Colpatria to benefit from GE's know-how after taking full control of bank unit - analysts

Thursday, May 26, 2011

Colombian conglomerate Colpatria's banking unit Banco Colpatria will benefit from the know-how it acquired through its partnership with the financial arm of General Electric (NYSE: GE) to grow in the largely untapped potential of the local financial sector, analysts told BNamericas.

On Thursday, the Colombian holding announced it was taking full control of Banco Colpatria as it closed a deal to buy back the 49.7% stake that GE Capital had in the bank.

In March, BNamericas reported that Colpatria had agreed to buy back the stake it did not own in its banking unit for some US$550mn, as a due diligence valued the bank at US$1.1bn.

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The price would represent 2.1x price-to-book value (P/BV) and 11.3x the earnings of 2010, a price that analyst at local brokerage Bolsa y Renta David Peláez sees as attractive.

GE Capital built its stake in Colpatria since 2007 through direct purchases and tender offers, and had the option to acquire an additional up to 25% stake in the bank by 2012.

"The four-year partnership leaves significant contributions in terms of management, risk control and technology [for Colpatria]," Felipe Toro, senior equity analyst at Colombian brokerage InterBolsa, told BNamericas.

Colpatria is Colombia's eighth largest bank with a 4.1% asset market share. It was the system's third most profitable bank in unconsolidated terms last year, with a 20.6% ROE.

The deal closing is subject to regulatory approval, GE said in a press release. Both parties expect to seal the transaction June 30, the statement reads.


"I see the deal as a strategic purchase for the Pacheco family [Colpatria's owners], who will now be able to carry out deals with investors or foreign banks that might want to enter the Colombian market," Leonardo Rueda, equity analyst at local brokerage Serfinco, told BNamericas.

"I think the best way for Colpatria to grow would be through a strategic partnership with a foreign bank," he said, adding that the local market's potential allows for significant growth in lending across all segments.

Rueda also said it was too soon to tell how the deal would affect Colpatria's capital position, but noted that the group has not ruled out a share issue to return to the local stock market.

Colpatria was delisted from the local stock exchange after inking the deal with the GE unit four years ago.

The Colpatria conglomerate also operates in the insurance and construction sectors.


The sale of GE's investment in Banco Colpatria is in line with the US company's global strategy of focusing investment on strengthening and consolidating its position in the industrial sector, GE national executive for Colombia and Venezuela Fabiola Sojet said.

GE has a direct presence in the Colombian market's energy, oil and gas, healthcare, security and water sectors, according to the company's statement.

The transaction pretty much seals GE's exit from the Latin American financial sector, where it has reduced its presence lately after being hit hard by the global financial crisis.

Last year, GE Capital completed the sale of Central American financial group BAC Credomatic to Colombian holding Grupo Aval for US$1.9bn and reached an agreement to sell its Argentine GE Money unit to local bank Banco Supervielle.

GE Capital also completed in April this year the sale of its Mexican mortgage business to Spain's Santander (NYSE: STD) for US$2bn.