Moody's: Andean country banks stable

Moody's Investors Service said in its first special report presenting a regional overview of banks in the Andean countries that it notes that the stable outlooks for bank financial strength and deposit ratings are underpinned by improving macroeconomic conditions that have resulted in an upsurge in banking activity and earnings generation in recent years.

In the report, which will be published annually, the agency included Colombia, Peru, Venezuela and Bolivia.

"Very low financial intermediation in the Andean countries points to an important asset growth and earnings opportunity for the region's banks," noted Jeanne Del Casino, vice president and regional credit officer and one of the report's authors.

"Earnings continued to grow at a good pace through 2007, despite higher funding costs and mark-to-market pressure arising in part due to somewhat tighter credit conditions globally."

According to Moody's, David Olivares-Villagomez, author and lead analyst for Colombian and Venezuelan banks, highlights that Colombian banks have benefited from growing lending activity.

"Bank balance sheets are shifting towards a higher proportion of loans - at the expense of government securities - a trend we view favorably as it boosts recurring earnings potential."

The analysts indicated a similar trend in Peru, where securities have also been a historically strong contributor to earnings, but are also a source of earnings volatility.

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