Bancolombia SA (BCOLO), Colombia’s biggest lender, is considering refinancing its debt, including through an exchange, after selling a record $2.7 billion of bonds last year, Chief Executive Officer Carlos Raul Yepes said.
The transactions would be a “financial engineering” of debt, Yepes, 48, said. Yields on Bancolombia’s dollar bonds due 2021 have fallen 38 basis points, or 0.38 percentage point, in the past month to 5.29 percent, matching a decline by Latin American bank debt, according to data compiled by Bloomberg and Credit Suisse Group AG.
The bond offerings and this year’s sale of $941 million in shares have positioned the bank for potential acquisitions as crisis-hit European and U.S. banks shed assets in Latin America, Yepes said. The bank is weighing acquisitions in Chile, Peru, Mexico, Central America and the Caribbean, he said.
“We’ve been offered everything but there are few good opportunities,” Yepes said in an interview at the bank’s headquarters in Medellin yesterday. “We are analyzing the financial map to be ready to jump at the right opportunity.”
He declined to comment further on takeover targets beyond geographical areas the bank is searching in.
Bancolombia’s shares have fallen 5.1 percent this year, the fourth-worst performance on Colombia’s benchmark IGBC Index, which has surged 17 percent after last year’s 18 percent slump. Grupo de Inversiones Suramericana SA, Bancolombia’s parent, has gained 0.6 percent in 2012 after a 17 percent loss last year.
Colombian companies led by Grupo Empresarial Antioqueno have been taking advantage of the European debt crisis and global economic slowdown to expand abroad at lower costs.
The biggest members of Antioqueno --modeled on Japan’s so- called keiretsus in which companies have business relationships and own shares in each other-- have made purchases of about $6 billion in the past two years to expand abroad. Suramericana closed the purchase of Latin American assets from ING Groep NV (INGA) for $3.6 billion in December. Bancolombia contributed $150 million as a co-investor in the purchase.
“Bancolombia was the first of the Colombian banks to expand abroad but now there’s strategic pressure to grow in Latin America,” said David Pelaez, Medellin-based analyst at brokerage Bolsa y Renta. “Bancolombia bought the biggest player in El Salvador and may be holding out for a big fish.”
Bancolombia reported 2011 profit of 1.7 trillion pesos, a 16 percent increase from the year before, fueled in part by the sale of AFP Crecer, a pension fund manager in El Salvador. Profit in Panama increased 35 percent to 119 billion pesos while profit in El Salvador, where it owns the country’s biggest bank, Banagricola SA (BAGR), rose 46 percent to 110 billion pesos.
Bancolombia expects Panama to grant it a banking license as soon as this month so it can receive deposits amid growing competition from Colombian peers in Central America, Yepes said.
Grupo Aval Acciones y Valores SA, Colombia’s biggest banking group by assets, bought General Electric Co. (GE)’s BAC Credomatic, Central America’s second-largest bank, for $1.9 billion in 2010. This year, Banco Davivienda SA (PFDAVVND), Colombia’s third-biggest bank, agreed to buy HSBC Holdings Plc’s operations in Costa Rica, El Salvador and Honduras for $801 million.
Bancolombia is also facing growing domestic competition from foreign banks lured by the country’s fastest growth rate since 2006. Chile’s Corpbanca (CORPBANC) and Canada’s Bank of Nova Scotia agreed to buy stakes in Colombian banks last year while Brazil’s Itau Unibanco Holding SA (ITUB), Chile’s SACI Falabella (FALAB) and Ecuador’s Banco del Pichincha CA set up branches in the country.
Bancolombia raised $941 million in share sales this year, money that Yepes said he will use to expand lending and fund potential acquisitions. A week after Bancolombia sold $1 billion of 10-year bonds in May, Moody’s Investors Service (MCO) raised the bank’s foreign debt rating to Baa3, the lowest investment-grade level, matching an increase it gave to the Colombian government.
Yepes said the bank has a “full tank” after last year’s sales and will wait until Colombia’s securities regulator publishes new regulations on bank capital adequacy as soon as this month before deciding whether to sell more bonds this year.
Colombia’s government forecasts economic growth of as much 6 percent this year, in line with an estimate for last year. Gross domestic product grew 7.7 percent in the third quarter from a year earlier.
The central bank raised the benchmark lending rate to 5.25 percent on Feb. 24, the second straight monthly increase, to cool the expansion and keep inflation in check.
Bancolombia expects it will see “more moderate” loan growth of 15 percent to 20 percent in 2012, compared with 27 percent last year, Yepes said. He said he expects the central bank to lift the benchmark rate to 5.75 percent by year-end.
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