Panama Banks Left Behind

Panama’s sovereign upgrade from S&P will not help the ratings of local banks Banco General (BBB-/stable), BBVA Panama (BBB-/stable) or Banistmo (BBB-/positive). Banks in Panama face several structural challenges including relatively low potential for retail loan growth and high loan-to-deposit ratios. Current ratings on major banks reflect adequate profitability, asset quality, and capital measures that are comparable to other banks rated BBB minus, says the agency. “We think that the financial system could be vulnerable to a downturn in the real estate market,” S&P credit analyst Leonardo Bravo states, noting that real estate prices have risen quickly.