By Eliane Portillo

Banking systems in Central America and the Dominican Republic will continue to strengthen their financial performance in 2012, with credit expansion and lower non-performing loan (NPL) ratios being key to sector profits, according to a Fitch report.

The ratings agency expects moderate credit growth in the region in 2012, with those countries with a better economic outlook, particularly Panama, Costa Rica and Guatemala, expected to show the highest credit growth.

Central American banks are also expected to improve their loan book quality in 2012, although Fitch noted that some Costa Rican and Dominican Republic banks could continue to show high NPL ratios in the first few months of this year.

Fitch said that the region's financial institutions are gradually adopting best international practices but remain sensitive to downturns in the global economy, although this does not threaten the stability or solvency of the Central American banking systems.