Assessing the performance of the Latin American and Caribbean banking industry: Are domestic and foreign banks so different?

Figures & data

Figure 1. Share of domestic banks (dashed line) and foreign banks (continuous line) in the LAC banking industry.

Source: BankScope and own elaboration.

Table 1. Performance indicators of the LAC banking industry, 2001–2011

	Net interest margin (%)		Overhead cost (% total assets)		Return on assets (ROA, %)
	2001	2011	2001	2011	2001	2011
Argentina	6.3	7.1	10.1	7.2	−0.1	2.8
Brazil	5.4	5.0	5.5	3.4	1.0	1.2
Chile	0.1	3.6	2.9	4.6	1.5	7.8
Colombia	3.6	6.1	9.1	8.0	0.7	2.2
Mexico	5.6	3.0	4.5	2.5	0.8	0.6
Peru	4.2	6.2	4.7	4.2	0.4	2.6
Uruguay	3.2	4.9	6.3	4.4	−2.1	1.2
LAC	3.9	5.9	4.8	4.3	0.9	1.8
United States	3.0	3.6	3.2	2.9	1.1	0.8
Eurozone	2.1	1.4	1.5	1.3	0.5	0.1

Note: Figures of capital for Argentina in 2001 refer to year 2003.

Source: World Bank.

Figure 2. Performance indicators of the LAC banking industry: domestic banks (dashed line) versus foreign banks (continuous line).

Source: BankScope and own elaboration.

Table 2. Sample description: averages in current millions US$

	Year 2001			Year 2013
	All banks (164)	Domestic banks (91)	Foreign banks (73)	All banks (145)	Domestic banks (87)	Foreign banks (58)
Outputs
Gross loans	1,116	1,387	779	7,261	8,758	5,016
Interbank loans	284	318	240	3,102	4,378	1,187
Securities	651	918	318	2,203	2,735	1,404
Inputs
Non-profitable assets	348	494	167	2,053	2,463	1,438
Customer deposits	1,178	1,478	804	6,143	7,239	4,500
Own resources	459	576	312	2,785	3,519	1,685
Staff costs	72	98	40	229	280	153

Table 3. Radial and input-specific technical efficiency: domestic versus foreign banks

	All banks		Domestic banks		Foreign banks		Kolmogorov–Smirnov test^a KS-statistic (p-value)^c	Simar–Zelenyuk–Li test^b Li-statistic (p-value)^d
	Mean	SD	Mean	SD	Mean	SD
	Year 2013
Radial technical efficiency	0.731	0.213	0.719	0.195	0.750	0.237	0.224 (0.041)^**	4.978 (0.000)^***
Input-specific technical efficiency
Non-profitable assets	0.511	0.320	0.481	0.354	0.556	0.294	0.201 (0.086)^*	0.639 (0.261)
Customer deposits	0.727	0.212	0.715	0.235	0.746	0.196	0.200 (0.087)^*	1.519 (0.064)^*
Own resources	0.723	0.221	0.710	0.254	0.742	0.197	0.224 (0.040)^**	2.626 (0.004)^***
Staff costs	0.645	0.263	0.615	0.272	0.689	0.255	0.195 (0.103)	0.891 (0.186)
	Year 2001
Radial technical efficiency	0.655	0.226	0.620	0.199	0.699	0.249	0.235 (0.023)^**	4.087 (0.000)^***
Input-specific technical efficiency
Non-profitable assets	0.544	0.291	0.488	0.261	0.614	0.313	0.237 (0.020)^**	2.821 (0.002)^***
Customer deposits	0.634	0.228	0.602	0.207	0.675	0.247	0.218 (0.042)^**	1.988 (0.023)^**
Own resources	0.652	0.228	0.614	0.202	0.699	0.249	0.259 (0.009)^***	4.352 (0.000)^***
Staff costs	0.524	0.299	0.458	0.269	0.607	0.316	0.284 (0.002)^***	4.214 (0.000)^***

^a The null hypothesis is that the two samples have the same distribution.

^b The null hypothesis is that the two samples have the same probability distribution function.

^c Corrected p-value.

^d Original estimates of technical efficiency are smoothed using the algorithm II in Simar and Zelenyuk (2006, p. 508).

^* Significant at 10%.

^** Significant at 5%.

^*** Significant at 1%.

Table 4. Decomposition of radial efficiency into managerial and program efficiency: domestic versus foreign banks

	Domestic banks		Foreign banks		Kolmogorov–Smirnov test^a	Simar–Zelenyuk–Li test^b
	Mean	SD	Mean	SD	KS-statistic (p-value)^c	Li-statistic (p-value)^d
	Year 2013
Radial efficiency	0.719	0.195	0.750	0.237	0.224 (0.041)^**	4.978 (0.000)^***
Managerial efficiency	0.818	0.194	0.773	0.221	–	–
Program efficiency	0.916	0.417	0.969	0.110	0.667 (0.000)^***	11.997 (0.000)^***
	Year 2001
Radial efficiency	0.620	0.199	0.698	0.249	0.235 (0.023)^**	4.087 (0.000)^***
Managerial efficiency	0.800	0.188	0.725	0.247	–	–
Program efficiency	0.774	0.158	0.962	0.065	0.649 (0.000)^***	20.127 (0.000)^***

^a The null hypothesis is that the two samples have the same distribution.

^b The null hypothesis is that the two samples have the same probability distribution function.

^c Corrected p-value.

^d Original estimates of technical efficiency are smoothed using the algorithm II in Simar & Zelenyuk (2006, p. 508).

^* Significant at 10%.

^** Significant at 5%.

^*** Significant at 1%.

Figure 3. Kernel density estimation functions of radial efficiency scores: domestic (dashed line) versus foreign (continuous line) banks.

Simar, L., & Zelenyuk, V. (2006). On testing equality of distributions of technical efficiency scores. Econometric Reviews, 25, 497–522.https://doi.org/10.1080/07474930600972582

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