Banks using liquidity stockpile to ramp up annual lending growth above 30%

Tuesday, March 22, 2011

Following on a period in which Bolivian bank accounts swelled much faster than lending, the situation has reversed, as the rate of growth in bank lending is vastly outpacing deposit growth.

Through the end of February 2011, local banks had expanded their combined credit portfolio by 33.6%, the fastest annual rate of lending growth seen by the sector in years, according to the latest numbers from financial services regulator ASFI.

Through February, banks had a total credit portfolio worth US$5.24bn, with the delinquency rate falling to an all-time low of 2.4%.

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In contrast, following rapid 20% growth in deposits in 2009, the expansion of deposits slowed to 9% in 2010 and 8.7% in the 12 months ending in February 2011.

Still, Bolivian banks remain extremely liquid, with US$7.67bn in deposits on their combined balance sheet, meaning the current rate of lending expansion could continue in the medium term without any crunch from the funding side.

Whether regulators worried about the rapid growth rate will let it continue is another story. Earlier this year, banking regulators put restrictions on non-collateralized consumer lending over fears that the sector was expanding its loan portfolio too quickly.