The race for space in Colombia¹s banking sector has been
running for some time. In addition to the retail transactions
that make headlines, foreign interest has boosted investment
banking operations. In theory, this will benefit all bank
players but, for the moment, Bancolombia¹s unmatched scale
across product areas gives it a substantial lead over its
The follow-up business to Grupo Sura¹s $3.8 billion
purchase of ING¹s pension assets offers a strong example
for Bancolombia¹s case.
³For the Suramericana transaction, the largest that a
Colombian company has ever done, we were a one-stop shop for
them,² says Jean Pierre Serani, vice president for
origination at Bancolombia¹s investment banking arm.
³We provided credit, we provided M&A, and we
provided the equity capital market access.² Bancolombia,
headed by Carlos Raúl Yepes, undertook evaluations of
indicative and binding offers, and helped arrange lines of
credit for $1.1 billion credit with three local banks. The
process, culminating in a public equity sale, took three
months, Serani says.
³More Colombian blue chips are looking to expand
abroad,² he says. ³Also, there is going to be more
local consolidation and global private equity shops coming for
acquisitions given the growing consumer base and strong
internal demand.² Inbound M&A, seen most heavily in
2012 in the financial sector, looks set to continue. There is
intense international interest in Colombian assets and plenty
of scope for consolidation. Serani expects M&A focus will
be in the middle market of $30 million-$150 million next
The $1.8 billion-equivalent equity follow-on to raise funds
for Sura¹s purchase was done during a tricky patch in the
international markets, and raised less from public investors
than had been aimed for. That said, it was still what the
issuer described as Colombia¹s largest-ever equity raising
by a non-government entity. Bancolombia also raised $900
million-equivalent for itself in the international and domestic
equity market during the awards period.
³Equity issuance has been a little more quiet his
year,² Serani says. ³The market is still digesting
what they acquired last year. Also, the effects of the crisis
in Europe have made portfolio managers more conservative. Next
year we will probably see more activity.² Bancolombia led
the domestic DCM and ECM league tables with dollar equivalent
figures of $927 million for DCM and $2.05 billion for ECM.
Among the most compelling growth areas is infrastructure
finance and in particular its implications for Colombia¹s
fixed income market. The country¹s growth has left its
roads below regional standards something a $25 billion
government program aims to address.
However, Serani says funding it will be well beyond the
capacity of the local bank market, the traditional source of
project finance. Domestic bonds backed by government payment
certificates as have been done in Peru should be
the way forward.
³This is going to trigger the development of the
project bond market, but we need to do short-term financings
from the banks to take care of the money needed for
construction,² Serani says. LF