Despite signs of an economic recovery at the end of 2020, weak credit demand during the year did not help Colombia’s banks. Unsecured consumer loans took a hit because of prolonged lockdowns and high unemployment rates, as rating agency Fitch recently noted in a May research note. And while commercial loans and mortgages grew last year, this was the result of excess liquidity and government subsidies — suggesting the growth of those portfolios may be temporary.
Based on The Banker’s analysis, gross total loans grew, either marginally or up to about a tenth, at all of Colombia’s largest five banks. The rates go from 0.41% for Bancolombia, the country’s largest bank both by assets and Tier 1 capital, to 9.85% for second biggest Banco de Bogotá.
The allowance for loan losses understandably rose for all big lenders too. For the largest four, the ratio between those allowances and the loan portfolios rose by between 100 and 270 basis points (bps) compared to the previous year — though for Banco Popular, the exception of the group, it rose only by about 5bps.
Non-performing loans (NPLs) were contained, with ratios rising from the previous year but still nominally not surpassing 5%. The highest NPLs-to-total loans ratio was for Banco de Occidente, at 5.02% compared to the previous 4.1%; the lowest was for Banco de Bogotá, at 3.3% versus a previous 3.1%.
Fitch notes that the rise in NPLs was contained thanks to the second wave of payment relief programmes, which have only expired this June. It expects, however, that after that date, there are likely to be material credit losses. Retail loans and exposures to vulnerable economic sectors, which include services, transportation and infrastructure, are most at risk.
Overall, the worst changes were in profit margins, which plummeted for all the banks. Returns on equity, in particular, were considerably lower for two of the five: Bancolombia and mortgage specialist Banco Davivienda.
In last year’s challenging environment, some big lenders did better than the others. Based on indicators that include loan and deposit growth, NPLs, cost-to-income ratios, returns and asset quality, Banco de Bogotá showed the highest overall performance score. It topped the growth, profitability, operational efficiency, return on risk and liquidity individual rankings.
Banco Popular, on the other hand, leads in the three remaining indicators of asset quality, soundness and leverage. It has also the second highest score for profitability and return on risk. Banco de Occidente, Banco Davivienda and Bancolombia are in third, fourth and fifth place in terms of overall performance, respectively.
While Bancolombia comfortably remains Colombia’s dominant name, Banco de Bogotá’s assets grew at a much faster pace. Furthermore, Tier 1 capital expanded for Banco de Bogotá but shrunk slightly for Bancolombia.
