Dominican banks on solid footing: Fitch Ratings
Bogota.- Fitch Ratings has published a dashboard on the performance of the largest Dominican banks for year-end 2018 (YE18).
“Favorable economic performance, sound liquidity across the system, and strong internal demand strengthened the Dominican banking system’s private credit growth,” Fitch Ratings said Tuesday in an emailed statement.
The rater said that acceleration of economic activity in 2018 and lower retail orientation underpinned an improvement in asset quality. “The past-due loans (NPLs) ratio improved, as the banks scaled back their presence and fine-tuned their underwriting standards in the retail sector.”
Lower impairment charges strengthened the Dominican banks’ profitability in 2018. The net interest margin continued its gradual downward trajectory but remained high compared to Central American peers. “This trend, if sustained, will correct the structural dependence on high spreads and will close the gap among peers.”
Capitalization still strong
Capitalization remains strong and continues to support financial system stability, largely reflecting the capitalization of retained earnings, strengthened profitability, and improved asset quality, Fitch said, and noted that “an ample, low-cost deposit base, which represents the largest funding source, benefits the system’s sound liquidity.”
The agency adds that it will monitor the tightening of global financial conditions and rising international oil prices that may pressure inflation, thus resulting in lower repayment capacity and losses for banks. “Furthermore, Fitch will also monitor the high disparity between the Dominican regulatory framework and international best practices, as well as future developments on this front.”