The banking sector is showing clear signs of recovery as the Peruvian economy starts to bounce back. Government fiscal discipline, growing consumer confidence and increased foreign investment all point to a renewal of activity.
Banks predict that credit growth will improve in line with overall growth in the economy. They also expect their mutual fund business to grow at impressive rates this year.
Despite Argentina’s decision to scrap the dollar peg, the currency still circulates widely in Latin America. Peru’s neighbor, Ecuador, opted for full dollarization in 2000. But in Lima there appears to be a gradual shift towards use of the free-floating sol and away from the dollar.

Richard Webb, president of the Central Reserve Bank of Peru, applauds the trend, but adds that it is unlikely that Peruvians will ever completely abandon the dollar. “With the expected economic recovery, bank credits to the private sector will grow by nine percent this year. Interest rates have been falling and this should help credit expansion and reactivate production,” he forecasts.
Peru’s largest financial holding company, Credicorp, forecasts improved profits this year, as loans increase and provisions decline. The main drivers will be Credicorp’s Banco de Credito de Peru, its Atlantic Security Holding Corp and insurance firm El Pacifico-Peruano Suiza.

Banco Credito del Peru, 90 per cent owned by Credicorp, plans to open more banks in Lima, particularly in the poorer areas to the north and the south of the city, the so-called ‘cones’.
Credicorp is controlled by Peru’s Grupo Romero, led by Dionisio Romero. He says there have been tremendous changes in management structure and strategies.
“We have invested heavily in hardware and software to the tune of $30 million a year,” he adds.
The competition from Spain “scared us and we had to be more efficient, which is good. Our bank is now in a very strong position – our strategy is to make it efficient and simple to deal with.”
Earlier this year, Credicorp reported consolidated net income for 2001 of $554.5 million, compared with $17.7 million the previous year. It also reduced its loan loss provisions by about $40 million over the year.

The number of banks in Peru has contracted from 26 to 15 in the past three years as the bigger institutions have swallowed up the small ones, while others have merged. “To a certain degree, the reduction was as a result of the invasion of the large Spanish banks,” says Raul Baltar, general manager of Banco Interamericano de Finanzas (BIF).
“Now there are a handful of banks that are very substantial, and a collection of small and medium-sized ones offering very specialized services and very high quality at corporate level. The banking sector in Peru is very healthy, and the rules and the regulations of the regulatory body are absolutely respected.”

BIF, which began operations in 1991, is part of the Spanish conglomerate Grupo Fierro, which first began investing in Peru more than 40 years ago. The group’s interests there include tobacco, agriculture, industry and construction, and it also has banking operations in Venezuela, Ecuador, the U.S., Curacao and Guatemala.
Mr Baltar says: “We’ve been mainly a corporate bank. Now, with the changes in the markets, we are becoming closer to what Grupo Fierro’s other banks in Latin America are like. We are becoming more commercial, offering a wider range of services because we are in a country with a lot of opportunities in every sector and for every player. We want to remain strong in corporate banking, but there is much more we could offer Peru.”
BIF plans to more than double its branches in Peru to 35 by 2003. “It is a very ambitious plan, but one that most firms should go through,” says Mr Baltar.