A new era for Latin American banks

Latin America’s banking sector is entering a new era that may see substantial growth in assets and profits in many major countries.
In the 1980s and ’90s, important changes across the regulatory, demographic, and political dimensions bolstered the sector’s outlook. Today banks benefit from growing per capita GDPs, lower fiscal deficits, and falling government-bond rates.
The multinationals, having taken notice of the improved environment, are increasing their investments across the region.
To compete with the multinationals, local banks must exploit economies of scale, superior brand recognition, and networks in their home countries, as well as their better understanding of the domestic markets and culture. The multinationals should leverage their knowledge and talent across the region.

Note: This article includes translations in Portuguese and Spanish.

Exhibit 1: Progress toward monetary stability varies across the region.
Exhibit 2: Among Latin America’s major economies, only Chile has taken advantage of the growth opportunity in mortgages.
Exhibit 3: The equity markets are already recognizing the success of leading local banks with high market capitalizations, high valuation multiples, or both.
Exhibit 4: Latin America has become very significant to the profitability of the multinational banks that have invested there.

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