SANTO DOMINGO.-During the past year, the national banking sector was a key player in driving economic growth, efficiently transforming the economy's savings into credit to finance projects for households and productive sectors.
This was stated by the Association of Multiple Banks of the Dominican Republic (ABA), highlighting the 5.1% growth registered by the national economy between January and November 2024, with an annual inflation rate of only 3.18% for the same period, as recently reported by the Central Bank, thus consolidating the recovery compared to 2023.
"In the midst of an increasingly uncertain global environment, characterized by geopolitical conflicts, volatility in commodity prices and Central Banks still struggling to normalize their monetary policies, the Dominican economy continues to show a resilience recognized by national and international analysts," the ABA stated.
He indicated that, in this performance, the proactive role of a more flexible Monetary Policy in the last semester stands out, which included reductions of 275 basis points of the TPM, provision of liquidity of RD$175 billion and other complementary measures.
These incentives definitely contributed to the increase in the gross private credit portfolio from RD$1.56 trillion in November 2023 to RD$1.80 trillion in November 2024, reflecting an annual growth of 15.8% and RD$246,355 MM in absolute terms, the banking association pointed out.
Of that increase of over RD$246 billion, 59% (RD$145 billion) benefited the business sector, either to finance operations with working capital or to invest in new projects to expand their activities, he specified. He reported that the remaining 41% (RD$101 billion) was allocated to households, for projects such as home acquisition or remodeling, vehicle purchases, and household appliances, among others.
Deposits and other banking indicators
The Banking Association considered that the growth recorded in deposits (public deposits that are later transformed into credit) reflects the confidence of savers in the Dominican banking system.
In this regard, he indicated that total deposits reached approximately RD$2.6 trillion as of November 2024, an increase of 10.9% compared to the same month in 2023, which in absolute terms is equivalent to RD$253,495 million.
He highlighted that the performance indicators of the Dominican banking sector show adequate comprehensive management of the risks inherent in financial intermediation activities, which corresponds to the responsible management of public resources.
Thus, as of November 2024, the liquid assets ratio (41.3%) indicated an adequate liquidity situation; its non-performing loan ratio (1.4) was the lowest in Latin America; the coverage ratio (207.9) is comfortably above 100, indicating that the banks have sufficient provisions to cover possible losses from unrecoverable overdue loans, it reported.
He noted that the solvency ratio as of September 2024 (15.9) comfortably and consistently exceeds the regulatory requirement (10.0); while the profitability of the banks as of November 2024; ROE (26.69) and ROA (2.93), is adequate and also shows leadership with respect to the Latin American region.
Outlook for 2025
By 2025, the Dominican economy is expected to continue growing close to its potential, in an environment of controlled inflation that will give the Central Bank room to continue normalizing its monetary policy, which should contribute to bank credit continuing to show good dynamism, boosting economic activity and employment, the Banking Association estimated.
In the longer term, and in line with the ABA's institutional strategic plan, "the banking sector will continue working on different projects that contribute to building a larger, more inclusive formal financial sector, with a technologically advanced human resource, in line with the digital age and that adopts the best practices in environmental sustainability," the association stated.
