Bolivian Banks Face Profitability Concerns Amid Lower Financial Margins

La Paz, Bolivia - Bolivian Banking Sector under Scrutiny

The Bolivian banking sector is facing concerns over profitability despite net profits remaining comparable to 2014 levels. According to a recent report by the Association of Bolivian Banks (ASBI), financial margins have decreased even as banks’ capital buffers remain ample.

Profitability Concerns

• Financial margins have declined, affecting banks’ bottom line.
• Net financial margin, which measures the difference between financial revenue and expenditure as a percentage of total portfolio, has decreased.
• Bolivian banks’ profitability (ROA and ROE) is now lower than the regional average.

Healthy Balance Sheets

• Banks’ balance sheets remain healthy, with low structural risks.
• Large buffer capital adequacy ratios ensure ample capital buffers.
• Non-performing loans (NPLs) remain low in Bolivia, with an NPL ratio one of the lowest in the region.

Potential Risks

• Expansion of credit quotas and interest rate caps may lead to circumvention and potential risks for banks’ profitability.
• Classification of tourism as a productive sector may create a “grey zone” and window dressing by banks in loan classification.

Conclusion

While policies aimed at promoting economic growth and financial inclusion, they may have unintended consequences on banks’ profitability and the overall stability of the financial system. The report concludes that careful consideration is needed to balance these competing goals and ensure the long-term sustainability of the Bolivian banking sector.