"We always want to grow, either through credit or acquisitions"

Friday, July 1, 2011

As Colombia's largest bank, Bancolombia has always had the upper hand when it comes to loan growth, expansion plans and IT improvements, both in its local market and abroad.

To find out more about these plans, BNamericas spoke with Bancolombia's chairman, Carlos Raúl Yepes.

BNamericas: What is the bank's main driver for its international growth strategy?

Yepes: Our main growth driver abroad today is the high demand we're seeing from our customers for funding in US dollars. We expect to meet this demand through the US$1bn bonds we issued in May.

We carried out this debt placement because we're always prepared to seize the opportunities that the market provides us. We always want to grow, either through credit or acquisitions. We don't rule out an acquisition, but for now we're focusing on growing through our projected lending expansion, which will be funded through these bond proceeds.

BNamericas: In which countries are you seeing a higher demand for credit?

Yepes: We're seeing a very high demand for loans in Colombia - both in pesos and US dollars - but funding for the former is guaranteed thanks to our large depositor base. We're also seeing strong credit demand from our foreign customers to access funding in US Dollars, especially in Peru and Central America.

BNamericas: How do you see credit demand in Colombia performing this year?

Yepes: Today, we're forecasting 15% consolidated loan growth for this year, and bear in mind that we're being conservative. This is an upgrade compared to the 13-14% forecast we had at the beginning of the year, and it based on an improved economic outlook both in Colombia and abroad.

Loan disbursals could even grow at a faster pace toward the end of the year. But I'd rather not give a figure because if I did, I would start talking in quantitative terms. In qualitative terms, the bank's asset quality remains healthy. We have very good coverage levels, and we're also seeing lower provisions.

BNamericas: How could the country's macroeconomic factors affect the bank's earnings this year?

Yepes: We're doing very well in terms of revenues, and we hope to generate net income in line with 2010, considering that this year we'll have to make additional expenses such as a tax on financial transactions that is affecting all Colombian banks, as well as our Innova IT project, which will allow us to improve our efficiency.

BNamericas: What is Innova's goal in concrete terms?

Yepes: The bank's consolidated efficiency ratio today stands at 57%, and it could deteriorate over the rest of the year and in 2012, considering the aforementioned expenses. Innova is a significant project, as it will review and renew the whole IT platform and technological architecture of the Bancolombia group. We hope that will help us improve our efficiency ratio to 54-55% by 2012 or 2013.

We will invest some 416bn pesos [US$235mn] in several projects, such as Innova, hardware modernization, opening and or revamping branches and broadening our ATM network, among others.

BNamericas: What are the bank's current plans in Peru?

Yepes: We're not looking at acquiring a bank in Peru, nor are we in talks to form a partnership today. Our leasing, trust and renting operations in that country are doing very well, and we aim at increasing our presence in those market segments. But we're not looking to buy a bank in Peru or start a bank from scratch.

BNamericas: But are you planning on requesting a banking license in that country?

Yepes: For now, we're not considering turning our current operations there into a bank.

BNamericas: Is the bank considering entering other countries in Latin America or growing in those in which it already operates?

Yepes: We're always looking at opportunities. Our strategic geography runs from the US to Central America, to the Caribbean and South America. In that respect, we always have our radar on, seeking strategic targets that fit into what we do as a group - meaning entities that are leaders in the markets where they operate, that are well managed and that can add value to our shareholders. We don't have self-imposed deadlines or preferred countries. But as long as we see opportunities, we'll always be ready to go where we want to be.

About the company

Bancolombia is the largest bank in its home market. It also operates in El Salvador through the country's biggest financial conglomerate, Banagrícola, and has offshore banking subsidiaries in Panama, the Cayman Islands and Puerto Rico, as well as an agency in Miami.

The bank had 71.2tn pesos in assets and 63.5tn pesos in liabilities as of March 31.