Moody’s Sees Andean Retail Loan Growth

Loan growth at Andean banks was strong across sectors in 2007 and should continue resilient in 2008, according to Moody’s. “Of some concern, however, is the high growth in riskier lending segments such as the consumer and middle market that may eventually lead to asset quality deterioration if not managed prudently,” says the agency. For highly dollarized countries such as Peru and Bolivia, credit risk for banks is heightened because of a natural mismatch of dollar loans to non-dollar earners. Colombian and Peruvian banks get an average rating of D+, while a D minus average rating was issued to Venezuelan and Bolivian institutions. Overall, Moody’s notes that a stable outlook for bank financial strength and deposit ratings is underpinned by improving macroeconomic conditions. “Banks that have relied on earnings from investment securities are shifting their emphasis towards more stable earnings sources such as lending and cash management,” says Moody’s.