A financial hub of international stature, the Panamanian banking sector is making good use of a tough regulatory regime and stable political environment.

After Switzerland, Panama City is host to the world's second largest international banking community, and the most vibrant in Latin America, with over 150 banks from 35 countries vying for business. The total assets of the Panamanian banks exceed $150 billion. According to Business Panama, the republic has three banks ranked among the Top 1,000 World Banks in 2014. These, with their positions, are Banco General (612), Banco Latinoamericano de Comercio Exterior (686), and Banco Nacional de Panama (861). The latter institution, dating back to 1904, is tasked with importing US dollars from the US Federal Reserve Bank. Incidentally, there is no limitation on other banks' dollar imports. Today the bank provides personal and business services to SMEs and corporate clients. It also caters to the agricultural sector. The country's largest public bank by customers and assets ($5,010.58 million), in 2014 it deployed the Gemalto's Ezio Multi-channel Authentication Solution to bolster rising eBanking and mBanking operations.

Financial stability is the byword of local banking legislation, where proven capitalization in excess of $15 million is stipulated merely to apply for a full banking license. The figure drops to $3 million for an international license, with payments deposited at state-owned Banco Nacional de Panama. In contrast, according to Sovereign, “Other tax haven countries today issue banking licenses with as little as $500,000 in capitalization."


Panama has yet to shake the mantle of “high risk" country, and international gray list status is an overhang on sector competitiveness. The Superintendency of Banks has identified exiting this list as a national priority. Tough bank auditing guidelines are in place, with players required to submit monthly auditing reports to the Banking Superintendence, itself supervised by the Banco Nacional de Panama (BNP). The BNP is the state's key depository, overseeing Panama's international reserves, and is the banking universe's clearing house. A comprehensive banking law (Decree No. 9) reflects the standards shared by key financial centers worldwide in terms of transparency and regulation. And as Jorge E. Morgan, Executive President of MMG Bank, puts it, “The country's legal infrastructure is attractive for people in the region, especially those coming from less stable countries." The bank expects total assets under management of $2 billion for 2014.


The Superintendency of Banks of Panama rated as “excellent" the monthly average liquidity of the National Banking System as of the start of 2014 in the light of a welcome bank liquidity index, of around 60%. The national bank ruled the roost at 77.9%, after which came foreign banks on 59.7%, and Panamanian banks at 47.5%. Banking law stipulates a 30% liquidity ratio.


Rooted in international best practices, the International Banking Center of Panama (IBC) is one of the most modern and successful in Latin America, offering investors over 100 banks from more than 30 countries, mostly from Asia, Europe, and the Americas. Moreover, it leverages the intrinsic appeal of Panama's dollarized economy. The IBC closed 2013 on assets of $97.9 billion, up 9.1% on 2012, according to the Superintendence. Meanwhile, the National Banking System, combining general license banks and local business, saw assets of $80.2 billion on 10.1% growth. For the year, domestic credit rose 10.4%, driven by mortgage loans (up 13.5%), consumer (up 13.5%) and interim construction financing (up 23.9 %). A landmark was reached when total assets surpassed $100 billion as of May 2014, at $101.67 billion, up 7.5% on the same period of 2013. Meanwhile, according to official data, the national banking system for the period saw growth of 216.5%, equivalent to $522 million. It also disbursed 9.1% of domestic loans to the private sector, accounting, too, for 14.8% of residential mortgages, and 12.2% of consumer loans. Panama's Superintendency and Banking Association are keen to welcome both investors and members to the IBC. Alberto Diamond R., Superintendent of Banks of Panama, evaluating the 40-year-old IBC, observed that, “There are 91 licensed banks within the IBC. Of those 91 banks, 13 are representative offices that allow banks and financial institutions to promote and conduct business from an office in Panama, although prohibited from providing banking services in Panama." Meanwhile, international banking license holders—28 in total—can offer services to clients beyond Panama, take deposits from abroad, and extend loans to other countries. Internal credit to the private sector grew 8.7% compared to the same period in 2013. “Banking is the most regulated and supervised sector in Panama, and this environment needs to be expanded to other sectors as well. Panama has an important task in terms of improving the transparency of the sector, and we are advancing in that direction," he added.


As of January 2014 the total profit of Panamanian private sector banks had risen 6.33%. The accumulated profit of 18 locally-owned private banks in the first 11 months of 2013 was at $333.35 million, up 6.3% on the same period of 2012.

And as of end-2013, four banks stumped up 55% of personal credit, where personal loans led the total consumer credit portfolio of the local banking system on 69.7%. According to Banking Superintendency data, the portfolio had reached $6.82 billion by the month of September. Among those aforementioned banks accounting for 55% of personal loans are Banco General with $776.9 million, Banco Nacional de Panamá with $705.1 million, and Banistmo with $695.2 million; and Banco Bilbao Vizcaya Argentaria (Panama) with $433 million.


Banco General, holds a BBB + rating from Fitch Ratings, and an 18.5% market share in local bank lending to the private sector as of May 2014. It closed 1H2014 on a net profit of $152.9 million, up 18.8% from $128.7 million a year earlier. The 2Q2014 profit print alone was at $78.5 million, marking a 37% YoY climb. Increased net interest income totaled $225.8 million, 12.7% up on 1H2013; the gain in net financial instruments was $4.5 million, soaring 433% YoY. The bank said in a statement that, “the results of 2013 were negatively impacted by a loss in $6.5 million, due to increases in interest rates of bonds in the international market, while in 2014 a gain in values was generated by a $4.2 million decrease in interest rates in the market." June 2014 ended with $12.41 billion in assets, up 10.7% YoY due to the loan portfolio, the bank's core asset, which stood at $8.15 billion, up 11.4% on the previous year. For 2Q2014, $1.3 billion in loans were issued with business loans at $963.2 million, residential mortgages of $130 million, and consumer loans of $92.2 million. Asset growth for the period exceeded that of the IBC, which rose 7.64% in asset terms to $690.10 million. Total bank assets for 1H2014 reached $1.521 billion, on a 12.1% YoY climb.


It's global portfolio split into two-thirds corporate and one-third personal banking, Global Bank, founded in 1994, ranks as the second largest private bank in Panama by assets (total assets as of June-end 2014: $3.81 billion). The bank is a wholly-owned subsidiary of G.B. Group Corporation, and with its nine 100% owned subsidiaries is a financial platform providing services from corporate finance to factoring, and overseas operations. 1H2014 net income was at $71.54 million. For 1H2014 net loans stood at $3.5 billion up YoY from $2.96 billion, of which $3.2 billion were domestic.


Banistmo—with a market share of 14% in personal and corporate banking—gained its new moniker upon Grupo Bancolombia's purchase of HSBC's Panamanian operations in 2013. The bank's President, Aimeé Sentmat de Grimaldo, told TBY that, “In Panama we are setting a growth goal at the same level as the banking and finance sectors. The country has a growth expectation of around 6% to 7%, whereas the industry will be around the 10% mark. We expect to be in line with this growth." During 1H2014 the bank, “…we consolidated our presence in key segments with key products. For example, we have seen a positive and promising rise in the demand for mortgages, a clear representation of the growth of the construction sector and an increase in Panamanians' purchasing power.“ The bank anticipates growth of 7%-10% for 2014.


Panama-based Bladex is a supranational institution formed by the central banks of Latin-American and Caribbean states to promote regional integration and foreign trade finance. 1H2014 net income stood at $44.2 million, up 16% YoY, while the 2Q2014 was at $20.7 million down 12% QoQ, as incremental revenues were impacted by a volume-driven rise in provisions for credit losses. 1H2014 net interest income (NII) was at $66.0 million up 19% YoY, on a rise in average commercial portfolios and greater net interest spreads. Fees and commissions were at $8.5 million, up a firm 62% YoY, on syndication business growth. Meanwhile, the net interest margin (NIM) rose 14 bps YoY to 1.81% in 1H2014.


Wealthy investor base aside, many ordinary citizens remain beyond the reach of regular banks. According to Superintendency of Banks data, in August, 2014 Panama's microfinance portfolio had risen 20.65% year-to-date with three banks holding microfinance licenses issuing loans of $154.17 million. Banco Delta ranked first on 72.24% of the total, followed by MiBanco on 17.12% and Banco G & T Continental on 10.64%. For the period, the three banks had respective assets of $189.87 million, $30.35 million, and $72.41 million.

Though a newcomer, established in 2006, Banco Delta is today the foremost microfinance entity in Panama. In conversation with TBY, bank President Arturo Müller N. revealed that, “The average micro-loan on our books is about $1,400. We also provide automobile loans of around $13,500 each, which brings the average up. A commercial loan to a small business, however, is around $25,000-$50,000 on average."