The growth of Panama's economy is lifting the banking sector, particularly private banking.
Panama’s wealth management sector is poised to grow 10% this year as Central America’s biggest economy strengthens in the wake of fresh presidential elections and an infrastructure boost.
“Panama is still an emerging market and the private banking sector has strong potential and has grown at an important rate in the past few years,” said Monica Garcia de Paredes de Chapman, VP of private banking at Global Bank.
Paredes de Chapman expects GDP growth of 5.0%-5.5% this year, significantly more than the 3.7% growth achieved in 2018 which followed years of similarly sluggish growth.
That—coupled with a robust financial system where bank capital ratios hover 30% above those required under the Basel regulations—should boost international investors’ interest in Panama’s investment products. The country's tax exemptions on capital gains (for both bonds and equity) will also help according to Paredes de Chapman.
Panama’s banking sector as a whole is strengthening with credit expected to grow 8% in the wake of President Laurentino Cortizo's recent election.
“Banks are well positioned in terms of capital, profitability, asset quality and in general, to continue growing,” Moody’s senior analyst Jose Montano said recently.
Paredes de Chapman adds that the Panama City-based lender also expects to match the overall market’s growth rate this year as the acquisition of rival Banvivienda boosts its client portfolio to 1,500. Currently, Global Bank has $1.3 billion in assets under management and 1,100 clients. Global Bank will boost boost its product offering by giving clients the option to invest in local and international funds and striking new distribution agreements with international lenders, private banks and fund managers such a Pimco and Blackrock.
Moody’s Montano believes bank credit could expand by as much as 9% in 2020. A string of infrastructure projects will drive this year’s credit growth says Ana Lorena Carrizo, a risk analyst at ratings firm Equilibrium.
Some of these projects include a third metro line, a fourth Panama Canal bridge, a new copper mine and other initiatives to upgrade sewage and urban infrastructure. All of this will require bank financing, Carrizo added.
“We are going to be better off with Cortizo,” she said. “He has a plan to boost the agricultural, healthcare industry and tourism, as well as exports.”
Carrizo does not see Panama going back to 10% annual growth anytime soon, however. “Those days were affected by the Canal expansion [in the mid-2010s] and metro and many projects but we don’t have the same amount this time so I don’t think we are going to get there just yet,” she concluded.