Bancolombia 3Q 2017 Net Profit Dips 1% Year-on-Year; 2.5% GDP Growth Seen in 2018
Medellin-based banking giant Bancolombia – Colombia’s biggest bank and now a growing multinational – reported October 26 that its third quarter (3Q) 2017 net profit dipped 1% year-on-year, to COP$1.7 trillion (US$564 million).
However, Bancolombia’s gross portfolio grew 6.5% year-on-year to COP$158 trillion (US$52 billion), of which 25% corresponds to its international operations including Banistmo (Panama), Banco Agrícola (El Salvador) and BAM (Guatemala).
The ratio of 90-day past-due loans rose to 2.9%, up from 2.0% in 3Q 2016. But provisions for this portfolio are 161%, which “guarantees solidity in the midst of a challenging environment,” according to the company.
“Recognizing the current economic outlook, the bank continues its growth path,” added Bancolombia president Juan Carlos Mora. However, “provisions charges were increased in order to maintain a prudent coverage index and keep the balance-sheet solid,” Mora said.
As of September 2017, Bancolombia Group had 9,707 correspondent banking outlets, 5,504 ATMs, and reported 6.8 million downloads of its “App People” banking application as well as 50,000 “App Companies” users.
“The growth in these channels makes it more efficient for more people and companies to access the financial system in all the geographies in which Bancolombia is present,” according to the company.
Another highlight was the growth in international capital markets, according to the company. For example, Banistmo achieved placements in the international bond market of US$500 million, with bond-buyer demand exceeding bond supply by 450%. “With this issue, the four banks of the Group have already successfully entered the international capital markets, managing to diversify their funding structure,” according to the company.
In addition, “Bancolombia Group has enough capital to face the challenges of the coming years. Primary capital reached 10.3%, which represents more than twice the minimum required. Likewise, solvency [ratio] was 13.4%,” according to the company.
In a subsequent October 27 conference call with investment analysts, Bancolombia chief economist Juan Pablo Espinosa added that Colombia’s economic growth this year continues to be sluggish, with year-on-year GDP seen rising by only 1.9%.
However, productivity is expected to rise, and when combined with improved global demand and likely reductions in central bank interest rates, full-year 2018 GDP is seen rising by 2.5%, he said.
Full-year 2017 inflation is now seen at 4%, while full-year 2018 inflation is likely to dip to 3.5%, he added.
Colombian exports are forecast to grow by 20% this year and another 5% next year thanks to the relatively strong U.S. dollar versus the Colombian peso, combined with recoveries in global demand.
While the national government is likely to meet its fiscal deficit target of 3.6% of GDP this year, the government will need to take more austerity steps in 2018 — and achieve more reforms in 2019 in order to keep fiscal deficits in check, he cautioned.