Banks See Profits Up 36% in First Quarter
The Costa Rican banking industry's first quarter profits increased 36.1% to ¢32.5 billion colones (US$63.7 million) compared to the same period last year, according to figures from local financial sector regulator Sugef.

Net interest income rose 27% to ¢81.2 billion colones, while net fee revenues increased 31.9% to ¢23.4 billion colones. Administrative expenses grew 26.4% to ¢74.3 billion colones.

The industry's average ROE was 19.8% in the first quarter compared to 17.1% in the same year-ago quarter. State-owned banks' ROE increased to 21.3% in first quarter 2006 from 18.6% a year ago, while private banks' ROE grew to 23.9% from 21.3%.

Lending expanded 33.7% to ¢3.08 trillion colones at the end of the first quarter compared to the same time last year, while financial investments increased 16.3% to ¢1.84 trillion colones.

"In contrast to other Central American countries, where lending grows thanks to the retail banking segment, namely consumer and mortgage loans, Costa Rica's loan expansion has been boosted by the commercial sector," said Fitch Ratings Central America financial institutions and insurance director Reynaldo López.

Consumer loans fell 19% during the first quarter over the first quarter 2005, while commercial lending rose 19%.

The banking industry's past-due loan ratio stood at 1.72% at the end of the quarter compared to 1.98% at the same time last year. State-owned banks' bad-debt ratio decreased to 1.69% in first quarter 2006  from 2.36% a year ago, while private banks' past-due loan ratio fell to 1.05% from 1.23%.

"It is important to point out that Costa Rican banks have important offshore operations so the past-due loan ratio may not reflect onshore bad debts," the Fitch analyst noted.

Assets grew 27.6% to ¢6.24 trillion colones at end-March compared to the same date last year. Interest bearing liabilities grew 29.9% to ¢4.66 trillion colones, while non-interest bearing liabilities increased 15.4% to ¢907 billion colones.

Costa Rica's banking system comprises 17 banks.

"Two state-owned banks and a workers' bank together have some 63% of asset market share, which is unique to the Costa Rican banking system when compared to other Central American countries," López added.

At end-March, Costa Rican top six banks ranked by asset market share were: state banks,  Banco Nacional de Costa Rica (32.6%), Banco de Costa Rica (19%) and Banco Popular y de Desarrollo Comunal (11.4%) and private sector banks Banco Interfin (7.3%), Banco Banex (6.3%) and Banco BAC San José (6.1%).