OREANDA-NEWS. The outlook for Central American banks remains stable in 2016, despite a challenging operating environment which includes decreased growth, pressured margins, and increased credit costs driven by asset deterioration, according to a new Fitch Ratings report.

'Most banks are well prepared to weather higher risks without jeopardizing their creditworthiness. Additionally, a sizeable number of banks may receive timely support from their shareholders if needed,' said Marcela Galicia, Director of Fitch's Financial Institutions Group.

Costa Rican banks are most exposed to challenging economic conditions, resulting in a negative sector outlook. Fitch expects loan growth below 10% and profitability to underperform peer averages.
El Salvador's slow local economy will limit credit growth to 5%, driven by a disproportionate growth in consumer loans.

In Honduras, single-digit loan growth is expected with weak asset quality when compared to other banking systems in the region. The effects of Banco Continental's forced liquidation have been contained by regulatory actions.

Nicaragua is expected to outperform peers with loan growth of 15% to 18%, supported by good asset quality. At around 1%, non-performing loans-to-total loans is expected to remain strong.

The Dominican Republic banking sector has the only positive outlook in the region, supported by a dynamic economy and strong macroeconomic conditions.