Since the National Banking Act was passed in 1970, Panama has been receiving foreign banks with open arms. The aim of the act was to establish a worldwide banking community within the Panama free zone. Today Panama, a small but geographically pivotal Central American nation with a population of just over three million, boasts over 92 banks, 50 of them possessing a general license for local international banking. But few of those banks have fared as well as Credicorp Bank, a traditional and conservative family-owned institution that has been growing in leaps and bounds.
Over the past six years, the Panamanian economy has been experiencing a boom. Between 2006 and 2008 the country grew on average 10.4 percent annually and, despite a significant slowdown in 2009, has recovered admirably in the face of the current global circumstances. GDP was up by more the 10.6 percent in 2011, as high as pre-recession levels. The reason Panama was able to bounce back so quickly after the crisis hit was an incredibly liquid banking system.
Traditional and creative banking
Because the country doesn’t have a central bank, and relies instead on a regulatory body known as the Superintendency of Banks of Panama (SBP), regulations are tough and designed to make Panama competitive with the biggest international banks. The SBP requires local banks to maintain a minimum liquidity ratio of over 30 percent, which has ultimately protected the local economy from the worst of the global downturn.
Credicorp is a trusted and established family-orientated institution. It is one of the biggest banks in Panama and part of Credicorp Group, which includes an insurance company, a brokerage house, a trust house and an offshore bank for private clients. Protected by Panama’s strict banking regulations, the bank has been able to grow and develop in a secure and competitive way. “Our main shareholders are a well-known local family, the bank is not a stand-alone business. The trust comes from the family; they are the backbone behind Credicorp Group,” says Elena Chong, Vice President of the Treasury at Credicorp.
Today the bank is one of Panama’s market leaders in consumer loans, and over 70 percent of its loan portfolio is private. The bank has been able to stay ahead of its competitors by offering a wide array of services that range from the conservative and traditional to the more creative. As well as loans, mortgages and credit cards the bank offers its private banking customers sophisticated investment advice through its sister brokerage firm, Credicorp Securities.
When the financial markets hit troubled waters, Credicorp saw an opportunity to expand into a new region while protecting its customers’ assets by investing in precious metals. As markets around the world have struggled, many have perceived gold bullion as a safe investment because of its liquidity and enduring high-value, and as a result gold is worth around 146 percent more today than it was five years ago, according to gold price tracker Goldprice.com. Credicorp deals with gold and silver commodities for investment but it is the only bank in Panama to also sell the metals directly to their clients as an alternative asset. “Gold is seen as a safe-haven and our customers wanted to diversify their portfolios,” explains Chong. “It has been extremely popular. Customers feel safer and comfortable dealing with a reputable financial institution.”
The bank takes full advantage of its place within Panama in order to offer the most comprehensive services to its clients. Corporate customers can make the most of a full spectrum of commercial loans, including typical working capital and trade facilities as well as commercial mortgages. “We also have special facilities and services for small businesses, as well as factoring and construction loans,” says Chong.
But perhaps its most successful commercial endeavours revolve around the Colón Free Trade Zone, the word’s second-largest free port. The area around the Atlantic entrance to the Panama Canal thrives in re-exporting a vast array of merchandise to Latin America and the Caribbean. In 2010, the last available figures, over $11.4bn of goods were re-exported from Colon. And Credicorp has been on hand with a specialised branch located within the Free Zone.
On the back of its huge success in Panama, Credicorp sensed huge commercial opportunities in other emerging Latin American countries, for instance Colombia. The bank’s first representative office in the neighbouring country opened in 2007, and has seen huge success. Traditionally, Panama and Colombia have always had close relations; many Panamanian families have Colombian relatives and ample trade is carried out across the border. “We were looking to diversify our portfolio, so we took advantage of the positive historic relations between the two countries,” says Chong. And that is only the first step in the bank’s international expansion plan. It is waiting for market conditions to improve before expanding into other Latin American areas. And that is just the start; according to Chong: “our aim is to have fully functioning representative offices in every country we do business with in Latin America.”
Free trade re-exports
The bank also operates a corporate mandate that demands it keeps a net profit derived 50 percent from interest incomes, and 50 percent from fee income. “We are very successful in terms of fee incomes,” says Chong. Credicorp is one of the leaders in e-commerce in Panama, being the first bank to incorporate web services into its portfolio. The bank’s goal is to make every customer’s online experience personalised and akin to private banking, in a system that can be accessed all over the world. The services are offered to private and corporate clients and are executed through a variety of online partners such as the eProcessing Network.
Forecasts predict that Panama will continue to grow by an average of 10 percent annually over the next five years. Unemployment is currently relatively low at five percent, and the construction of a third set of locks for the canal will boost productivity there. The construction began in 2007, and it is expected that upon completion in 2014, the third lane will allow for the tonnage being shipped through the canal to increase by an average of three percent per year, doubling the current capacity by 2025. The new lane will generate thousands of jobs and millions of dollars a year in tolls and taxes for Panama.
Together, all of this is excellent news for Credicorp, which is operating in 100 percent of the Panamanian capital. So far this year, the bank’s net income has been well in excess of US$18m. The bank is truly unique by following a strict yet personal policy of getting to know its customers, allowing it to develop successful and long-term relationships that are mutually beneficial. With this in mind, the bank’s philosophy is conservative yet innovative, always looking to maintain relationships as it navigates the SBP’s stringent legislation, while maintaining the highest standard of internationally accepted banking.