Wednesday, August 08, 2007

Scotiabank has 3rd Largest Branch Network in Peru

Dow Joens Newswires, RObert Kozak, 8 August 2007

Thanks to Peru's red-hot economy, foreign banks are lining up to start operations, vying for customers, office space and bankers.

That poses a challenge for locally owned Banco de Credito del Peru, the largest bank in the Andean nation, although bank officials say they continue to increase market share.

Chief executive Raimundo Morales said that while it might be more comfortable to not face greater competition, it also wasn't a realistic expectation. "The growth in the economy means that we are able to grow our operations, but the risk is that there is more competition. We feel comfortable that we are able to compete," he said at a press conference Wednesday.

Peru's robust economy - with gross domestic product expanding 8.0% last year and forecasts of similar growth this year - has sparked widespread interest in offering banking services.

Billboards lining the Javier Prado freeway in Lima recently started to advertise the latest entry into banking system: Banco Falabella, part of Chile's SACI Falabella.

The nation's Superintendent of Banking recently said that Germany's Deutsche Bank had asked for permission to establish a bank in the local market, while HSBC Holdings PLC has already opened shop.

The nation's banking regulator also recently gave Chile's Financiera Cordillera SA permission to organize a new bank to be known as Banco Ripley SA.

It also told Banco Santander Central Hispano SA that it could organize a new bank in Peru, marking a return to the market that the Spanish bank earlier left.

Peru's banking regulatory agency has also been looking at a request from Banco Azteca, a unit of Mexico's Grupo Salinas, to set up shop.

Despite the tougher competition, Banco de Credito has so far managed to hold its own.

Controlled by financial holding company Credicorp Ltd, Banco de Credito has increased market share, with a 32% share of loans in June this year compared with 31.2% in the same month last year.

Banco de Credito also had a 37.5% share of bank sector deposits as of June, compared with 36.3% a year earlier.

"The volume of loans has grown in almost all sectors," Morales said, adding that this year should be another strong one for loan growth, particularly for small and mid-sized businesses, mortgages and personal loans.

Net loan growth grew "a very solid" 31% in the second quarter year-over-year, the company said, and officials say that overall, loans could gain some 30% to 35% on a full-year annual basis.

The robust economic growth is being reflected in Credicorp's bottom line. Its net income before a minority interest totaled $87.4 million in the second quarter, compared with $64.4 million in the same quarter a year earlier.

In a release Credicorp said that this 36% year-over-year growth reflects dynamic local markets and a strong economy.

Banco de Credito, which contributed some $79.8 million of Credicorp's second- quarter 2007 earnings, has 251 branches in Peru.

That compares with 206 for number two bank, BBVA Banco Continental SA, which is partially owned by Spain's Banco Bilbao Vizcaya Argentaria SA.

Canada's Bank of Nova Scotia remains in third place, with 142 branches, according to figures from Credicorp.

"We believe that second quarter 2007 had good quality across many areas and should be a powerful trigger for the stock in the short-term, leading to earnings upgrades," UBS said Wednesday. "If we incorporate strong loan growth trends, better than expected net interest margin and sound asset quality, we find upside to our 2007 and 2008 numbers."

Credicorp trades locally on the Lima Stock Exchange and has an American depositary receipt on the New York Stock Exchange, where it was recently down 1.8% at $65.19. That's near its 12-month high of $67.30 set July 24. Its ADR has gained 109% over the last year.