Venezuela's hyperinflation has turned the struggling OPEC nation's once-powerful banks into warehouses of useless cash that are worth a total of only $40 million, according to a Reuters analysis of regulatory data.
Although banks such as Citigroup Inc and Spain's BBVA are maintaining operations in the hopes of better times, the value of the country's 31 banks in 2017 was equivalent to that of a single mid-sized bank in the Dominican Republic, according to bank regulator data.
The combination of annual inflation estimated at 8,000 percent and state-regulated interest rates has left banks with little motivation to lend and little reason to inject capital onto their balance sheets, meaning credit is steadily disappearing.
The banks are unlikely to fold, due in large part to the huge potential upside if the economy turns around, according to financial industry consultants and bank executives.
"Venezuela is a tragedy," BBVA Executive Chairman Francisco Gonzalez told reporters at a meeting in Davos in February. "Of course we do not want to leave. I trust that something will happen," he added, without elaborating.
BBVA did not respond to an email seeking further comment.
Meanwhile, the disappearance of credit threatens to aggravate an already brutal recession that has led hundreds of thousands to flee the country amid chronic product shortages, rising malnutrition and increased incidence of preventable disease.
Caracas resident Beglis Villanueva is a private-school teacher with three credit cards issued by BBVA subsidiary Banco Provincial — and a combined total credit limit of $2.
"I use them to buy bread, which is the only thing I can buy with them," she said. "They used to get me out of trouble in an emergency situation. I showed my new salary to the bank but they won't raise my credit limit."
?Making ends meet
Though private banks' return on equity hit an eye-popping 115 percent in December of 2017, that was devoured by an estimated 2,600 percent inflation in the same month. The central bank does not provide inflation statistics, and estimates are given by the opposition-run National Assembly.
Unlike previous hyperinflationary periods in Peru and Brazil, banks cannot make ends meet through hard currency operations because the country's 15-year-old currency control system makes such financial maneuvers impossible.
Venezuelan banks as of January were lending only 28 percent of their deposits, compared with an average of 100 percent in the region last year, according to data from the Venezuelan government and the Latin American Federation of Banks, or Felaban.
Citibank Venezuela began suspending accounts and credit cards to clients in 2017 as part of a strategy to minimize operations while it waited for the situation to improve, according to two industry sources.
The local affiliate of Citi reported a return on equity of -43.1 percent in December, according to regulatory data.
Citi has already sold off its consumer banks in economically healthier Colombia and Brazil to cut costs, but there are no obvious buyers for the Venezuelan one.
Citi declined to comment.
Neither Venezuela's Superintendence of Banks (Sudeban) nor the Information Ministry responded to emails seeking comment.
As of December, Venezuelan banks on average were lending $13 per person per year, in a nation with 30 million inhabitants, compared with more than $2,000 per person in 2017 in other countries in the region, according to Sudeban and Felaban data.
For large and medium-sized companies, local private banks lend no more than the equivalent of $25,000 and in almost all cases require guarantees in dollars, said one consultant who works for large companies operating in the country.
Most of those loans are for less than two years, according to a banking sector executive.
The credit crunch hurts entrepreneurs like fashion designer Yenny Bastida.
This year, her bank lent her the equivalent of $300 and required that she pay it back in six months — one-fifth of the amount and half the duration of a loan she received in 2016 to open a second store in an elite Caracas shopping center.
"The amount is ridiculous," said Bastida, who says she now has to self-fund any growth in her business.