Latin Finance - November 2008 - 34
of the 2008 Mighty Challenger he executive suite of Banco de Bogotá’s headquarters has one of the best views of Colombia’s capital. Alejandro Figueroa Jaramillo, the bank’s president, has just delivered first half performance figures to the board, which includes members of Grupo Aval, the majority owner of the bank and Colombia’s largest financial conglomerate. As he sits down for a rare interview – his aides say Figueroa does not speak to local press – he is interrupted by an urgent note from his assistant. “It’s the finance minister on the phone, excuse me,” says Figueroa, getting up. While he does not reveal the nature of the conversation, it is evident Banco de Bogotá, along with the rest of the country’s financial system, is racing to adjust to a relentless selloff in LatAm indices, currencies and fixed income assets that took hold in late September. Within four hours of the call, Colombia’s central bank announces it will stop intervening in the FX market to ease the pressure on the peso. It joins monetary authorities in several other LatAm countries including Brazil, Argentina and Peru in responding to the panic selling walloping local assets and threatening to undermine otherwise stable fundamentals. It is within this context that LatinFinance examines Colombia’s banks, looking for signs of solid risk management, conservative provisioning and strong growth capacity. As the country’s second largest institution by assets – Bancolombia is unquestionably the incumbent, with the broadest geographic reach and largest share of the local asset base – Banco de Bogotá has a clear target to shoot for. But it will not do so at the expense of lowering the quality of its portfolio, says Figueroa, who claims his institution has the lowest level of non-performing loans among the country’s top banks. In the period ended June 2008, Bancolombia recovered from an uncharacteristically poor first quarter, posting annualized ROAE of 29.5% and T Colombia Best Bank – Banco de Bogotá ROAA of 2.9% in the second quarter, versus Bogotá’s 24.8% and 2.8%, respectively, in the same period. It also grew its asset base at a strong pace – 20.7% in the 12-month period, versus an equally impressive 17.4% for Bogotá. Both beat the financial system’s average of 14.2%. Alejandro Figueroa, CEO Banco de Bogotá Banco de Bogotá’s main area of strength is commercial lending, with the second largest portfolio in the country after Bancolombia. The bank grew the commercial portion of its asset base by 29.4% between June 2007 and June 2008, following a 20.9% jump in the previous year. That helped it boost its share of the aggregate Colombian commercial portfolio to 19.4% from 18.1%. While that trails Bancolombia’s 26.2%, Bogotá’s 7.2% increase tops Bancolombia’s 1.1% loss of market share in that category, according to Banco de Bogotá. The bank’s commercial portfolio is 33% dedicated to what it calls corporate clients – large wholesale loans – while another 29% is held by smaller business clients. Government and institutional clients make up 12% and the remainder goes to SMEs and other small entities. “We have a very conservative approach to managing our commercial portfolio, which includes basically analyzing very carefully our clients’ capacity to pay, and not concentrating [our lending] in any one sector,” says Figueroa. He acknowledges that this does not differ from standard, prudent lending practice. The largest portion of the banks’ $8.32 billion commercial portfolio – 26% – is dedicated to transportation and communications services companies, followed by 19% for manufacturing and 17% for retail financing. Another 16% goes to the goods and services sector, while 24% is spread out between defense, mining, agriculture, and construction. In line with a stated conservatism regarding the commercial portfolio, as of June, Banco de Bogotá’s NPL ratio stood at 2.5%, versus an average of 3.7% for the rest of the system and 3.2% for Bancolombia. Provisioning for these assets stood at 139%, versus 121% for the system and 132% for Bancolombia. “We try to be conservative in provisioning for losses,” notes Figueroa, pointing to the bank’s immediate action following news in September that Lehman had filed for bankruptcy. Its $8 million position in junior notes issued by the failed investment bank was immediately provisioned for with a 50% writedown, which the CEO says accounts for roughly 4% of the bank’s monthly expenses. When looking at Bogotá’s relatively low NPL ratio, however, it is critical to remember that the majority of its portfolio is commercial, not ordinary consumers. The bank’s 3.1 billion peso consumer portfolio is 23% smaller than Bancolombia’s, which totals 3.8 billion pesos. LF UPDATE For more on this Award see www.latinfinance.com > 34 LATINFINANCE November 2008
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Latin Finance - November 2008
Table of Contents for the Digital Edition of Latin Finance - November 2008
Latin Finance - November 2008
Contents
Banks of the Year 2008
Bradesco Interview
Multilateral and Development Banks
Local Investment Bank
Mexico Investment Bank
Colombia
Panama
Peru Retail Banking
Clearing & Settlement
Panama Investment Report
Derivatives Losses
Inside Source
Latin Finance - November 2008 - Latin Finance - November 2008
Latin Finance - November 2008 - Cover2
Latin Finance - November 2008 - Contents
Latin Finance - November 2008 - 2
Latin Finance - November 2008 - 3
Latin Finance - November 2008 - 4
Latin Finance - November 2008 - 5
Latin Finance - November 2008 - 6
Latin Finance - November 2008 - 7
Latin Finance - November 2008 - 8
Latin Finance - November 2008 - 9
Latin Finance - November 2008 - 10
Latin Finance - November 2008 - 11
Latin Finance - November 2008 - 12
Latin Finance - November 2008 - 13
Latin Finance - November 2008 - 14
Latin Finance - November 2008 - 15
Latin Finance - November 2008 - 16
Latin Finance - November 2008 - 17
Latin Finance - November 2008 - Bradesco Interview
Latin Finance - November 2008 - 19
Latin Finance - November 2008 - 20
Latin Finance - November 2008 - 21
Latin Finance - November 2008 - 22
Latin Finance - November 2008 - 23
Latin Finance - November 2008 - Multilateral and Development Banks
Latin Finance - November 2008 - 25
Latin Finance - November 2008 - 26
Latin Finance - November 2008 - 27
Latin Finance - November 2008 - Local Investment Bank
Latin Finance - November 2008 - 29
Latin Finance - November 2008 - 30
Latin Finance - November 2008 - Mexico Investment Bank
Latin Finance - November 2008 - 32
Latin Finance - November 2008 - 33
Latin Finance - November 2008 - Colombia
Latin Finance - November 2008 - 35
Latin Finance - November 2008 - 36
Latin Finance - November 2008 - 37
Latin Finance - November 2008 - 38
Latin Finance - November 2008 - 39
Latin Finance - November 2008 - 40
Latin Finance - November 2008 - 41
Latin Finance - November 2008 - Panama
Latin Finance - November 2008 - 43
Latin Finance - November 2008 - 44
Latin Finance - November 2008 - 45
Latin Finance - November 2008 - Peru Retail Banking
Latin Finance - November 2008 - 47
Latin Finance - November 2008 - 48
Latin Finance - November 2008 - 49
Latin Finance - November 2008 - 50
Latin Finance - November 2008 - 51
Latin Finance - November 2008 - 52
Latin Finance - November 2008 - Clearing & Settlement
Latin Finance - November 2008 - 54
Latin Finance - November 2008 - 55
Latin Finance - November 2008 - 56
Latin Finance - November 2008 - 57
Latin Finance - November 2008 - Panama Investment Report
Latin Finance - November 2008 - 59
Latin Finance - November 2008 - Derivatives Losses
Latin Finance - November 2008 - 61
Latin Finance - November 2008 - 62
Latin Finance - November 2008 - Inside Source
Latin Finance - November 2008 - 64
Latin Finance - November 2008 - Cover3
Latin Finance - November 2008 - Cover4
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