What trends are defining the financial sector in Panama, and how did the financial sector perform in 2016?
The financial sector continues to be strong. At times, the short-term consequences of the slowdown in 2016 were visible; however, the overall growth trends of the country and banks' asset books were not significantly affected. In the medium term, we expect to see a healthy consolidation of the financial sector. There are 49 full universal local banks in this economy and compliance, regulations, and the cost of doing banking is increasing. Banks need a large revenue base to distribute those expenses, though that will likely take place in the medium term. 2016 was challenging; however, Scotiabank and the financial sector continued to do well. We continue to see a strong consumer side, with real growth though low margins. Despite 2016 being a tough year with the Panama Papers and so on, there is economic stability, the US dollar-economy, low inflation, low unemployment, and immigration, which in the long term will benefit the country.
How did your acquisition of Citigroup in 2015 impact your operations in Panama and Costa Rica?
It was a successful transaction. We have always been a conservative bank and that will not change; however, there is a global strategy to be bigger and better with credit cards. This transaction was mainly a bet on the country, its growth, and the credit card portfolio that Citibank had built. We had 28,000 clients before and now have over 100,000; therefore, it was also a customer base acquisition. The reason for the success is because the acquisition involved a bank that was well placed and well recognized for unsecured lending mortgages and another bank that was mainly recognized and successful in placing secured products like credit cards. The cross-selling potential of those two products is fantastic. We now have the product and our customer base grew correspondingly. It was coincidental that Citibank had decided to leave the consumer market in Panama. We are currently going through the integration process, which is a challenge with every acquisition, and everything is on schedule. Currently, both Scotiabank and Scotiabank Transformandose are in the market, though the latter will eventually merge into the Scotiabank branch.
What is the composition of your client portfolio in terms of corporate clients versus private clients?
This bank was established as a corporate commercial bank funded by Canada in 1974; however, its business started to change in 2007 and 2008. Currently, 65% of our assets continue to be corporate commercial book while 35% is retail. With our acquisition of the Citibank portfolio, the retail increases significantly in terms of customers and even employees, though the assets per se were not that large relative to what we had. My objective is to make that 65/35 closer to 60/40 and then work toward 50/50 to make it more balanced. We are betting on the consumer and on retail, and that needs to be bigger; however, that does not mean our focus on large corporate transactions and large commercial transactions will stop. We find this business relevant for the country. Our presence and role in lending for large projects is necessary as this country is growing; the government has invested in infrastructure and we will continue to be a part of it.
How much is the financial institution investing in innovation?
We have talked about classic banking up until now; however, the reality is that the consumer, banking, and generations are changing and we pay a great deal of attention to this. One of the key strategies and measurements of success for us globally as management and the bank is digital transformation. That is key, and we measure, create, and leverage IT. This is where our global capabilities become useful. We have five Digital Factories in Colombia, Peru, Mexico, Chile, and Canada where people design and think about how to be digital, how to be faster, and how to be better for the customer. There are natural challenges to this; in developing economies, we work to get the customer out of the branch and do things electronically. We are at a transition point, in which everyone has a cellphone that they use for many tasks but they still go down to a branch to register for a credit card. We need to think about this situation and understand how we can encourage people to use available channels to facilitate their lives.
What are your main targets and objectives for 2017?
Being in a solid, stable, and growing economy represents a challenge because targets are aggressive. We have low double-digit targets for almost every aspect of our balance sheet and earnings and we are on target. Our financial year starts on November 1 and we are doing well. Our goal is to continue to be strong participants in large development projects. A key goal this year is to manage growth and while maintenance the highest standards on control and compliance, which is absolutely critical. At the same time, we work on integration, which entails resources, people, decisions, stress, and deadlines; we are in a key year where we have to manage those things. There are growth expectations that I am confident we will meet; we are betting on the country. We are a patient bank, we are not in a hurry and are here to stay; at the same time, we have deadlines to meet for the integration and 2017 is a critical year for us. We also have a digital transformation agenda that is a key priority for us.