As of the penultimate month of 2022, bank profits grew 21% from the same month but last year. The profits to be distributed amount to about G. 2.9 trillion, equal to 411 million dollars, according to the Central Bank of Paraguay (BCP).
The earnings trend remained above 15% in terms of expansion throughout the year, thanks to the good performance of the main portfolios. Loans and deposits grew respectively by 14.1% and 2.3% up to last November.
The banking system is considered one of the most robust areas of Paraguay, as it has maintained profit margins and liquidity despite the shocks that have hit the country’s economy.
Economist and financial analyst Anibal Insfrán argued that although earnings growth is lower than in pre-pandemic years, the balance sheet is extremely positive, taking into account cyclical factors.
Credits
Bank loan placements totaled G.125.1 trillion (USD 17,263 million), representing a 14.1% growth over November last year, maintaining a similar dynamic in the eleven months of the year included in the latest report of the Superintendency of Banks.
Anibal Insfrán argued that the placements were granted normally despite the fact that the country’s economy has presented zero growth, in addition to the sharp increase in the cost of credit that has responded to the adjustments in the Monetary Policy Rate (TPM).
The expert also adds that credits in foreign currency have shown significant dynamism in the last period, due to a seasonal demand for liquidity of some specific items.
In particular, the loan portfolio in dollars amounts to USD 7,926 million, up 18% compared to November 2021, marking a positive nominal difference of USD 1,214 million.
Deposits
The banking system’s savings portfolio presented once again a positive balance in November, maintaining this trend for the second month in a row, after presenting several declines during the year. In November, the balance is G.128.1 trillion (US$17,671 million).
From the BCP they had explained that the negative changes in the deposit portfolio were due to the fact that very large sums had been deposited in previous periods, showing a growth of 18%, due to the effect of the pandemic. In other words, it was mainly due to a comparative factor, as well as a dynamic influenced by inflation.
On the other hand, the chief economist of the BCP, Miguel Mora, explained that the growth in recent months in the deposit portfolio is due to the increase in foreign currency, after the price presented a higher price, which caused a migration to said currency in search of more positive returns in line with the backdrop of US Federal Reserve (FED) rate hikes.
delinquency
As far as system arrears are concerned, a current rate of 3.08% is observed, which represents a reduction of 0.22 points compared to what was observed in the previous month, when the rate was 3.30%, one of the highest of the last years .
Similarly, it is expected that arrears will continue to decrease in the last month of the year, as this arrears is generally mitigated by the dynamics generated by the payment of Christmas bonuses, as well as by the temporary refinancing measures of key sectors such as agriculture and MPMI. .
2021 closed with a default rate of 2.16%, after reaching 2.58% in November.
The prospects for next year are much more encouraging, according to Anibal Insfrán, as a year is expected with growth in the order of 4% and a gradual return to inflation levels consistent with the BCP’s 4% target, which affects significantly on the performance of system finance.
However, uncertainties remain that could affect the sector, especially in foreign exchange transactions.
Cost effectiveness
As regards the profitability of the banking system, we also observe a positive indicator that is practically stable compared to the previous months. ROA is 1.93% while ROE remains at 17.72%
The deposit and loan portfolio is expected to see a significant boost in the coming months with the incorporation of Solar Banco, which has already registered approximately G.1,899 million loans in the banking system.
