Bancolombia sees NIM improving over next quarters on interest rate hikes

Thursday, August 4, 2011

Colombia's largest bank, Bancolombia (NYSE: CIB), expects its net interest margin (NIM) to increase from the 6.2% posted in 2Q11 over the rest of the year and in 2012, given the central bank's hawkish monetary policy.

The Colombian monetary entity has hiked the benchmark interest rate six times so far this year, to 4.5%, and market observers expect additional increases to end the year at 5.0%.

Bancolombia will be able to absorb higher funding costs thanks to its strong deposit base, chairman Carlos Raúl Yepes told a conference call.

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The lender saw high demand among corporate clients in the second quarter, both for local currency and US dollar-denominated loans.

And while loan growth in Colombia will likely be restricted by the central bank's monetary policy, Bancolombia expects to finish this year with 20% annual loan growth, Yepes said.

Despite strong loan growth, Bancolombia's non-performing loan (NPL) ratio hit 2.6% as of end-June, the lowest level in almost five years.

The bank was adopting more cautious lending policies to preserve its healthy asset quality, Yepes said.

Bancolombia booked a 386bn-peso (US$218mn) profit in 2Q11, up 32% compared to the same period 2010 and in line with analysts' estimates.

Strong revenues and lower provision charges offset higher IT expenses in the quarter.

"We think the results should be fairly well received by the market, as the mostly solid operating trends point to continued strong growth potential," Deutsche Bank (NYSE: DB) said in a report.

To read the bank's full earnings release, go to this link