Fitch Affirms Bancolombia Panama at 'BBB'; Outlook Stable
NEW YORK -- September 19, 2013
Fitch Ratings has today affirmed Bancolombia Panama's Viability Rating (VR) at
'bb' and its Issuer Default Rating (IDR) at 'BBB'. The Rating Outlook is
Stable. A complete list of rating actions is provided at the end of this
KEY RATING DRIVERS:
ISSUER DEFAULT RATING
Fitch affirmed Bancolombia Panama's (BP) IDRs in line with those of
Bancolombia since it is highly integrated with its parent and it is considered
a core part of its business strategy in Colombia and Central America. Support
from Bancolombia should be forthcoming if needed and Bancolombia's ability to
support BP is reflected in its ratings; Bancolombia's IDR is 'BBB' with a
Bancolombia Panama's viability reflects the bank's success in restoring its
capital base to levels that compare better with its peers in similar ratings
thanks to sustained growth, profitability and capital retention. BP maintained
an adequate performance, efficiency and improved diversification on both sides
of the balance sheet.
Tight cost control and economies of scale foster lean operations in Panama and
El Salvador. However, BP's efficiency ratios have somewhat declined as margins
tightened; nevertheless, they continue to compare well to its local and
BA is a well-positioned bank that runs an efficient and profitable universal
banking business in El Salvador. By acquiring BA, BP gained in geographical
diversification. In addition, it increased its business lines, revenue
sources, product offering and funding base.
BP was able to maintain a sound performance during the past years benefiting
from a positive operating environment in its core market and a dominant
franchise in El Salvador, even though at December 2012 show a decrease
explained by the Guatemalan loans sell to its parent. Figures are likely to
improve as macroeconomic conditions stabilize in the Central American region
and loans portfolio increase; in addition, BP managed to restore the amount of
loans by June 2013.
The spike in PDLs observed in 2009-2010 was reversed in 2011 as PDLs reached a
minimum ratio of 2.1% at YE11 as El Salvador's economy stabilized and the
bank's sound risk management policies helped contain asset deterioration. At
December 2012 the ratio shows deterioration to 3%, explained in part by the
22% decrease in gross loans after the Guatemalan loans sale. At June 2013 and
explained in part by loans increase, the trend of this ratio is reversed to
2.4%, which is likely to stabilize into 2013-2014.
BP's funding is better diversified after BA's acquisition and shows great
stability. The bank maintains sound levels of liquidity between its cash,
deposits in banks and investment portfolio.
BP maintains adequate loan loss reserves that cover PDLs at 115% at June,
2013. Along with BP's sustained profitability, reserves constitute an
additional cushion against unexpected losses.
BP's tangible equity to tangible assets ratio was depressed after the
acquisition of BA. Sustained profitability (i.e. capital generation) and sound
growth in its core market have contributed restore capital and dilute the
weight of goodwill. Capital has grown at a rate of 100-150bp per year since
2008, reaching a peak at December 2012 and stabilized at around 8%, a level
that is in line with that of its regional peers.
ISSUER DEFAULT RATINGS
BP's IDRs could be upgraded if Bancolombia's IDR is upgraded; the IDRs would
move in line with Bancolombia's rating.
The viability rating could be pressured if BP's asset quality deteriorates,
resulting in higher loan loss provision needs and eroding the loan loss
reserve and capital cushion. On the other hand, the viability rating could
improve if BP is able to maintain its performance while improving its capital
and reserve cushion and better diversify its balance sheet.
Fitch has taken the following rating actions on Bancolombia Panama:
--Long-term foreign currency IDR affirmed at 'BBB'; Outlook Stable;
--Short-term foreign currency IDR affirmed at 'F2';
--Viability rating affirmed at 'bb';
--Support rating affirmed at '2';
--Long Term Deposits affirmed at 'BBB';
--Short Term deposits affirmed at 'F2'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 15, 2012);
--'National Ratings Criteria' (Jan. 19, 2011);
--'Rating FI Subsidiaries and Holding Companies' (Aug. 10, 2012).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
National Ratings Criteria
Rating FI Subsidiaries and Holding Companies
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Diego Alcazar, +1-212-908-0396
Fitch Ratings, Inc.
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New York, NY 10004
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