The Solid Performance of Panama Banks
Panoramic view of Panama City at night, commercial area with main banks and government offices.
The risk rating agency Moody’s said this past Monday that it maintains the stable outlook for Panama’s banking system (Baa3) given the forecast that “the solid performance” of the banks will offset their prediction of a sharp slowdown in the country’s economic growth in 2024. The strong history of the Panamanian bank, which has solid capital and a low appetite for risk, will also counteract the effect of the political noise prior to the presidential elections on May 5th as well as the possible weakening of consumer confidence in companies, indicated in the rating agency’s report.
The economic slowdown, evidenced by growth estimated at 2.5% for this year compared to 7.3% in 2023, will affect the recovery of portfolio quality, but banks’ lower appetite for risk and strong Capitalization will help contain risks, according to Moody’s. The rating firm anticipates that Panamanian banking interest income may fall due to the low business volume expected for the next 12 months, and high rates will keep financing costs high, which may harm the system’s profits. Adjustments to provisions for credit losses in a weakened economy will also affect the final results in 2024 of Panamanian banks, whose profits grew by 42.6% in 2023, compared to the previous year, according to data from the Superintendency of Banks of Panama (SBP) published by the local press.
