Ecuador's private sector banks recorded net profits of US$76.2mn in the first quarter this year, up 8% compared to US$69.4mn in the same period last year.
Calculations are based on statistics from financial sector watchdog (SBS) and expressed in real terms.
"Banks have been enjoying an excellent four years, getting stronger and positioning themselves in the market," BankWatch Ratings senior director Patricio Baus told BNamericas.
Net interest income was US$151mn in the first quarter, a 20% rise year-on-year. Commission revenues rose 9% to US$77.2mn in 1Q07 over the year-ago quarter, while fee income increased 4% to US$58.6mn.
Banks' net loans climbed 25% to US$6.64bn at end-March over the same time in 2006.
Commercial loans increased 19% to US$3.6bn at end-March 2007 over end-March 2006, while consumer lending rose 29% to US$2.12bn. Mortgage lending climbed 27% to US$851mn and loans to microenterprises expanded 35% to US$504mn.
However, Ecuador's shaky political environment has led to a slowdown in credit expansion, which started during the fourth quarter of 2006 and has been particularly pronounced early this year, Baus said.
A second-round presidential election vote was held last November between left-wing candidate Rafael Correa and banana tycoon Alvaro Noboa. Correa won with 56.8% of the vote.
Correa, who believes bank profits are too high, has stated his intention to reduce bank fees and commissions and interest rates.
Monthly growth in private sector lending fell to 0.1% in February compared to 1.3% in January and 3.7% in December, according to the central bank (BCE).
"Banks are much more cautious about lending," said Baus, who anticipates this attitude will continue until bankers get a better idea of government plans regarding the banking sector.
Asset quality worsened quarter-on-quarter, with banks' past-due loan ratio finishing March at 3.7% compared to 3.3% at end-December. However, the ratio improved from the 5.4% recorded at end-March 2006.
The political situation has also affected deposit behavior. In its latest report, the central bank said the banking system continued to show a substantial slowdown in deposit growth in February, a trend not seen since 2004.
Total deposits held by banks at end-February rose 9.6% over the same time the prior year after expanding 17.0% during the 12 months ending February 2006.
Total deposits rose 8% to US$9.07bn at end-March over the same time in 2006.
Private sector banks reported assets of US$11.9bn and combined equity of US$1.2bn as of March 31, 2007.
At end-March, there were 25 private sector banks operating in Ecuador, up from 24 banks at end-2006 since banking authorities intervened Banco de Los Andes - 21st by assets - in December and former non-bank lender Corfinsa joined the banking system in March.
The five top banks finished the first quarter with the following market shares in terms of loans: Banco del Pichincha, 27.1%; Banco de Guayaquil, 10.6%; Banco del Pacífico, 9.8%; Produbanco, 9.0%; and Internacional, 8.1%.