The PR Banking sector reached a Pre-Tax ROE of 20.9% in Q1 2021, the highest profitability level since 2004. There is excess liquidity in the banking system, part of which is likely to be deployed to lending activity as the local economy takes off.
El ROE antes de impuestos de las Asociaciones de Ahorro y Préstamos aumentó de 7.9% en el año 2020 a 12.5% en el primer trimestre del 2021 gracias al aumento de su margen financiero y a la disminución de la provisión de crédito ante la mejora de las perspectivas económicas.
The PR Banking sector reached double digit Pre-Tax Return on Equity in 2020 (10.2%) despite the low interest rate environment, the impact of COVID-19 on business and consumer activity, and higher credit provisions.
Banks remained profitable during the first nine months of 2020 despite the impact of the Covid-19 pandemic. However, they experienced a moderate reduction in profitability (8.8% Pre-Tax ROE) vs 2018 and 2019 due to lower interest margin and fee income, and higher loan loss provision.
La rentabilidad de la banca dominicana comienza a mostrar una disminución, producto del impacto de la crisis sanitaria en la economía. Los principales indicadores que inciden en esto son: aumento de provisión para cartera de crédito, disminución de comisiones por servicios y disminución del ingreso financiero.
La banca múltiple dominicana ha seguido mostrando un nivel elevado de rentabilidad en la primera mitad del 2020. Los efectos de la pandemia no se han manifestado aun en los indicadores de calidad de activos, solvencia y rentabilidad gracias a las medidas tomadas por las entidades reguladoras.
Reduction in profitability in the first half of 2020 (7.0% Pre-Tax ROE) vs 2018 and 2019 due to lower interest margin and fee income, and higher loan loss provision, mostly driven by the Covid pandemic and its impact on the local and US economies. Despite the magnitude of the pandemic impact, no bank had negative net income, with Popular reaching the highest pre-tax ROA (0.97%), followed by Oriental (0.68%), Santander (0.58%), and FirstBank (0.40%).
The impact of Covid-19 has been partially absorbed by local banks in their Q1 2020 results through a significant increase in loan loss provision. However, the reduction in fees and transactional income was small (last two weeks of March 2020) and will be felt mostly in Q2 2020 and in subsequent quarters depending on the pace of return to normal economic activity. In this Q1 2020 Banking Industry Report we present a brand new format where the user will be able to select particular periods of time and banks to review key metrics trends and make bank comparisons.
El impacto de la crisis global de salud en el sistema financiero del país será significativo, y en este Insight se compara con las dos últimas crisis financieras (2003 y 2008), y se estima que sectores económicos se verán afectados y que acciones deben tomar las instituciones financieras ante este panorama
The local banking industry has gone through a profound and long-lasting consolidation process since 2010, with only three remaining banks surviving, Popular, FirstBank, and Oriental. With this consolidation came a steep decline in assets, deposits, and loans. From 2009 to 2016, total banking assets decreased by 38% or $34.9 billion, deposits by 24% or $14.4 billion, and loan portfolios by 38% or $23.5 billion. However, 2016 seems to be a turning point in the financial condition of local banks with assets increasing by 21%, deposits by 33%, and loans by 8% during the 2016-2019 period. The banks that have survived the latest wave of consolidations exhibited a strong financial performance in 2019, posting a consolidated Pre-Tax ROE of 13.7%. Their productivity, credit quality, and capital position in 2019 were solid and moving in the right direction, posting a cost-to-income ratio of 57.9%, a nonperforming loans ratio of 5.0%, and a Tier 1 Risk-Based Capital Ratio of 21.0%. Looking into the rest of 2020, the banking sector will likely benefit greatly from the imminent inflow of $8.285 billion in Community Development Block Grant Mitigation (CDBG-MIT) funds which have been made available by the Department of Housing and Urban Development (HUD), after months of delay. Additionally, new Current Expected Credit Losses (CECL) regulations will likely have material operational implications as well as financial ones.
