stake in Republic Bank (Grenada). The offerperiod is set to launch May 11.

* After finalizing its takeover of Leasing Bolívar SA, Colombia'sBanco Davivienda SA hasestablished its own leasingunit known as Davivienda Leasing SA. The new unit will offer financing for cargoand passenger vehicles, commercial buildings and industrial machinery, among otheritems.

* Inversiones LaConstrucción SA, signed a dealwith Corp Group Banking SAand others to acquire the remaining shares in Inversiones Confuturo, formerly knownas Corp Group Vida Chile SA,for 49.27 billion Chilean pesos. ILC had acquired a 67% stake in Corp Group VidaChile in November 2013 and later rebranded CorpVida as Confuturo. Under the originalagreement, Corp Group retained the right to sell its remaining shares to ILC inthe future.

* BBVA Banco ContinentalSA completedits acquisition of 100% of BBVA Consumer Finance EDPYME, Forum Comercializadoradel Peru SA and Forum Distribuidora del Peru SA. The bank said it purchased allof the shares owned by BBV América S.L. in the consumer financing units, after buyingthe shares owned by Indumotora Internacional SA and Holding Continental SA earlier.

Regulatory moves

* Panamanian banking regulator SBP took administrative and operationalcontrol of afterthe company was sanctioned by the U.S. Treasury Department for alleged links toan extensive Panama-based money laundering network. The U.S. Treasury said the money-launderingscheme used various methods to launder drug proceeds for multiple internationaldrug traffickers.

* Banco de México,decided to hold its benchmarkinterest rate steady at 3.75% citing stable inflation and domestic economic growth,but said continuing financial volatility in global markets is a concern. "Goingforward we cannot rule out new episodes of financial volatility," the centralbank said, adding that although oil prices have continued to show recovery, theglobal market for oil has undergone a "structural change" affecting supplyand demand.

* Banco Centralde la República Argentina adopted measures to lift the monthly minimum of U.S. dollar currency purchasesto $5 million from $2 million. The monetary measure is part of an overall plan byArgentina to remove its remaining currency controls in the coming months.

* Mexico's consumer protection agency, Condusef, that 82 savings co-ops, or Socaps,should not accept deposits from the general public due to their financial situation.A recent revision by Focoop, the committee that oversees the regulation of Socaps,found that the financial situation faced by those entities do not meet the requirementsto collect deposits.

* Mexico's CNBV namedseven banks that it says are of local systemic importance based on the country'sBasel framework. The designation means the banks must have minimum capitalizationratios above the 10.5% required for other lenders. However, Fitch Ratings said thatthe seven systemically important Mexican banks selected already meet the additional capital buffer requirements.

Branching out

* Banregio GrupoFinanciero SAB de CV is openingits fourth branch in Querétaro this year and plans to expand its presence throughoutMexico's Bajío region, an executive reportedly said. The bank is also planning onopening new branches in Irapuato, Aguascalientes and San Luis Potosí as it recognizesthe growth opportunities the North-Central region of Mexico offers for expansion.

* Banco RipleyPerú SA plans to open 40 financial stores, known as Estaciones R, inthe next three years offering electrical appliances and financial products, CEORené Jaime reportedly said.Pilot stores in the cities of Trujillo and Villa El Salvador have generated goodresults, and the bank aims to open a third store in Chincha by the end of May.

* Argentina's Bancode Galicia y Buenos Aires SA opened two branches in the cities of Cutral Có and Añelo, both inthe province of Neuquén. As a result of the openings, the bank now has 263 branchesnationwide.

* Banco Nacionalde Panamá will open four new branches in Panama's Herrera province inthe coming years under a board-approved strategicplan. The branches will be in the cities of Parita, Los Pozos and Divisa,as well as a branch in Chitré. As a result, the bank will have a total of nine branchesin the province.

Banking barometers

* Savings withdrawals in Brazil exceeded deposits by some 8.25 billion Brazilian reais inApril, marking the fourth consecutive month where withdrawals have exceeded deposits,according to data from the Banco Central do Brasil.

* Corporate bankruptcy requests in Brazil in the year to April 30, risingto 571 requests from 289 in the year-ago period, data from Serasa Experian showed.Small businesses accounted for 327 of the bankruptcy filings in the first four monthsof 2016.

* Despite continuing global economic volatility, Mexican commercialbanks increased lendingto the private sector by 11.1% in March compared to the same month a year earlier,data from Mexico's central bank showed. Banks' total loan portfolio for the privatesector reached 3.1 trillion Mexican pesos, up from 2.7 trillion pesos a year ago.

In other news

* Fitch Ratings knockedBrazil further into junk territory, lowering the country's long-term foreign andlocal currency issuer default ratings to BB from BB+. "The downgrade of Brazil'sratings reflects the deeper-than-anticipated economic contraction, failure of thegovernment to stabilize the outlook for public finances and the sustained legislativegridlock and elevated political uncertainty that are sapping domestic confidenceand undermining governability as well as policy effectiveness," the ratingagency said. The ratings outlook on the long-term ratings remains negative.

* Governments in Latin America will have less flexibility to improve economic growth through fiscalmeasures in 2016 as growth remains subdued and commodity prices stay low, accordingto Moody's. Most governments in the region are expected to have moderate-to-lowfiscal space in 2016, the rating agency said, noting that this will limit theirability to cope with adverse shocks using fiscal policies.

* The Global Canopy Programme is including several Mexican andBrazilian banks in a global pilot program to test international banks' resilienceto climate risks. Theorganization is enlisting Grupo FinancieroBanorte SAB de CV, GrupoFinanciero Banamex SA de CV, CaixaEconômica Federal, Itaú Unibanco and Banco Santander (Brasil) SA to participate in the pilot thatwill test lending portfolio exposure to climate threats.

Featured this week onS&P Global Market Intelligence

* Best of the Web:Colombian insurers look to woo female clients, and Mexico calls a "Trump emergency."

* Hires and Fires:A weekly rundown of executive management, board and other personnel moves at LatinAmerican financial institutions.

* Ratings Roundup:A summary of various ratings actions on Latin American financial institutions andeconomies.