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Competitive Dynamics in Peruvian Banking Sector

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The Peruvian banking sector has been experiencing moderate stability over the past few years. Here are some key points related to competitive dynamics in the industry:

Stability of Market Shares

• The banking sector in Peru is moderately stable.
• Banks’ market shares have remained fairly stable for the past five years.

Presence of Large, Financially Strong Banks

• The three largest banks (Banco de Crédito del Perú, BBVA Banco Continental, and Scotiabank Perú) have a joint market share of about 60% of total loans.
• These banks are financially strong, which helps to stabilize the industry.

Consolidation among Non-Banking Financial Institutions

Focus on Lending to MSEs

• NBFIs focus on lending to micro and small enterprises (MSEs).

Negative Impact of Increased Competition

• The increased competition reduced net interest margins.
• Weakened underwriting standards led to higher non-performing loans (NPLs) and credit losses.
• Lower margins, higher losses, and poor efficiency have decreased NBFIs’ profitability.

Further Consolidation: A Positive Outlook

Benefits of Consolidation

• Consolidation among NBFIs could improve risk management and operating efficiency in the sector.

New Investors and Improved Stability

• New investors with better expertise may enter the market, leading to improved stability in the sector.

Conclusion

Overall, the competitive dynamics in the Peruvian banking sector are stable due to the presence of large, financially strong banks. However, the sector is expected to undergo further consolidation among NBFIs, which could lead to improved stability and efficiency.