Ecuador top bank: default hurts deposits

By Alonso Soto

QUITO (Reuters) - Ecuadorian banks will see their deposit levels fall further if the government fails to resolve a debt default that has severely limited financing, the head of the country's largest private bank said on Tuesday.

Pichincha bank CEO Fernando Pozo, who spoke at the Reuters Latin American Investment Summit in Quito, said the country has failed so far to inject liquidity into the economy to help private banks reeling from the global financial crisis.

"Bottom line the default has limited international financing for us ... our credit lines have been reduced," Pozo said. "The government needs to get financing from any source to inject resources in the economy and help the banks."

Pozo, who is also the head of the country's private banks association, said the fall in deposits is also due to lower oil prices and the government's failure to secure international financing and calm international markets after the default. Oil is Ecuador's main export.

He also said banks will have to continue limiting credit to make up for the drop in deposits and safeguard liquidity.

"The dynamic of credits will depend on the dynamic of deposits and access to international financing."

Pichincha has seen deposits fall 5 percent in the first quarter of 2009 compared to 10 percent growth in the same period last year.

The bank, which is by far the country's largest in terms of deposits, expects net profits this year to drop to 2007 levels of about $60 million. The bank will also cut investment to $25 million in 2009 from $35 million last year.