Keeping an Even Keel


KEY METRICS Colombia’s financial sector today enjoys healthy corporate and retail balance sheets, credit quality, and profitability. The SFC has duly been satisfied with the performance of the sector—over 30 […]


Colombia’s financial sector today enjoys healthy corporate and retail balance sheets, credit quality, and profitability. The SFC has duly been satisfied with the performance of the sector—over 30 banks in total—between 2012 and 2013, revealing total assets of $968.1 billion in 2013, up 8.9% YoY. Meanwhile, pure profit had climbed $6.2 billion from 2012. The solvency ratio of 14.7% in 2013 healthily exceeds the 9% regulatory minimum, and moreover, since August 2013, has been in compliance with Basel III. The condition of the sector is signposted in a series of financial soundness numbers for 2013, principal among which are a non-performing loans (NPLs) to gross loans ratio of 2.8%, a provisions to NPL ratio of 160.7%, down 3.2pp YoY, return on average assets (ROAA) of 2.8%, and a return on average equity (ROAE) 19.5%. Furthermore, the liquid assets to total assets ratio was at 8.8%, and deposit to loan ratio at 96.3%.


A 2014 IMF report on Columbia delivered a welcome appraisal of the financial sector. So what did it latch onto? At end-2013 the sector had total assets of Ps963 trillion, or 143% of GDP. Accounting for this sum were credit institutions—predominantly the banks—on 44% of assets and a huge 62% of GDP. Next came trust companies on 29% and 40% of GDP, and pension funds within 16% of assets spelling 22% of GDP. The Fund noted continued deepening of financial intermediation where credit to the private sector had reaching 39.2% of GDP in 2013, although credit growth had slowed to 12.15% for the year from over 20% in 2011. Private sector credit is estimated to reach 41.4% in 2014. At end-2013, Colombia’s credit portfolio featured commercial loans at 24% of GDP, consumer loans comprising 11%, mortgages accounting for 3.5%, and microcredit on just 1%. Asset quality for the year was healthy, as NPLs were at just 2.8% of the total; this in addition to strong provisions, where prudent banking had led to the drop to a 15% risk-weighted capitalization ratio as of February 2014 from 18% at end-2012. In 2013 commercial loans extended to the top 1,000 borrowers were at 42% of the total with a full 20% going to the manufacturing sector, followed in order of size by commerce and construction. Meanwhile, IFRS implementation is set to come online at Colombia’s banks by January 2015.


The tendency of Colombia’s financial giants to spread their wings abroad has seen leading bank Bancolombia, part of the Grupo Empresarial Antioqueño conglomerate, purchase HSBC’s assets in Panama for $2.1 billion. Local bank GNB Sudameris has invested over $7 billion beyond Colombia in deals such as the $362 million purchase of Spain’s fourth largest bank Sabadellin 2013, followed by the purchase of Peru’s HSBC operations. This has required regulation, which Colombia’s Director of Financial Regulation announced in the form of the Conglomerate Law in August of 2013, stipulating deeper reporting transparency.


The Colombian authorities promote financial inclusion to counter concentration risk. Inclusion also expedites the rise of the middle class. IMF analysis revealed that over the past decade while the volume of loans has increased, this has deceptively been a case of larger loans, rather than a larger number of debtors. The government has addressed the need for cheaper access to financial services, among others, by allowing banks to offer them through correspondents. Registered correspondents exceeded 38,000 in 2013. Meanwhile, the state’s interest subsidy program extending soft mortgages to around 5,000 low-income families, in place since 2009, is extended into 2014. Reassuringly in fact, SFC data points to Colombia’s financial portfolio growing annually by 11% essentially due to a greater number of housing and commercial loans. And for 2013 the total balance of credit institutions posted at $281.7 billion, up 11.4% over 2012.


A constituent member of Medellí­n-based Grupo Empresarial Antioqueño (GEA), one of Colombia’s principle conglomerates, Bancolombia is Colombia’s largest bank in terms of total assets, with a 20% market share and robust pedigree in corporate, mortgage, government, and retail lines. It operates Colombia’s largest distribution network of 900 branches and 2,669 ATMs. For 2Q2014 it posted a net profit of $248.7 million, more than doubled YoY, due to prudent cost management and loan portfolio growth. Yet the profit print was 8% down on 1Q2014. The bank’s loan portfolio came to Ps89.5 trillion, up 23.7% YoY. For 2Q2014 assets were at Ps129,179 billion, 1% down QoQ, but up 18.3% YoY. Net loans rose quarterly by 2.5% and by 23.7% over the previous 12 months, 15% of which constituted the contribution of Banistmo (the former HSBC Panama). In February 2013 Bancolombia had bought the Panama operation for $2.1 billion, reportedly the most ever stumped up by a local bank.

A sturdy balance sheet revealed that reserves to NPLs at the end of 2T14 claimed 4.5% of the gross portfolio. The CAR closed the quarter at 13.5%. ROE for 2Q2014 was 13.83%, while the ROA was 1.50%. NPLs as a percentage of total gross loans declined quarterly with those of 30 days or more, as a percentage of gross loans at 3.1%—1.6% at 90 days. Net interest income rose 1.8%. Deposits rose by 1% for 2Q2014 and 19% YoY, while the ratio of net loans to deposits exceeded 101%. Bancolombia posted consolidated net income of Ps467 billion, down 8% QoQ 2014 but up a whopping 123% from 2Q2013.

Banco de Bogotá posted total assets of $53.3 billion as of December 2013, up from $41.4 billion YoY, granting it around 15% of the sector total. Net income of $741 million was up YoY from $727 million. For 1Q2014 consolidated assets totaled Ps104.8 trillion, on respective YoY and QoQ growth of 30.7% and 4.1%. Growth was underpinned by the loan portfolio, Ps60.6 trillion in 1Q2014, up YoY and QoQ by 30.5% and 4.2%, respectively, thanks largely to commercial and mortgage lending. Deposits overall provided 69.5% of total funding. The efficiency ratio in 1Q2014, was improved to 50.0% from 53.7% in 4Q2013. Of the total quarterly loan portfolio, 62.4% was commercial loans. The deposits to net loans ratio was at 111.8%. The bank reported an ROAA of 1.7% in 1Q2014, quarterly NIM was at 5.6%, up 7.1% YoY, while the ROAE was 12.7%, down from 23.9% a year earlier. The bank has a strong retail focus, with some 11.4 million customers, and an employee head count in excess of 36,000. Branch numbers are at around 1,300, and it offers around 2,700 ATM points through its network. Banco de Bogotá’s majority shareholder, Grupo Aval (64.4%), also has majority interests in the banking sector through Banco Popular, Banco de Occidente, and Banco AV Villas, giving it around a one-third market share. Grupo Aval overall as of 2013 had 11.7 million customers over 11 countries, with 1,374 branches in Colombia alone.

Banco Davivienda’s main shareholder is Group Bolí­var, Davivienda has a strong presence in the retail market, and is strong in mortgage segment, though has activities across the financial spectrum. It has been on a rapid domestic and overseas expansion program, snapping up HSBC’s operations in El Salvador, Costa Rica, and Honduras for $829.7 million. As of March 2014, total assets of PS48.8 billion accounted for 12.1% of the market, while net income of Ps339 billion claimed a 15.2% market share. And while total loans for the quarter had a 13.4% market share, total deposits stood at 12.1%.