- Banking in Latin America 2024: a year with asymmetrical results, marked by inflation and international tensions
- Total credit accounted for 49.1% of the regional GDP.
- Brazil and Mexico stood out for their levels of capitalization.
The banking sector in Latin America showed mixed results during 2024
Despite facing inflationary pressures and currency fluctuations, the sector made significant progress in areas such as profitability and market consolidation. This is reported by the Latin American Federation of Banks, a trade association representing the banking sector in the region. In its annual report, the institution analyzes the key indicators reported in the Quarterly Banking Economic Report, highlighting the situation of assets, profits, delinquency, and solvency in the regional financial sector.
Banking market consolidation
The region registered 530 banks as of June 2024, two fewer than the previous quarter.
Argentina, Brazil, and Paraguay each lost one entity, while Mexico added a new one.
Since 2021, the sector has seen a net reduction of seven banks, consolidating after the pandemic. Colombia leads with 30 active entities, while Panama has lost six banks since 2019, reflecting structural adjustments in response to competition and the need for operational efficiency.
Growth in credit and deposits
Financial deepening continued its upward trajectory. Total credit accounted for 49.1% of the regional GDP, while deposits reached 52.1%. Panama led the year-on-year growth with an increase of nearly 8 percentage points, while Argentina, Chile, Colombia, and Peru recorded slight declines of 1.2% on average.
Total assets: currency impact and recovery
Total assets in the banking sector amounted to USD 5.08 trillion, a 1.6% decrease from the previous year; however, this was a 25.7% increase compared to 2019.
This annual decline is attributed to the devaluation of key currencies such as the Brazilian real and the Chilean peso (17%), which together represent 63% of the region’s assets. However, Paraguay, Honduras, and Brazil stood out with growth ranging from 13% to 16% in local currency terms.
Net profit: downward trend
Net profits in Q2 2024 totaled USD 17.264 billion, a 24% decrease from the previous year.
The semi-annual total was USD 38.581 billion, a 4% drop. The most significant declines were observed in Colombia, Ecuador, Mexico, and Peru, which were affected by economic volatility and inflationary pressures.
Profitability: ROA and ROE recovery
ROA (Return on Assets)
The sector reached an average of 1.71%, higher than the 1.61% from the previous year.
Argentina, Mexico, Paraguay, the Dominican Republic, and Uruguay stood out with ROAs above 2%.
ROE (Return on Equity)
The average ROE was 16.2%, confirming a positive trend over the last four years. Uruguay and the Dominican Republic led with values above 20%, while Colombia, Costa Rica, and Ecuador showed more modest performances.
Portfolio quality and risk management
Delinquency ratio
Non-performing loans decreased by 5.8% year-on-year, from USD 74.44 billion to USD 70.11 billion. The average delinquency ratio was 2.6%.
Colombia and Peru faced the highest levels (5% and 4.4%, respectively), while the Dominican Republic, Costa Rica, and El Salvador reported the lowest (0.9% and 1.9%).
Coverage ratio
The average coverage ratio stood at 164%, showing a decreasing trend compared to the historical peak of 212.4% in 2022. Despite this, Brazil, Costa Rica, and Mexico reported year-on-year improvements in this indicator.
Solvency and capitalization
The average solvency ratio of the Latin American banking sector was 17.2%, reflecting a solid level of regulatory capital relative to risk-weighted assets. However, regulatory differences between countries make direct comparisons challenging. Brazil and Mexico stood out for having the highest capitalization levels, driven by strict banking regulations.