( BW)(NY-FITCH-RATINGS/LAT-AM) Fitch: Latin American Banks' Performance Tied to National Economics

www.businesswire.com BW5291 MAR 06,2003 6:41 PACIFIC 09:41 EASTERN Business Editors

    NEW YORK--(BUSINESS WIRE)--March 6, 2003--It is generally difficult for banking systems to differentiate themselves from trends in the overall environment in which they operate, according to a recent report analyzing the performance of Latin American banking systems from Fitch Ratings. This dependence seems to matter more than size as there is no clear connection between the size of a banking system and its performance.     'Throughout Latin America, in 2002, banking systems in Argentina, Colombia, Peru, and throughout Central America generally reflected the state of their recessionary or stagnant economies, while the Chilean and Mexican systems reflected relatively better performing economies,' says Ricardo Chaves, Director, at Fitch Ratings. 'In Venezuela and Brazil, on the other hand, the banking systems have to date weathered economic volatility more successfully. While the Brazilian banks operate in a more adverse operating environment, a high level of income diversification, sophisticated management teams and proven operational flexibility have culminated in a system that is highly resilient to stressful economic scenarios.'     The Venezuelan banking system has been the most profitable in the region reporting annualized returns on assets in excess of 2% over the past few years. Comparatively, the Colombian banking system, returned to profitability in 2001, following three consecutive years of losses.     'In light of the recent political events in Venezuela, banking sector profitability will most likely weaken going forward as a result of a high level of exposure to the sovereign, government intervention in the form of exchange controls and the likelihood of loan quality deterioration following the damage to the country's economy in the wake of the two-month strike. In Colombia, system profitability continues to be negatively affected by high provisioning costs as banks strive to boost reserve coverage on problematic loans to more conservative levels; operating platforms that are too large for current business volumes also weigh on profitability,' said Chaves.     A full copy of the report, 'Fitch Ratings Comments on Latin American Banking Systems' Performance,' is available within FitchResearch, Fitch's subscription-based web site located at 'www.fitchratings.com,' or contact ratings desk at 1-800-853-4824.