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Banco de Comercio Exterior de Colombia S.A. (BANCOLDEX)

Strategy

BANCOLDEX is likely to continue broadening the range of its products, focusing on extending more medium- to longer-term loans rather than short-term loans, and to continue expanding its loan portfolio to SMEs over the next few years. Over the years, its mandate has widened beyond export-oriented lending and has shifted toward that of a development bank. The bank has placed growing emphasis on providing services to poorer segments of society by expanding its network of intermediary lenders, its products, and its regional presence. Such activities require more time and effort to implement (compared to loans to traditional large borrowers), but they generate a modest level of added lending. In addition, they are an important part of the bank's policy mandate.

The bank is also participating in other initiatives to modernize the country, including investments in Colombia's infrastructure fund (along with multilaterals like Corporacion Andina de Fomento {CAF} and the Inter-American Development Bank {IADB} and private investors). The infrastructure fund is likely to play a key role in developing infrastructure such as roads, highways, and ports over the coming years. The bank would also like to promote the Colombian private equity sector in cooperation with multilaterals and local pension funds.

Asset Quality

One of BANCOLDEX's distinguishing characteristics has been its superior asset quality. Its gross nonperforming loans (NPLs) remain below 1% of gross loans, and loan loss reserves have risen above 3% of gross loans. (NPLs were less than 0.2% of gross loans in September 2009.) This compares favorably with the Colombian financial system as a whole, where NPLs rose to 4.1% of the total portfolio in 2008.

Table 2 Banco de Comercio Exterior de Colombia S.A./Asset Quality

  • --

    Year ended Dec. 31--

Mil. COP Loan loss provisions/average loans

2008 2.90

2007 2.08

2006 1.10

2005 0.74

2004 0.27

Loan loss reserves/loans (gross)

3.11

2.83

3.14

3.19

2.66

Nonperforming assets (gross)/loans (gross) Loan loss reserves/nonperforming assets

0.04 3,553.6

0.04 2,520.1

0.11 2,842.3

0.35 904.3

0.98 272.6

As a second-floor bank, BANCOLDEX is exposed primarily to Colombia's higher-quality financial institutions rather than to lesser-quality financial entities or exporters. The bank works with 47 financial intermediaries, which it ranks from 1 to 5 according to creditworthiness (1 being the highest quality). The board of directors established the bank's limit exposure to any one institution rated in Category 1 to 100% of BANCOLDEX's eligible equity, 600% of the borrower's equity, or 80% of the borrower's earning assets, whichever is lowest. The limits are lower for institutions rated below Category 1. Loans to institutions in Category 4 are restricted to 10% of equity, and those in Category 5 are ineligible for loans.

The bank's total assets grew 28% in 2008, while NPLs stayed below 1% of total loans (mainly a residual from the 1998 portfolio from an old bank). Total disbursements leaped to COP3.89 billion in 2008, 66% above the planned level. The resulting increase in total outstanding credit was about COP1.2 billion. Credits issued in U.S. dollars rose

Standard & Poor’s | RatingsDirect on the Global Credit Portal | January 26, 2010

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771152 | 300210593

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