Latin Finance - November/December 2009 - 39

2009 Best Bank – Bancolombia Colombia Extending Reach D espite Colombia’s generally sturdy fundamentals during the financial crisis, its financial institutions have had to swallow their share of bitter cocktails, including isolated corporate derivative losses, toxic Lehman notes, Stanford fallout, and slowing exports to the US. An uptick in unemployment and slower economic growth also boosted defaults at the retail and corporate levels for all banks. So it may have irked some retail and corporate banks when, on top of these crisis-related aggravations, a sudden surge in local bond issuance actually dampened the profitability of lending. Challenged by debt spree: Londoño Colombian corporates like Argos, EPM, Isagen, and Grupo Nacional de Chocolates and financial institutions like Titularizadora Colombiana and Bancoldex have issued prolifically and successfully over the past several months, posing a challenge for banks. “We celebrate this trend [of robust local markets,] but it poses a challenge for us because our loan portfolio grows at a slower pace,” says Jorge Londoño, CEO of Bancolombia, reflecting on the past year. Managing portfolio risk has also taken center stage. “We have been very aggressive in setting up provisions for our credit portfolio,” says Londoño. “Usually, we’ve had a coverage equivalent to 110% of our past-due loan portfolio, but in the past 12 months we’ve moved that up to 130% or so,” he adds. In terms of provisioning for lending and leasing portfolios, Bancolombia leads the country on the conservative side, with 167.81% coverage versus Banco de Bogotá’s 121.15%. Both figures are above the country’s private sector average of 117.88%, according to data through July from the Superintendencia Financiera, Colombia’s financial sector supervisor. Bancolombia is slightly behind Bogotá in terms of the quality of loan portfolio. Their percentage of past-due loans stood at 3.07% and 3.04% of their total books, respectively. But that is well inside the 4.33% average of the country’s private sector banks, according to the Superintendencia. And with total assets of 40.4 trillion pesos through June, Bancolombia is by far the largest Colombian financial institution, followed by Bogotá, with 27.0 trillion pesos, according to the Superintendencia. In addition to its Colombian operations, Bancolombia now has El Salvador’s Banco Agrícola under its wing, which helps boost its total assets by over 10%, according to first quarter figures from Banagrícola. Some 55% of Bancolombia’s portfolio is in the form of loans to large corporates, with the rest accounted for by retail and SME loans, says Londoño. Around 8% is mortgages, he adds. As in many LatAm countries, Colombia’s rapidly growing middle income earning class provides both a challenge for the country’s large banks and an opportunity for those able to extend a network in a financially viable way. “In Colombia . . . bankarization is growing very rapidly,” says Londoño. “But this places the responsibility on us to develop new products that depart from the older methods of banking,” he adds. Londoño notes that in addition to Bancolombia’s 720 traditional branches, it has 500 points of service it calls nonbank correspondents, mostly in remote locations, where new clients can conduct basic transactions like pay bills, as well as make deposits and withdrawals. Microcredit and insurance services are also on the menu for new clients. “You must have much lower transaction costs to service the lower income populations,” says Londoño. He notes the relative lower cost of deploying insurance services to smaller earners, for example. For its more sophisticated clients, Bancolombia is also rolling out a new suite of derivatives. Through agreement with Suvalor Panamá and regional broker MF Global, the bank is offering crossborder futures and options contracts for FX, interest rates, indices, equities and commodities. LF Best Local Investment Bank – Bancolombia Colombia Taking on the Bigger Boys B ancolombia looms large in some of Colombia’s most important markets, including DCM and project finance advisory. It is also making headway in areas traditionally dominated by foreign competitors, like cross-border M&A and equities, sticking to a strategy of covering local clients as they look to expand their horizons . In a year when international bond markets and cross-border credit lines dried up, having a leading franchise in peso-denominated DCM has boosted Bancolombia’s profile. Rodrigo Velásquez, president of Bancolombia’s investment bank, notes that for the first time ever corporate bond supply has surpassed government bonds. “In 2009 so far, we’ve seen $5.5 billion [equivalent] in corporate issuance, versus around $5.0 billion in local TES,” he says. November/December 2009 LatinFinance 39

Latin Finance - November/December 2009

Table of Contents for the Digital Edition of Latin Finance - November/December 2009

Latin Finance - November/December 2009
Contents
Latam-China Flows
Petrobras Interview
Best Boutiques
Banks of the Year 2009
Itau Unibanco Interview
Mexico: How to Capitalize on Crisis
Colombia: Local Shop Repels Foreign Pretenders
Chile: Pefecting the Art of Retail
El Salvador: A Foreign-owned Bank Dominates
Infrastructure & Energy Awards
Private Equity Fundraising
Latin Finance - November/December 2009 - Latin Finance - November/December 2009
Latin Finance - November/December 2009 - Cover2
Latin Finance - November/December 2009 - Contents
Latin Finance - November/December 2009 - 2
Latin Finance - November/December 2009 - 3
Latin Finance - November/December 2009 - 4
Latin Finance - November/December 2009 - 5
Latin Finance - November/December 2009 - 6
Latin Finance - November/December 2009 - 7
Latin Finance - November/December 2009 - 8
Latin Finance - November/December 2009 - 9
Latin Finance - November/December 2009 - 10
Latin Finance - November/December 2009 - 11
Latin Finance - November/December 2009 - 12
Latin Finance - November/December 2009 - 13
Latin Finance - November/December 2009 - 14
Latin Finance - November/December 2009 - 15
Latin Finance - November/December 2009 - 16
Latin Finance - November/December 2009 - 17
Latin Finance - November/December 2009 - Latam-China Flows
Latin Finance - November/December 2009 - 19
Latin Finance - November/December 2009 - 20
Latin Finance - November/December 2009 - 21
Latin Finance - November/December 2009 - 22
Latin Finance - November/December 2009 - 23
Latin Finance - November/December 2009 - Petrobras Interview
Latin Finance - November/December 2009 - 25
Latin Finance - November/December 2009 - 26
Latin Finance - November/December 2009 - 27
Latin Finance - November/December 2009 - Best Boutiques
Latin Finance - November/December 2009 - 29
Latin Finance - November/December 2009 - 30
Latin Finance - November/December 2009 - 31
Latin Finance - November/December 2009 - Banks of the Year 2009
Latin Finance - November/December 2009 - 33
Latin Finance - November/December 2009 - 34
Latin Finance - November/December 2009 - Mexico: How to Capitalize on Crisis
Latin Finance - November/December 2009 - 36
Latin Finance - November/December 2009 - 37
Latin Finance - November/December 2009 - 38
Latin Finance - November/December 2009 - Colombia: Local Shop Repels Foreign Pretenders
Latin Finance - November/December 2009 - Chile: Pefecting the Art of Retail
Latin Finance - November/December 2009 - 41
Latin Finance - November/December 2009 - 42
Latin Finance - November/December 2009 - El Salvador: A Foreign-owned Bank Dominates
Latin Finance - November/December 2009 - 44
Latin Finance - November/December 2009 - 45
Latin Finance - November/December 2009 - 46
Latin Finance - November/December 2009 - 47
Latin Finance - November/December 2009 - 48
Latin Finance - November/December 2009 - 49
Latin Finance - November/December 2009 - Infrastructure & Energy Awards
Latin Finance - November/December 2009 - 51
Latin Finance - November/December 2009 - 52
Latin Finance - November/December 2009 - 53
Latin Finance - November/December 2009 - 54
Latin Finance - November/December 2009 - Private Equity Fundraising
Latin Finance - November/December 2009 - 56
Latin Finance - November/December 2009 - Cover3
Latin Finance - November/December 2009 - Cover4
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