Balboa Bank rises from the ashes of Stanford Bank with profits in Jul-Aug

Monday, November 15, 2010

Panama's Balboa Bank & Trust, the current incarnation of Stanford Bank, which was taken over by regulators last year, has posted combined earnings of US$1.85mn in July and August.

Local banking regulator SBP intervened in Stanford Bank in February 2009 due to the fraud allegations by the US authorities against Robert Allen Stanford, chairman and CEO of Stanford Financial Group. Stanford is currently in jail awaiting trial.

The local banking operations were then acquired in March this year by a local company, Strategic Investors Group, which paid US$15.5mn for it. The group reopened the bank as Balboa Bank & Trust in June and retained Stanford Bank's management team.

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It is the first time in Panama's history that a new bank emerges from an intervened bank because in the past such banks had always been liquidated or integrated into other banks, according to local daily Capital Financiero.

Management expected Balboa Bank & Trust to report losses this year, but the bank will close the year with a profit thanks to the increased valuation of its financial investments, the bank's general manager Ramon Martinez Stagg was quoted as saying. The executive also said that he expected two thirds of Standard Bank's clients to withdraw their frozen funds when Bilbao Bank & Trust opened its doors, but in the end only a third withdrew their funds from the bank.

The strategy to turn the new bank around consisted of selling off all investments that were exposed to unacceptably high levels of risk or volatility, as well as selling off US and European corporate bonds and holdings in investment funds, said Martinez.

The bank held onto a securities portfolio that it considered stable, which is comprised of sovereign bonds from Latin American countries and bonds from regional development bank CAF and the Central American Bank for Economic Integration (Cabei), the executive said.

Balboa Bank & Trust is run as a boutique bank with its main focus on serving corporations and high-income individuals.

The bank operates through its headquarters and two branches.