Banking in Costa Rica is among the isthmus’ most government-dominated. The two largest state-supported banks, Banco Nacional de Costa Rica and Banco de Costa Rica, control about 55% of the market, according to S&P. At the top, Nacional has the edge in assets and has shown more growth, earning it LatinFinance Bank of the Year honors.

As of June, Nacional led the market in assets, with 2.4 trillion colones ($4.8 billion) to Costa Rica’s 1.5 trillion. Nacional’s growth in the previous 12 months out outpaced Costa Rica’s 18% to 17%, in a national banking sector that grew 19%. As of June, these two were the only Costa Rican banks with more than 1 billion in assets. Nacional is easily the more profitable, with 22.7% ROE to 15.4%.

Foreign banks have bought in to the country – HSBC via Panama’s Banistmo, Scotia with Interfin and Citi through Cuscatlán – but they represent a relatively small part of the market. They will push the top two towards more sophistication and quality of service, says Angélica Bala, director at S&P. And a large state-backed bank is associated with tradition and safety, making it hard to convince customers to move. “Foreign banks will think twice before entering a country with large public banks,” she says.

It will be a while, Bala says, before Banco de Costa Rica and Banco Nacional de Costa Rica have to be concerned with losing customers to foreign competition. The main threat is the other dominant domestic financial institution.
Across the sector, S&P’s main concern is the amount of money lent in dollars – cheaper funding that Costa Rican banks offer their customers, many of whom earn in dollars – which exposes banks to a high convertibility risk. LF