What does Moody say? on loans and crimes in the Panamanian financial sector

Local Moody’s Panama published the results of its analysis of the Panamanian banking system as of May 31, 2024. Among the main findings, it indicated that the balance of overdue and delinquent loans represents 4.35% of the total portfolio of the Panamanian banking system . at the end of the fifth month of the year (4.34% at the end of 2023), in a context where the loan portfolio expanded by 6.94% year on year.

However, explains Moody’s, that the coverage of overdue loans with provisions is currently at the lowest levels in the last four years, so the basis of provisions is a challenge for the banking system, which may lead to changes in the profitability metrics in 2024.

Another finding is the low participation of construction loans in the banking system, because until May 2024 it was at 7.90%, the lowest figure in the last five years.

Moody’s said this trend of under-participation could continue to increase as there is lower momentum in the construction sector by 2024, given the current government transition period.

He also noted that approximately 17.02% of the employed population in the country are employed under the state apparatus, which could generate credit risk if there were fiscal adjustment measures.

“One could try to generate efficiency in public spending, through reducing current expenditures on the government payroll, which could reduce the income of a high percentage of the employed population in Panama and the risk of further dishonoring your credit records. read the analysis.

In addition, Moody explained that Panama’s financial margin shows a contraction due to an increase in investment levels higher than active levels. Although some loan levels show an upward trend, a gradual lower growth is seen.

In addition to the above, the credit group expects to need more provisions due to the increase in crime rates, which will have a negative impact on the operating margin of the banking system. “Given the level of unemployment in the country, we can expect this crime trend to continue in the coming months,” he warned.