Bancolombia shoots for 6-6.2% NIM in 2011

Tuesday, March 8, 2011

Colombia's largest bank, Bancolombia (NYSE: CIB), aims for its net interest margin (NIM) to increase to 6-6.2% this year given higher expected interest rates, finance VP Jaime Velásquez told a conference call.

The bank's NIM decreased to 5.9% in 4Q10 compared with 6.7% in the same quarter in 2009 on lower loan and investment margins, leading net interest income to fall 18% to 851bn pesos (US$448mn).

Last month, the country's central bank unexpectedly increased the benchmark lending rate by 25 basis points to 3.25% in the face of a deteriorating inflation outlook.

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Bancolombia's economists are expecting increases in the range of 100-150 additional basis points over the course of the year, Velásquez said.

"We think that the retail loan portfolio will grow healthily, which will significantly affect our NIM, as margins in this segment are higher than on the corporate side," he said, adding that the bank is willing to take a higher exposure in the consumer segment.

The bank's loan portfolio expanded 15.6% last year to 48.6tn pesos.

Bancolombia executive VP Sergio Restrepo said the company is expecting the provisions-to-assets ratio to be between 1.5% and 1.7% over the next 10 years, without taking into consideration loan recoveries, which should remain stable.

The bank improved its non-performing loan (NPL) ratio 100 basis points to 2.9% as of end-December, compared with the same time in 2009.

"We believe we can sustain current credit quality levels as a result of an improving economy," Restrepo said.


Bancolombia reported consolidated net income of 429bn pesos in 4Q10, up 16% on the same quarter in 2009, surpassing analysts' estimates on lower than expected provisions.

According to a Deutsche Bank (NYSE: DB) report, earnings were also boosted by higher "other" income of 170bn pesos, which likely included a one-time gain of 31bn pesos related to asset sales, and a lower tax rate of 22%.

The bank's ROE rose to 22.2% in the fourth quarter, from 20.5% in 3Q10 and 15.2% in 4Q09, marking the highest level reached in the last two years.

On Monday (Mar 7), the bank's new chairman, Carlos Raúl Yepes, told press that the bank expects to grow lending 12-15% this year and will invest 416bn pesos in its Innova IT project and in new branches and ATMs.

Bancolombia had 68.1tn pesos in assets as of end-2010, of which 68% where loans. The bank owns El Salvador's largest bank, Banagrícola, and has subsidiaries in Panama, Peru and Puerto Rico.

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