Introduction

This post presents relevant data from Bolivia’s banking system, focusing specifically on the asset side—that is, how banks use the funds they receive from both shareholders (capital) and the public (savings). The data presented is based on the reports published by the Financial System Supervisory Authority (ASFI) as of the end of May 2024.

Balance Sheet Structure

For context, the following chart shows the composition of the Bolivian banking system’s balance sheet at three points in time: May 2023, April 2024, and May 2024. The goal is to: i) understand the evolution of the balance sheet over the year, and ii) compare monthly changes.¹

Between May 2023 and May 2024, the financial system’s total assets grew by USD 1.81 billion, equivalent to a relative growth of approximately 4.7%. While this is not particularly high by historical standards, it allowed the banking system to recover to the asset level seen in March 2023, before Banco Fassil’s liquidation—although it still falls short of the December 2022 level.

In terms of composition, the main balance sheet components remain relatively stable year over year, on both the asset and liability sides. However, there’s a slight increase in system liquidity, mostly at the expense of the loan portfolio. In particular, temporary investments have become more prominent among assets.

Looking at monthly variation, the balance sheet expanded by only USD 11 million—a small amount that annualized would represent just 0.32% growth. Excluding the loan portfolio, however, loans grew by USD 188 million, or 8.57% annualized.

In the sections that follow, we analyze two key components of the asset side: temporary investments and the loan portfolio, including delinquent loans and restructured or reprogrammed loans.

Assets

The chart below shows the evolution of total bank assets, measured annually as of each December from 2015 through the most recent month:

As shown, banking sector assets grew steadily through December 2022. Then, following Banco Fassil’s liquidation in March 2023, assets dropped significantly. What stands out is that between December 2023 and May 2024, the system’s balance sheet has again declined, highlighting ongoing economic difficulties.

Temporary Investments

According to ASFI’s accounting manual for financial institutions, temporary investments are defined as:

Investments in deposits with other “financial intermediation entities,” deposits at the Central Bank of Bolivia, and debt securities acquired by the institution; investments made, per the institution’s policy, with the aim of obtaining adequate returns on temporary liquidity surpluses, and which can be converted into cash within no more than thirty (30) days.

The following chart shows the composition of temporary investments as of each December from 2015 onward:

Temporary investments have averaged around USD 4.2 billion. In 2023, a larger share of these investments were placed with the Central Bank of Bolivia (BCB). These may include fixed-term deposits, bills, bonds, and other debt instruments. In a context of rising uncertainty and sluggish economic activity, it’s understandable that financial institutions would prefer to hold higher liquidity at the BCB.

The next chart presents the evolution of temporary investments on a monthly basis from January 2003, broken down by account type:

Since January 2023, temporary investments at the BCB (especially central bank bills and “other” accounts) have increased significantly and consistently. In contrast, repurchase agreements and restricted operations have declined both in absolute and relative terms.

Although not covered in this post, it would be interesting to analyze the interest rates paid on BCB investments. If these are high relative to risk-adjusted returns in the market, they may negatively affect the macroeconomy by discouraging lending and dampening economic activity.

Loan Portfolio

This section analyzes the behavior of the loan portfolio in Bolivia’s banking system. Note that loans are the main source of financial income and by far the most important asset on bank balance sheets.

Growth

A key question is how the loan portfolio has grown in recent years. This is important because both excessive growth and stagnation may signal deeper issues. Rapid growth could point to a credit boom that risks future solvency problems, while sluggish growth could reflect weak aggregate demand and underlying real-economy concerns.

The chart below shows year-on-year growth in the loan portfolio (excluding provisions and accrued interest):

Overall, a negative trend is visible, although comparisons are complicated by Banco Fassil’s liquidation.

To complement this, the following chart shows absolute monthly changes in the loan portfolio, measured in USD:

The portfolio was growing by around USD 200 million per month until the onset of the pandemic. After that, growth continued but with higher volatility. From 2023 onward, monthly growth has rarely surpassed USD 150 million, and contraction months—where repayments exceed new loans—have become more frequent.

Delinquency and Restructuring

The delinquency rate (or NPL ratio) includes all operations over 30 days past due, as a percentage of total loans.

The following chart shows the delinquency rate from January 2013 through the most recent available month:

As noted in previous posts, the delinquency rate has maintained a clear upward trend, reaching 3.4% in May 2024. While this figure is not catastrophic in itself, the persistent upward trend is worrisome. Moreover, delinquency is a lagging indicator of portfolio quality—meaning the real situation may be worse.

Interestingly, ASFI previously emphasized Bolivia’s relatively low delinquency rate in the region. But in its latest Press Release as of June 27, 2024, it acknowledges that while Bolivia remains below the regional average, it doesn’t disclose the exact figure:

With regard to the delinquency index, it stands below the regional average of 3.6%, mainly because a large portion of the index is made up of loans that deferred payments in 2020 due to the pandemic and still face difficulties in resuming or maintaining payments, despite grace and extension periods. Of the total delinquent portfolio as of May 2024, amounting to Bs7.513 billion, 44%—that is, Bs3.341 billion—corresponds to these deferred-payment loans from 2020.

So, although ASFI does not explicitly report the current delinquency rate, it attributes the increase to loans deferred during 2020. If those loans haven’t recovered after four years, what makes us think that new deferrals will behave any differently?

This is concerning, especially given that approximately 17.5% of the banking system’s loan portfolio is still classified as restructured or reprogrammed, as shown below:

While the restructured portfolio has been gradually decreasing in recent years, it should be closely monitored—especially the portion classified as performing but restructured, which tends to concentrate risk.

Finally, it is the responsibility of the regulator to ensure that banks’ deferral policies do not evolve into future problems. Ideally, losses should be recognized early and progressively, rather than postponed. Some banks have struggled to reduce their restructured balances in recent months:

Given this, a key question emerges: How much of the current delinquency stems from previously restructured loans? Although disaggregated data is unavailable, we can observe the share of the delinquency ratio that originates from loans previously classified as restructured or reprogrammed:

As ASFI notes, it is the delinquency stemming from restructured loans that has surged once the deferral, restructuring, and refinancing measures related to COVID-19 ended.

Conclusion

The 12-month and month-on-month comparison of the banking sector balance sheet reveals a slight increase in liquidity, especially in temporary investments. These funds have largely been placed in BCB securities, which—in a context of macroeconomic uncertainty and weakened aggregate demand—represent an attractive option once risk is accounted for. However, if the yields on these instruments are too high, they may crowd out credit and reduce lending to the real economy, a trend worth monitoring.

Meanwhile, the loan portfolio has shown declining growth rates, both year-over-year and month-on-month. Between April and May 2024, banks issued approximately USD 188 million in new loans—making May the strongest month of the year and a clear contrast to the previous four months, when cumulative net lending reached only USD 33.4 million.

Finally, the delinquency rate hit 3.4%. Although this is not alarming in and of itself, the continued upward trend is troubling—especially considering that: i) delinquency is a lagging indicator, and ii) most of the deterioration stems from the restructured loan portfolio.