S&P: Panama Banks unchanged

Standard & Poor's said that the upgrade on the Republic of Panama to BB+ from BB will not affect the ratings on Banco General SA (BBB-/stable/A-3), BBVA Panama SA y Subsidiarias (BBB-/stable/A-3), Primer Banco del Istmo SA (BBB-/positive/A-3).

Although the country's overall economic situation has improved, major banks in Panama face several structural challenges, including their important exposure to domestic real estate, relatively low potential for retail loan growth and high loan-to-deposit ratios, the agency said.

S&P added that the current ratings on Panama's major banks reflect their adequate profitability, asset quality and capital measures that are comparable to other banks rated BBB-.

"We are concerned about the banks' exposure to real estate because the sector has been growing very fast with prices increasing, especially in the upper market, we think that the financial system could be vulnerable to a downturn in the real estate market," said S&P credit analyst Leonardo Bravo.

The agency said that the ratings on the major Panamanian banks listed above are higher than those on the Republic of Panama, given its opinion that these banks would be resilient, to a certain degree, in a sovereign default scenario because of their financial performance, which is comparable to other banks rated BBB-.

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