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Banco GyT
Summary of Proposed Investment

This Summary of Proposed Investment is prepared and distributed to the public in advance of the IFC Board of Directors’ consideration of the proposed transaction. Its purpose is to enhance the transparency of IFC’s activities, and this document should not be construed as presuming the outcome of the Board decision. Board dates are estimates only.

Project number 26634
Company nameBanco GyT
Country
Guatemala (IDA)
Sector1Commercial Banking - General
Environmental categoryFI
Department
StatusActive
Date SPI disclosedJanuary 9, 2008
Projected board dateFebruary 28, 2008
Previous EventsInvested: August 29, 2008
Signed: July 17, 2008
Approved: June 12, 2008
  Overview     Sponsor/Cost/Location     Development Impact     Contacts     Attachments  

Project description
The proposed investment consists of the subscription of Tier I capital in a locally-owned Guatemalan bank through an IFC injection of up to $68 million in preferred shares to be issued by Banco GyT Continental S.A. (Banco GyT or the client).

Like all other Guatemalan banks, Banco GyT has a portion of subordinated debt, which the client and the regulatory authorities consider as Tier II capital and include it in the calculation of regulatory capital ratios. However, when rating agencies assess a bank’s adjusted risk capital, this subordinated debt is currently not being included as Tier I capital, leading to substantial undercapitalized ratios and excessive penalization of the client’s credit rating. Based on preliminary discussions between the client, IFC and the rating agencies, preferred shares can be considered as Tier I capital and, consequently, improve capitalization ratios. Currently, the client’s Tier I/Total Assets ratio, is 6% (as of October 2007). With the proposed investment, Banco GyT’s ratio would increase to above 8.35%.

Given its closed shareholding structure and its centralized decision making, the client does not prefer to open up its common shareholding to external investors at this stage and prefers to materialize this capital injection through preferred shares.

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