Joint profit of 5 banks reached S/26 million per day in 2023

The joint net profit of five large banks in Peru was S/9,821 million in 2023, equivalent to S/26 million net profit per day. Meanwhile, the levels of its economic profitability (ROA) and profitability per shareholder (ROE) reached peaks of up to 3.63% and 62.74%, respectively.

These five banks are BCP, BBVA, Scotiabank, Interbank and the National bank. The first four, which lead the list of 17 private banks operating in our country, concentrated 80.47% of direct credits (placements) and 82.14% of deposits (captures) in the system. In the case of Banco de la Nación, the placement fee was 3.47% and 11.56% for deposits.

In terms of net profits, BCP recorded S/4,664 million in 2023, more than in 2022 (S/4,484 million). Further behind is BBVA, with S/1,869 million (from S/1,912 million); Scotiabank, with S/736 million (from S/1,424 million); and Interbank, which posted profits of S/900 million, also below a year ago (S/1,171 million).

According to Alejandro Narváez, senior professor of Financial Economics at UNMSM, the lower profits of the Scotiabank and Interbank were due, in part, to “high provisions recorded for direct loans”, in order to cover credit risk in a scenario characterized by high interest rates.

Provision to win

The provisions (an allocation that the same entity makes to prevent payment defaults, “without generating cash flow”) for direct loans from the four banks had year-on-year progress. In BCP, they went from S/1,422 million in 2022 to S/2,644 million in 2023; BBVA, from S/999 million to S/1,964 million; Scotiabank, from S/596 million to S/1,014 million; and Interbank, from S/1,003 million to S/1,802 million.

Narváez maintains that these amounts, being expenses, reduce the banks’ profits, but do not mean an outflow of cash. The SBS allows system entities to make voluntary or additional provisions without limit.

“Which is detrimental to profits and IR. The delinquency rate of the four banks was 4.25% on average, still low for a year of recession. Therefore, the provisions recorded were excessive,” says the teacher.

However, he explains that these higher incomes respond to “high rates charged to consumer loan borrowers (ordinary citizens), which are gaining ground compared to corporate and mortgage loans,” although under the roof of BCRP’s restrictive policies since August 2021, “unrelated to the management of these entities.” The reference rate reached 7.75% in August 2023, and in February of this year it stood at 6.25%.

Transparent from SBS

Juan José Marthans, director of Economics at PAD Universidad de Piura, explains that Latam’s financial markets are “tremendously concentrated” and with margins that tend to be very high.

However, it does not consider that Peruvian banks, regardless of their scale, have had a particularly good year in 2023, especially because the difference between active and passive rates (spread) was similar in the region.

Instead, he points out two problems: inflexibility in the cost of credit (which can go down, “but less than it should”), and deterioration in the quality of service, because banks “are aware that transaction costs for the average of users is high” if the service of an entity with national coverage or alternative payment channels is not available.

For this reason, Marthans proposes not only to reinforce the work of Indecopi, which must “independently” guide the system so that it offers a better service, but also to generate an “aggressive transparency policy” in terms of credit costs and remunerations offered by the banks in comparative terms for their products.

“It gave excellent results in 2002, but it is not being done properly today, despite the fact that there are more tools to generate competition,” he says.

The data

Cost effectiveness. In 2023, BCP’s ROA was 2.61%, while BN achieved 3.63%. Regarding ROE, BCP closed with 20.69%, and BN took off to 62.74%. “The National bank “It obtained a net profit of S/1,652 million last year, almost double that of 2022.”

Figures

• 4.25% was the average delinquency rate of BCP, BBVA, Scotiabank and Interbank in 2023, compared to 3.86% in 2022.
• 12.8 million soles each day was the net profit of BCP in 2023, the leading entity in the Peruvian market.