Bancolombia aims to maintain NIM in 2011 on higher expected interest rates

Thursday, May 5, 2011

Bancolombia (NYSE: CIB) will attempt to maintain its net interest margin (NIM) at around 6% this year, as Colombia's central bank is expected to continue its restrictive monetary policy by raising interest rates, chairman Carlos Raúl Yepes told a conference call.

The bank's NIM fell to 5.9% in 1Q11 from 6.1% in the same period in 2010.

Bancolombia is expecting expenses to rise 15% in 2011 due to investments in IT renovation as well as higher taxes, but this will likely to go directly to equity and not pass through the income statement.

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IT investments of 250bn pesos (US$142mn) annually over the next few years are expected to significantly lift the bank's efficiency ratio toward 2014-15, the executive said. That ratio, measured as operating expenses to net operating income, stood at 61.6% as of end-March.

Fee income is likely to grow only around 5% this year partially due to the sale of its pension business in El Salvador and the reduction of certain service fees, Yepes said.

Bancolombia posted a consolidated 350bn-peso profit in 1Q11, up 3% on the same period in 2010 but below expectations due to disappointing fees and expenses, as well as weaker FX and derivative gains from the appreciation of the Colombian peso.

The figures did not include revenues from pension fund and insurance assets in El Salvador that were sold last year.

Bancolombia is the country's largest bank. In 2007 it acquired El Salvador's biggest lender, Banagrícola.