News Column

Fitch: Colombian Banks Face Greater Challenges from Recent Acquisitions Abroad

February 18, 2014



NEW YORK--(BUSINESS WIRE)-- After a series of successful cross-border acquisitions over the past few years, the transactions carried out more recently present greater challenges for Colombian banks, according to a Fitch Ratings report published today.

'While Bancolombia and Banco de Bogota's first acquisitions in Central America were well capitalized and highly profitable with financial ratios similar to or even exceeding the Colombian banks' metrics, the entities involved in the second acquisition wave at this point may lack such stellar performance,' said Rene Medrano, Senior Director and Central American banking analyst in Fitch's Latin America Group.

Although the Colombian banks' recent expansion abroad further consolidates their footprint in Central America, it also imposes challenges on the acquirers, temporarily pushing capital ratios toward the lower end of their respective rating categories.

'Given the scale and speed at which capital has been deployed over the past few years and the already high goodwill undermining the overall quality of the banks' capital bases, there is little room for additional acquisitions in the near term without it affecting the acquirers' credit profile and ratings,' said Diego Alcazar, Director and Colombian banking analyst in Fitch's Latin America Group. 'However, some groups have recently made vested efforts to enhance their capital bases and this has helped mitigate some of our concerns,' added Alcazar.

Colombian banks' management teams have a proven track record in acquiring and successfully integrating operations, both in their home country and abroad. While Davivienda has already achieved notable improvements in some of its Central American operations since their acquisition in late 2012, similar trends are expected for Bancolombia's and Banco de Bogota's most recent acquisitions.

However, any additional transactions in the near future could stretch managerial and execution capacity beyond a reasonable level and jeopardize the integration of the most recent acquisitions. Therefore, the current process will require close monitoring and improved management tools to better gauge the different trends and risks overseas.

For more information, the full report titled 'Colombian Banks' Expansion Abroad - Additional Acquisitions more Challenging' is available on the Fitch web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Colombian Banks -- Expansion Abroad (Additional Acquisitions More Challenging)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=734720

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.



Fitch Ratings

Diego Alcazar

Director

+1-212-908-0396

Fitch Ratings, Inc.

One State Street Plaza

New York, NY 10004

or

Rene Medrano

Senior Director

+503 2516 6610

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526 (New York)

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Business Wire


Story Tools