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WorldFebruary 1 2013

Banks to watch in 2013, Corpbanca

The Banker has identified 13 banks to keep an eye on in the coming year based on a variety of factors. Chile-based Corpbanca made a daring move into Colombia in 2012, making it one to watch in 2013.
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When a bank expands into a foreign market that is less stable than its own, there are two ways to look at it: focus on the risks, or focus on the new growth potential.

Last year marked just how big Corpbanca’s expansion appetite is for Colombia, a country that has a fast expanding consumer market but that poses higher economic risks than the Corpbanca’s home market of Chile. Only few months after the completion of the $1.23bn acquisition of Santander’s Colombian operations, Corpbanca announced it was going to take over a second, larger lender, Helm Bank, the eight biggest in the country by assets and seventh by Tier 1 capital, in a deal worth $1.28bn.

While rating agency Standard & Poor’s put Corpbanca on negative watch in early January this year, because of its increased exposure to Colombia (but S&P has nonetheless assigned the bank an investment grade status), The Banker prefers to focus on the Chilean bank’s increased access to a fast-growing financial market.

The smaller valuation paid for Helm Bank – which is 1.9 book value compared to 2.4 paid for Santander – is a reflection of the target’s below average return ratios. Nonetheless, Helm Bank has a good lending business and one that can only improve with cost savings – estimated to be $100m per year – and a larger number of products being made available to both Colombian and Chilean customers.

Following these acquisitions, Corpbanca is set to become the sixth largest player in Colombia in terms of lending volumes, according to government figures. The lender has a bigger prize in its sights, however, and believes it can climb up to fifth place through targeting corporate clients and high- and medium-income individuals.

Colombia has certainly increased its appeal to international banks over the past few years, thanks to the near eradication of the security issues that have afflicted the country for so long, as well as its pro-markets policies. This has meant that sellers are not so easy to find – Santander itself did not let go of its Colombian operation easily, and only eventually decided to do so because of lack of market share.

Canada’s Scotiabank – and increasingly large presence in Latin America – was another international buyer into Colombia last year, thanks to General Electric’s decision to scale down its financial division GE Capital and consequently put bank Colpatria up for sale. Whether it is well-known international name or a smaller local lender, those banks able to fund expansion in a market such as Colombia are being looked upon with envy.

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Read more about:  Americas , Chile , Americas , Colombia , Regulations