Bancolombia 2Q 2018 Net Income Dips 9.5% Year-on-Year

Medellin-based international banking giant Bancolombia reported August 2 that its second quarter (2Q) 2018 consolidated net income dropped 9.5% year-on-year, to COP$592 billion (US$204 million), from COP$653 billion (US$225 million) in 2Q 2017.

Despite the year-on-year decline, the 2Q 2018 profits were 13% better than first-quarter (1Q) 2018 profits, according to the company.

As of June 30, 2018, Bancolombia’s assets totaled COP$204 trillion (US$70 billion), up 1.8% compared to 1Q 2018 and up 0.4% compared to 2Q 2017, according to the company. Bancolombia’s liabilities totaled COP$180 trillion (US$62 billion), up 1.6% compared to 1Q 2018 but down 0.1% compared to 2Q 2017.

During the latest quarter, the Colombian peso depreciated 5.4% against the U.S. dollar, whereas in the prior 12 months, the peso appreciated 3.9% against the dollar.

“In 2Q 2018 there was a growth in the gross portfolio of 2.9% compared to 1Q 2018,” while “compared to 2Q 2017, the annual growth of the peso portfolio was 8.7% while the dollar portfolio decreased 2.4%,” according to Bancolombia.

“At the end of 2Q 2018, operations at [subsidiaries] Banco Agrícola in El Salvador, Banistmo in Panama and BAM in Guatemala represented 25% of the total portfolio balance,” according to the company.

“At the same time, the portfolio denominated in currencies other than the Colombian peso — generated by operations in Central America, the off-shore operation Bancolombia Panama and the U.S. dollar portfolio in Colombia — represented 33.4% of the total portfolio and had an increase of 7.4% for the quarter (expressed in pesos), mainly explained by the depreciation of the peso versus the dollar,” the company added.

Total reserves (provisions in the balance sheet) for delinquent loans increased 5.4% during the quarter, “equivalent to 5.8% of the gross portfolio at the end of the quarter,” according to Bancolombia.

At the end of 2Q 2018, Bancolombia’s investment portfolio declined 6.7% compared to 1Q 2018, but rose 2.2% compared to 2Q 2017. “The investment portfolio consists mainly of debt securities, which represented 70.5% of total Bancolombia investments and 5.4% of assets at the end of 2Q 2018,” according to the company.

At the end of 2Q18, the portfolio of investments in debt securities had a duration of 19.6 months and a yield to maturity of 4.7%.

The consolidated loan portfolio in 2Q 2018 grew 3.2% compared to 2Q 2017 “The annual growth reflects a moderate demand for credit in Colombia,” according to Bancolombia.

Net interest income fell 3.3% compared to 2Q 2017, according to the company.

“This decrease is mainly explained by the impact of the adoption of IFRS-9 [accounting standards] in 2018, which reduced revenue by COP$106 billion [US$36 million] compared to 2Q 2017, as well as margin compression during the year,” according to Bancolombia

Net annualized interest margin in the latest quarter was 5.9%. “The margin increased six basis points in the quarter, and decreased 31 basis points compared to 2Q 2017, impacted by the fall in net interest income due to the adoption of IFRS 9, as well as the reductions in the reference rate of the central bank in Colombia,” according to Bancolombia.

Provision charges against loans were COP$972 billion (US$335 million) and the 90-day past due loan coverage indicator was 157.3%. “Provision charges increased 23.1% compared to 2Q 2017 and 11.1% compared to 1Q 2018,” according to Bancolombia. “This level of provisions allows maintaining a solid coverage index in the middle of a challenging environment.”

The past due portfolio is “explained mostly by corporate clients,” according to the company.

“Net fees were COP$645 billion [US$22 million] and grew 4.8% compared to 2Q 2017. Debit and credit cards, payments and collections and fiduciary activities are the [venues] that contribute the most to this positive annual performance,” the company added.

Income taxes dipped to COP$195 billion (US$67 million) in 2Q 2018, down 37.3% from 1Q 2018, and down 30.6% compared to 2Q 2017.

“These variations are mainly explained by the depreciation of the peso versus the dollar in the second quarters of 2017 and 2018, since the operation in Colombia, which has the highest tax rate, represents a lower proportion in the consolidated results,” according to Bancolombia.

As of June 30, 2018, the Bancolombia Group had 31,000 employees, 1,045 branches, 5,746 ATMs, 11,269 correspondent-bank locations and more than 12 million customers.