Best Bank Colombia: Extending Reach

Nov 1, 2009

Despite 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. 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...

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