Banco Nacional de Costa Rica (BN) remains the largest, with us$5.56 billion in assets as of June, ahead of the Banco de Costa Rica (BCR) with us$3.75 billion in assets.

During the downturn, however, return on equity (ROE) at the larger bank sunk to 13.2% from 18.3% the year before, while BCR’s managed to rise slightly to 14.06% from 12.28%.  BCR’s ROA was up to 2.22% in June, from 1.95% the year before. Total assets increased to the June levels from $3.53 billion the year before.

“As a state-owned bank we have played a very decisive and important role in trying to inject credit and more liquidity through remote activity,” says Mario Rivera, general manager at BCR. He says the banking sector has had to restrict lending after first feeling the effects of the global credit crisis late last year. This year will not see asset growth as high as in other years, but he explains it should be sufficient to maintain the financial solvency and market participation level of his bank. BCR has 18% of the system’s assets and 20% of deposits.

“There are small signs of improvement in the economy, but Costa Rica will have to wait until the [December-April] tourist season to see if activity in that important sector picks up,” he says. If it does, other areas of the economy should start to show signs of life, even if 2010 is not a year of sharp improvement.

BCR remains focused on credit growth, Rivera says, fundamentally to help the main sectors of the country, particularly residential. It also aims to increase credit to retail clients, which is a smaller portion of total lending than commercial banking.

As for the competitive landscape in Costa Rica, the credit crisis should help maintain the status quo. Though a merger of the three state-backed banks always seems to be a talking point, Rivera says the focus short-term is more about seeking economies of scale and developing areas such as interconnecting networks and technological advances that would be cost-prohibitive individually.

Competition from foreigners – Costa Rica is seen as among the last Central American markets lacking big external presence – should also be on hold.

“We can’t lose sight of the HSBCs and the Scotia's (Scotiabank) in the crisis,” Rivera says. “They’ve been weakened a bit. The crisis has given us a bit of time in this respect from the standpoint of competition. But the global economic picture will eventually improve, and they will be significant competitors,” he adds. LF