The renowned risk rating agency Fitch Ratings affirmed the long-term international issuer risk rating (IDR) of the state-owned National Bank of Panama (Banconal) at “BBB-“, with a Stable Outlook; as well as affirming the local Long-Term rating at “AAA (pan)”, with a Stable Outlook.
According to the rating agency, it considers Banconal’s capitalization to be good with common equity tier 1 (CET 1) of 17.5% as of March 2022. Capital ratios have also benefited from a higher proportion of liquid assets with lower risk density. While the capital outlook remains high, close to 17% over the rating horizon.
The IDR, GSR national scale ratings are based on the potential support that Banconal would receive from the Republic of Panama (BBB- Outlook Stable), if necessary.
Fitch’s support opinion is highly influenced by the general subsidiary state guarantee for all liabilities established in the Organic Law of Banconal (article 3).
Fitch maintains that the National Bank of Panama fulfills an unofficial role as lender of last resort in the country, which has been evident at different times in the history of stress, since the bank has been the recipient of contingency funds to inject liquidity to the system.
According to Fitch, one of the National Bank’s financial strengths comes from the government’s low-cost deposit-based liability structure. In terms of liquidity, the bank has a solid metric of 39.5% loans to deposits (compared to most local and international peers), and its liquid assets cover 81.8% of total deposits.
The report went on to highlight the institution’s business model which is defined by its multiple roles, on the one hand, it is a government-owned universal bank and, on the other hand, a state treasurer.
According to the National Bank, it maintains good profitability indexes; the core metric of operating profit to risk-weighted assets (RWA) was 2.2% in March 2022 (December 2021: 2.3%; December 2020: 2.3%) with a four-year average of 2.7%.
This allows the National Bank of Panama to have access to public funds, resulting in the largest liquidity portfolio in Panama. It should be noted that its asset quality is defined by low-risk assets, which allows it to maintain good profitability and solid capital.