Profitability of Ecuador banks to remain under pressure in 2024, says Fitch

Fitch Ratings predicted that the asset quality and profitability of banks in Ecuador will remain under pressure due to the economic slowdown, social unrest and increased violence in the country, among other factors.

This situation will also be influenced by the government's low financing flexibility and climate-related shocks, said Andrés Márquez, senior director of Financial Institutions at Fitch Ratings, during a webinar on the credit outlook in Latin America.

According to the expert, Ecuador's big banks have a long history of liquidity, solidity and stability in terms of deposits, but the limited sovereign capacity to obtain financing affects the liquidity of the system and prevents growth, since the banks aim to maintain conservative liquidity buffers.

Márquez added that the increased debt of households due to the growth of retail loans and high interest rates also exposes banks to a deterioration in asset quality and an increase in the cost of credit.

According to information from Ecuador's association of private banks (Asobanca), the 24 private sector entities that operate in the country reported total profits of US$737mn last year.