Overview
The Peruvian banking system is profitable, liquid and well capitalised, recording solid indicators for operational efficiency. The financial system is divided into different types of institutions: private multiple banks, financial services companies, non-bank microcredit providers and two state-owned institutions – Banco de la Nacion and Banco Agropecuario (Agrobanco). By far, the 17 private banks account for the lion’s share of the financial intermediation and services in the country. The banking system is highly concentrated, with the four top players (Banco de Credito del Peru, BBVA Banco Continental, Scotiabank Peru and Interbank), accounting for over 85% of the deposit base and the credit portfolio as well as for approximately 83% of the net worth, as of August 2015.
Changes remain unlikely
The commercial banking sector in Peru is highly concentrated, with the four main players gathering more than 85% of the deposit base and the credit portfolio, and combining approximately 83% of the net worth of the system. The latter include Peruvian bank Banco de Credito del Peru; BBVA Banco Continental, an affiliate of Spanish financial institution Banco Bilbao Vizcaya Argentaria (BBVA); Scotiabank Peru, a subsidiary of Canadian financial group Bank of Nova Scotia; and Peruvian financial services provider Interbank.
The number of commercial banks has stabilised at 17 during the last years, well below the 27 banks operating in the early 1990s. The financial crisis that hit the country in 1997 triggered a rapid consolidation process in the sector.
However, the high concentration has often been cited as one of the factors inhibiting competition in the domestic financial market. Due to this fact, the scope for further consolidation remains slim, while competing directly with the main four players in the sector could prove challenging.
Outlook
As the financial sector is highly concentrated, this leaves slim scope for organic expansion. Nevertheless, Peru remains relatively underbanked compared to other countries in Latin America, which suggests that a strong growth rate could still be attainable in the long run, mostly for those players which are already established. Deposits continue to provide the lion’s share of funding of the banking system and the direct exposure to the commodity sector appears limited. The high level of competition among market players has led to growing exposure to riskier segments, such as loans to small and medium-sized enterprises (SMEs) and consumer loans. A more effective use of existing financing programmes directed towards SMEs could help mitigate the effects of the overall economic slowdown and the softening labour markets conditions.