--Ecuador's four main banks had 67% of reported income and 63%
of banking assets
--Analysts say President Correa's administration aims to
increase regulations on private banks
--Economists say that the president plans to increase the
state's control over banks if he is re-elected
By Mercedes Alvaro
QUITO, Ecuador--Combined profit for Ecuador's private banks fell
21% in 2012 due to a series of measures taken by President Rafael
Correa's administration.
According to the Bank Superintendency of Ecuador, 25 private
banks operating in Ecuador, plus the state-run Banco del Pacifico
Ecuador, posted a combined $312 million net profit in 2012 from
$395 million the year before.
Banco del Pichincha CA (PCH.GU), Banco del Pacifico, Produbanco
and Banco de Guayaquil SA topped the list, with $66 million, $48
million, $41 million and $35 million in earnings, respectively,
according to the banking regulator.
The four banks posted 67% of reported income and own 63% of
Ecuador's banking assets.
Analysts say Mr. Correa aims to increase regulations on private
banks and that he will likely deepen the state's control over the
sector if he wins re-election next month. This could reduce banks'
loan growth, leading to a slowdown in the economy while also
jeopardizing the health of the financial system, the analysts
say.
Currently, Mr. Correa is a favorite to win in the first round of
voting on Feb. 17, according to local polls.
Since taking office in 2007, Mr. Correa has tightened controls
on private banks, setting interest rates and increasing the
services that banks must provide to clients for free.
Last year, the Ecuadorean government took tough measures to
control imports and reduce consumption. The measures included
prohibitions, quotas and tariffs on imports, which affected banks,
particularly their granting of consumer loans.
In May, Ecuador's National Assembly passed a law, proposed by
Mr. Correa, to regulate mortgages and car loans. The legislation
limits a borrower's liability in case of failure to repay a loan to
the maximum amount of the appraisal of the seized property.
The law also prohibits financial institutions from collecting
debts on a mortgage that has gone into default by seizing other
properties owned by the mortgage holder.
Ecuadorean banks were also forced to divest or liquidate their
stakes in insurance and brokerage companies and pension
administrators last year.
The central bank increased to 60% from 45% the obligation for
private banks to keep their assets and investments in Ecuador. The
central bank also ordered private banks to increase their
contributions to Ecuador's liquidity fund to 5% from 3%, and then
1% every year to a maximum of 10%.
In addition, Ecuador's Congress approved a bill to increase
taxes on the banking sector starting in January in order to finance
the so-called human-development bond.
A recent report from Analytica Securities, an investment bank
based in Quito, said this law will "at least challenge bankers'
ability to grow in the increasingly hostile environment."
The government has said it expects to raise about $164 million
this year from the tax change. This amount is expected to increase
to $171 million in 2014 and $183 million in 2015.
Alberto Acosta, an economist with private consulting firm
Analisis Semanal, said the government sees private banks as a tool
for monetary policy and to define where the economy should go.
"Now the government regulates how many mortgages should be
granted by each bank. For the future it is clear that the
government's intention is to define where the loans should go, to
whom, [and] how much to lend," Mr. Acosta said Tuesday.
Official data shows that just 6% of last year's earnings came
from foreign banks operating in Ecuador, which includes the
U.S.-based Citigroup Inc. (C), Dutch-German Procredit Bank (PCB.YY)
and Panama's Promerica.
Mr. Acosta said the Ecuadorean financial system is becoming less
attractive to foreign investors because it is highly regulated and
there are continuous rule changes.
Write to Mercedes Alvaro at mercedes.alvaro@dowjones.com
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