Political Risk Latin America Blog @PolRiskLatam

Peru banks: Creeping uncertainty

Posted in News and Articles, Political Risk by politicalrisklatam on February 28, 2011

by The Economist Intelligence Unit, February 28th, 2011.

Peru’s banks record healthy profits in 2010, but momentum is slowing as the authorities tighten policies to combat inflation and investment inflows.

The outlook for Peru’s banking sector is rosy, for the most part. GDP grew by nearly 9% in 2010 and is expected to remain one of the fastest-growing countries in Latin America over the next two years. At the same time, bank penetration rates remain among the lowest in a region with already low rates. As a result, the prospects for Peruvian banks are bullish.

But banks stumbled in the fourth quarter of 2010, muting what was otherwise a spectacular year. Year on year, quarterly profits for the sector were up by only about 6% in the fourth quarter, with the most visible local institutions—Credicorp’s BCP and Intergroup’s Interbank—missing market expectations.

The stumble was not severe enough to impact the sector’s robust overall health, as return on equity (ROE) surpasses 20% at many lenders. It did, however, highlight concerns over the possibility that the government’s efforts to tackle inflation and combat “hot money” inflows could impact the banking sector’s bottom line. (continue reading… )



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