With presidential elections on the cards boding a potential impact on volatility and economic deceleration, Banco de la Producción took the strategic decision to strengthen its liquidity position. To partially offset the effects on profitability and because of the central bank’s mid-year decision to increase reserve requirements by 300bp, the bank undertook several well-timed strategic initiatives.
It started by stimulating the growth of stable liabilities that were not subject to reserve requirements, such as lines of credit from international banks, deposits from local financial institutions and long-term subordinate debt. This allowed the bank’s assets to grow at a modest rate of 7.4%. However, despite this low rate, the average yield on interest earning assets increased by concentrating more on the credit card business and less on government securities.
The bank also continued with its strategy of being less dependent on the financial margin and aiming for increased fee income, which was up 37.1% in 2006 from 28% in the previous year.
The bank’s vision is to be the biggest and most profitable financial institution in Nicaragua. Last year, the group attained the highest ever return on assets among its peers. It was also the first to implement and apply risk-focused management, which has yielded impressive results in terms of regulatory compliance, strategic planning and business performance.
