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Fitch Affirms Bancolombia S.A. at 'BBB'; Outlook Stable



  Fitch Affirms Bancolombia S.A. at 'BBB'; Outlook Stable

Business Wire

NEW YORK -- September 19, 2013

Fitch Ratings has affirmed Bancolombia S.A.'s Viability Rating (VR) at 'bbb'
and its Issuer Default Rating (IDR) at 'BBB'. The Rating Outlook is Stable.
Fitch has also affirmed Bancolombia's National Ratings. A complete list of
rating actions is provided at the end of this release.

KEY RATING DRIVERS:

VIABILITY AND ISSUER DEFAULT RATINGS

Bancolombia's local and foreign currency IDRs are driven by its VR of 'bbb'
which reflects its strong franchise, solid balance sheet, consistent, sound
performance, robust asset quality and reserves, ample deposit base and access
to funding. The VR also reflects the expected decline in capital and
profitability ratios due to the bank's inorganic expansion and their gradual
recovery.

Bancolombia is a top contender in its core markets (22% market share by assets
in Colombia, 30% in El Salvador at June 2013) and an increasingly active
competitor in Central and South America. As a universal bank serving all
segments, the bank enjoys a strong competitive position and a diversified and
quite stable revenue base.

In El Salvador, Banco Agricola has consolidated its leading position and has
been able to improve its performance in spite of limited growth. The bank has
a strong franchise, good asset quality, adequate reserves, strong capital and
sound performance. Besides improving its contribution to Bancolombia's bottom
line, the bank is also performing an important role in Bancolombia's expansion
into the region, beyond El Salvador.

Bancolombia boasts a well-balanced business with loans diversified by
geography, by industry, by product and by obligor. Little undesired
concentrations, adequate asset quality, ample reserves and sufficient
liquidity reflect a well-diversified deposit base and proven access to capital
markets.

Strong earnings generation, resilient margins and controlled operating costs
contribute to Bancolombia's performance while sound asset quality and adequate
risk management contain credit costs. In spite of changing external conditions
and market volatility which affected the bank's investment portfolio
valuation, Bancolombia's profitability has historically compared very well
with its regional peers.

In spite of rapid growth into riskier segments and portfolio seasoning,
Bancolombia's asset quality metrics showed signs of stabilization during 2012
and 1H'13 and remain sound, with past-due loans (90-day PDLs) reaching 1.5% at
June 2013. Moreover, the bank maintains ample reserves that cover PDLs 3.1x.

Given its sizable market share the bank enjoys a well-diversified, stable and
relatively low-cost deposit base providing flexibility to grow. In addition,
the bank has proven access to local and global capital and debt markets.
Accordingly, the loan-to-deposits ratio reached 109% at June 2013 as the bank
actively uses capital markets to better match its assets and liabilities tenor
profile.

Fitch's view of Bancolombia's creditworthiness is tempered by its heightened
competitive environment and the execution risk that any merger or acquisition
entails. In addition, the bank's acquisitions will somewhat stretch the bank's
capital - Fitch expects Bancolombia's Fitch Core Capital ratio (FCC) to
decline about 400 basis points (bps) on day one of the announced acquisition -
but positive prospects in its two main markets, continued profitability and
moderate organic growth should allow it to replenish its capital and bring FCC
closer to 10% within a 24-30-month period.

On Feb. 19, 2013 Bancolombia announced that it would acquire 100% of the
common shares and 90.1% of the preferred shares of HSBC's banking and
insurance operations in Panama for $2.1 billion. In addition, Bancolombia
announced on Dec. 18, 2012 that it would acquire 40% of the holding company of
Banco Agromercantil (BAM) for $216 million through Bancolombia Panama (BP), a
wholly owned subsidiary of Bancolombia.

The expected expansion of Bancolombia's activities in Panama through the
acquisition of HSBC Panama will further enhance the 'core' characteristics of
the Panamanian operations of Bancolombia in Panama and Central America.

In Fitch's opinion, the bank's expansion within Colombia and abroad would
deepen its revenue diversification and support its revenues while a positive
economic background fosters healthy growth. Bancolombia would maintain a
strong balance sheet and performance while solvency metrics would gradually
revert to the average of similarly rated peers.

SUPPORT AND SUPPORT RATING FLOOR

Bancolombia's Support Rating and Support Rating floor reflect its systemic
importance. Support from Colombia's central bank would, in Fitch's opinion, be
forthcoming, if needed. Colombia's ability to provide such support is
considered moderate and reflected in its sovereign rating ('BBB-' with a
Positive Outlook).

SENIOR UNSECURED AND SUBORDINATED DEBT

The ratings of Bancolombia's senior unsecured and subordinated debt are driven
by the bank's IDR. The plain-vanilla subordinated debt is rated one notch
below the bank's IDR reflecting a potentially higher loss in the event of
default given its subordinated nature.

RATING SENSITIVITIES

VIABILITY AND ISSUER DEFAULT RATINGS

Bancolombia's VR and IDRs may be negatively affected if the bank fails to
replenish its FCC according to the expected projections (expected FCC Ratio of
around 10% by 2015), an unexpected deterioration of its impaired loans ratio
above 4%, or a reduction of its ample loan loss coverage. In addition, a
weaker profitability below the recent average (ROAA around 1.7%) could hinder
its ability to replenish its capital base and may trigger a negative rating
action.

Bancolombia's IDRs and VRs would be upgraded if the bank completes uneventful
mergers and is able to sustain its performance while maintaining its sound
balance sheet and restoring its FCC ratio toward the median of similarly rated
banks.

Even when integration risk of the acquired entities exists, as it does in any
other M&A transaction, a solid history of successful integration in Colombia
and abroad and the good financial profile of the acquired entity suggests that
these risks are manageable for Bancolombia. Alternatively, a failure to duly
integrate the acquired business may trigger a negative rating action on
Bancolombia's VR and IDRs.

SUPPORT AND SUPPORT RATING FLOOR

Bancolombia's Support and Support Rating Floor ratings would be affected by a
change in Colombia's ability or willingness to support the bank.

SENIOR UNSECURED AND SUBORDINATED DEBT

The ratings of Bancolombia's senior unsecured and subordinated debt would move
in line with the bank's VR/IDR.

Fitch has affirmed the following ratings for Bancolombia S.A.:

--Long-term foreign currency IDR at 'BBB'; Outlook Stable;

--Short-term foreign currency IDR at 'F2';

--Long-term local currency IDR at 'BBB'; Outlook Stable;

--Short-term local currency IDR at 'F2';

--Viability rating at 'bbb';

--Support rating at '3';

--Support rating floor at 'BB+';

--Senior unsecured debt at 'BBB'.

--Subordinated debt at 'BBB-';

--National long-term rating at 'AAA(col)'; Outlook Stable

--National short-term rating at 'F1+(col)';

--Multiples y sucesivas emisiones de bonos ordinarios de Bancolombia con cupo
global por $1.5 billones National rating at 'AAA(col)'.

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);

--'Assessing and Rating Bank Subordinated and Hybrid Securities' (Dec. 05,
2012).

Applicable Criteria and Related Research:

Assessing and Rating Bank Subordinated and Hybrid Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695542

Rating FI Subsidiaries and Holding Companies
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679209

National Ratings Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=595885

Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=686181

Additional Disclosure

Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=802572

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS.
PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK:
HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING
DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S
PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND
METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF
CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL,
COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM
THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER
PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS
OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN
EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER
ON THE FITCH WEBSITE.

Contact:

Fitch Ratings
Primary Analyst
Diego Alcazar, +1-212-908-0396
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Andres Marquez, + 57 1 326-9999
Director
or
Committee Chairperson
Rene Medrano, +503 2516 6610, El Salvador
Senior Director
or
Media Relations, New York
Elizabeth Fogerty, +1-212-908-0526
elizabeth.fogerty@fitchratings.com
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