TBY talks to Otto O. Wolfschoon, Jr., Executive Vice-President of Global Bank, on growth in the finance sector, and the state of investment banking in Panama.

Global Bank was founded in 1994 and today, 20 years later, it is the second largest private bank in Panama by assets. Could you walk us through the history of your success?

We began with mostly corporate business, which remained our core activity for the first five years of operations. Following an acquisition, we expanded more into personal and retail banking. Since then, we have basically implemented what we call a universal banking strategy. In other words, we participate in many different markets in Panama, as long as they are viable in terms of a risk/return profile. The reason we have grown is because we started with a clear strategy in a growing economy; that and the fact that we have maintained a high level of service and are able to respond to our clients' needs efficiently compared to other local and foreign banks that operate in Panama. Also, there has been a process of consolidation in the industry, and all of these factors together explain our growth over the past 20 years.

What were the main benefits and synergies gained from the acquisition of another bank in 1999?

The main benefit was the broadening of the range of services, products, and markets that we cater to in Panama. It also increased our branch network, the number of geographic areas in which we operate, and added not only size, but also a new perspective of the markets that we could serve. In our global portfolio, we are split into two-thirds corporate and one-third personal banking, but the intention of the bank is to serve all areas of banking, not only personal banking, but also corporate banking, corporate finance, insurance, and private banking. We also have an area that deals with international banking from Panama, and we lend in Costa Rica and the rest of Central America. This has become a growing area for the bank. In addition, we have a captive insurance company, a trust company, and have a seat on the local exchange. In other words, we have formed a conglomerate of financial companies and financial entities that have all evolved around the bank, with each serving different purposes.

How are you growing subsidiaries like Global Valores, Aseguradora Global, and Global Financial Funds, and what differentiates them from other investments?

Those and the factoring company have to provide the services and the quality of services that the market requires, as stand alone entities. But on the other hand, they all benefit mutually from having a one-stop arrangement where clients can do most, if not all of the financial transactions they need with the synergies that can bring.

“Bancarization has grown in Panama, and is at a high level compared with the rest of Latin America."

What has been the trend in bancarization over the past five years, and what is the advantage of electronic banking?

Bancarization has grown in Panama, and is at a high level compared with the rest of Latin America. Participation in electronic banking and internet banking has increased. People have many other means available to them today to deal with the bank, including the internet, ATMs, call centers, and telephone banking.

A key trend in commercial banking is the advance to a more human-focused model. What is your commitment to this concept and how important is it for the banking sector?

It is important because we always pride ourselves on dealing with our clients on a personal basis and strive to serve their financial needs in the best way. In other words, we try to adapt our systems, policies, and products to meet the specific needs of the client.

What is your view of corporate social responsibility?

We are active in social responsibility programs through our involvement with several major NGOs. In particular, we developed a financial education program that we have run for a number of years, whereby we approached senior students in public high schools and developed workshops to explain the workings of the financial system and how they could work in it. We are aware that many people lack the knowledge and lose opportunities and time figuring out how to deal with their personal finances. It is a good idea to start with young people who are still in high school.

What are your financial expectations for this year?

We foresee slower growth than in 2013. The economy is growing rapidly, but not at the same high rate as previously, and we have followed that trend.

Could you comment on the state of the Panamanian investment banking industry?

The investment banking industry in Panama has progressed significantly, and it is now a fundamental part or Panama's financial landscape. The increase in the size of transactions and deals partially explains this trend. In the past, these transactions were not sufficiently large enough to demand the participation of an investment banking team, as they do now. Today we have much larger transactions that need to be structured specifically to meet the demands of the issuers and the potential clients or investors. Investment banking has grown much faster over the past three or four years, and expectations are that it will continue to grow.

What do you see as the key challenges that the banking sector faces?

Critical challenges are related to the future of interest rates, as I believe that we will face higher rates going forward. We will need to adapt to a country that has grown rapidly, yet one that will continue to grow at a lower rate. We need to find new sources of funding for this growth, which could come from non-traditional local investors or from international players. Forecasts for economic growth are at around 6% to 7% for 2014, which would be robust, though not as good as the 8% to 10% of previous years.

© The Business Year - April 2014