PANAMA CITY, Panama – Despite a challenging macroeconomic environment and shrinking global margins, Latin American banks have maintained their position as some of the world’s most profitable financial institutions, with Panama emerging as a regional standout. The Global Banking Annual Review 2025 from McKinsey & Company reveals that Latin American banks generated $36 billion in net profits during 2024, achieving an average Return on Tangible Equity (RoTE) of 16% – significantly outperforming the global average of approximately 10%.
This exceptional performance comes amid decreasing liquidity and normalizing profit margins worldwide. Panama distinguished itself among regional leaders with a RoTE of 17.1%, surpassing the global benchmark and positioning competitively against major economies like Mexico (15.7%) and Chile (17.2%). The country’s robust financial system, regulatory stability, and role as a regional financial services hub contributed significantly to these results, continuing to attract substantial capital and investment.
“Latin American banks maintain structurally higher margins, which reinforces their capacity to sustain profitability over time,” the McKinsey report states, noting that this advantage stems partly from a less saturated customer base and ongoing opportunities to expand financial inclusion.
The report projects that banking revenues in Latin America will grow by nearly 10% toward 2028, driven by digital transformation, development of new business models, and strategic adoption of artificial intelligence. Emerging technologies like AI are expected to fundamentally reshape how banks manage operations, analyze risks, and personalize customer experiences across the region.
Global Banking Paradox: Record Profits Amid Stagnant Valuations
McKinsey’s comprehensive analysis highlights what it terms a “paradoxical profitability record” in global banking. While banks worldwide registered historic profits in 2024, with net earnings reaching $1.2 trillion and intermediated funds exceeding $426 trillion – four times global GDP – stock market valuations remain stagnant. Only 15% of listed banks create sustained value, compared to 54% across other industries.
Latin American banks, particularly those in Panama, demonstrate a markedly different pattern. The gap between market value and financial performance is substantially narrower across the region, with several institutions maintaining more balanced valuation multiples and stronger investor confidence. This contrast underscores the relative stability and perceived growth potential of Latin American banking markets despite global uncertainties.
“The performance of Latin American banking, and especially Panama’s, reflects a combination of structural strength and strategic vision,” the Global Banking Annual Review emphasizes. “In a challenging global environment, the sector continues to demonstrate that profitability and resilience can coexist when there is discipline and adaptive capacity.”
The structural advantages identified in the report include smaller balance sheets relative to Gross Domestic Product (GDP), which allow Latin American banks to maintain higher margins despite global pressures. This financial architecture provides a buffer against international market volatility while supporting consistent returns to investors.
Strategic Opportunities for Sustainable Growth
Looking forward, McKinsey concludes that regional banks have the opportunity to lead the next wave of industry growth by adopting more granular strategies. Key recommendations include deepening relationships with specific customer segments, innovating in digital products and services, and expanding beyond traditional banking toward ecosystem-based models and strategic partnerships.
The integration of advanced technologies represents a particularly promising avenue for Panamanian and Latin American banks to enhance efficiency while developing competitive advantages. Artificial intelligence applications in risk management, customer service automation, and personalized financial products could accelerate the region’s banking transformation while maintaining profitability leadership.
“Banks in the region have the opportunity to lead the next wave of growth, provided they adopt a more granular strategy,” the report concludes, highlighting the importance of “deepening relationships with specific customer segments, innovating in digital products and services, and expanding beyond traditional banking toward models based on ecosystems and partnerships.”
Panama’s consistent performance as a regional financial hub positions it favorably to capitalize on these trends. The country’s established infrastructure, international connectivity, and regulatory framework provide a solid foundation for implementing the strategic initiatives McKinsey identifies as crucial for sustained success in the evolving global banking landscape.
The full Global Banking Annual Review 2025 offers comprehensive analysis of regional and global banking trends, with detailed recommendations for financial institutions navigating current market conditions while preparing for future opportunities. The report draws on extensive data from banking systems worldwide, providing comparative benchmarks and strategic insights for industry leaders and policymakers.
Source: McKinsey & Company Global Banking Annual Review 2025