fbpx Caribbean Real Estate: the best option to invest | Dominican Republic

The rapid growth of the Dominican Republic economy in recent years has led to strong credit growth, changing market dynamics, and is attracting new entrants.

The IMF predicts a 5% increase in GDP this year, slightly down from 2018’s 7.0%, but still leading the region.

If next year’s forecast of a further 5% materializes – and with a presidential election, there is risk of volatility – it would see a record-setting 17 years of consecutive positive growth.

The growth in the economy is corresponding to record results for the banks. In 2018, state-owned Banreservas – the country’s largest bank, with a 32% market share in terms of assets – made $142.3 million in net profit, its best result.

Speaking at the Felaban conference in Miami in November, Roberto Jiménez, the bank’s senior director of specialized business, told Euromoney that Banreservas had already generated more net income in the first 10 months of 2019.

Despite being a publicly owned organization, the bank has transformed itself in recent years into being focused on the private sector. In 2019, only 19% of its loan portfolio was exposed to the public sector – a reversal from the beginning of the decade when only 20% of its loans were extended to private-sector companies.

However, Jiménez denies that the bank is crowding out the private sector.

“We are funded by our deposit base – there’s no anti-competitive use of low-cost government funding, so we are competing on a fair basis,” he says.

Jiménez also says the bank retains a distinct mandate as a public bank.

“We have the largest footprint and are present in places that other banks don’t see as profitable,” he explains. “We don’t see that footprint disappearing: it might shift, but it won’t go away.”

He also notes Scotiabank’s acquisition of Banco Dominicano del Progreso, to create a larger fourth-placed bank in the system behind second-placed Banco Popular Dominicano and Banco BHD Leon – and it will still be about 40% smaller than the third-placed bank in terms of its loan portfolio.

One M&A banker who operates in the country says he ran the numbers of this merger many times and “the synergies pay for the costs very quickly” – it will essentially add a large credit-card business to Scotia’s existing bank in the Dominican Republic.

However, despite the logic of the acquisition, its competitors don’t foresee a different competitor emerging.

“Despite being small, Scotia has always had a strong product offering and, when talking to corporates, has been able to point to its international balance sheet, so I don’t see this doing much in terms of creating a radically different bank in the system,” adds the banker.


Banco Popular Dominicano, the largest private sector bank, has been growing so strongly that it is beginning to eye new industries and territories for growth.

Popular also enjoyed a record year in 2018, with net income of DOP170.3 million – assets grew 11.1% and deposits by 10.2% – and a return on equity of 27.8%.

Is that a recognition that it can’t grow market share within the Dominican Republic on a risk-weighted basis?

“It’s a little bit of that, but I don’t want to say that’s the main reason,” Edward Baldera, the bank’s vice-president international, institutional and investment banking, tells Euromoney at the Felaban conference.

“We have a very broad base of capital which helps us explore a wide range of opportunities – and not just within our industry and country,” he says.

Baldera doesn’t want to be drawn into specifics, but says the bank is considering opportunities in insurance, energy and infrastructure. He also says the bank is looking at regional expansion – the bank has been wanting to grow its Panama bank as a base for participation in regional loans.

It’s hard when you have a relatively small operation and you face the same compliance costs as all the other banks – Edward Baldera, Banco Popular Dominicano

The bank exited the US market in 2014 looking for other opportunities to make similar ROE on investments to its home market. Baldera notes, adding that “there is still room to grow in the Dominican Republic as technology enables much better penetration to clients that are not currently bankerized”. 

Both Popular and Banreservas see local capital-markets activity as a source of growth for their securities operations. Deal size has been growing in the local markets as a rapidly growing pensions sector – the industry is growing with $100 million net new contributions a month – and providing an interesting group of buyers for corporate papers.

Tenors are lengthening and new products are emerging – this year a local milk producer issued the country’s first variable-rate note.

Melvin Deschamps, treasurer of Banreservas, says of its inversiones subsidiary: “We have been very active in this area – we are very well positioned. If companies want a loan we can provide that or we can take them to the local capital markets.”

The bank is also part of the growing asset management industry, with two subsidiaries that offer administration services for pension accounts, as well as offering portfolio management and mutual funds.

New entrants

Meanwhile, the sector is seeing new entrants, many focused at these higher-risk consumer segments.

One of these banks is Banco Vimenca. The bank recruited Banreservas’ Jose Obregon at the beginning of 2019 to lead its transformation from a remittance company – with a 40% market share – and corporate FX player.

Obregon now sits on Vimenca’s board and has been managing the bank’s plan to transform some of the 1.2 million clients of the remittance business into banking customers.

The bank has recently completed a data-mining process that identified a segment of its customers that had strong credit scores – users of one or more banking products for more than three years without default.

The bank is using this list – and the remittance company’s network of 60 branches and 250 full-time agents – to convert these individuals into Vimenca clients.

Source reference Euromoney

Compare listings