The Banker has identified 13 banks to keep an eye on in the coming year based on a variety of factors. Colombia-based Banco Davivenda has impressed was selected for its ambitious expansion strategy. 

It may come as a surprise that a bank that is the third largest in a country the size of Colombia is classified as one of The Banker’s ‘banks to watch’. However, Banco Davivienda has not only retained its strong market position of late, it has also successfully diversified its business and has more recently expanded abroad, in a move that took observers by surprise, as the lender had never previously ventured in foreign markets.

In December 2012, Davivienda completed the acquisition of HSBC’s businesses in Costa Rica, El Salvador and Honduras in an effort to bolster its global presence. The deal, announced in January 2012, was worth $800m and comes with 136 branches across the three countries – to be added to its 566 outlets in Colombia – $4.3bn of assets and loans of $2.5bn.

Furthermore, it gives Davivienda a presence in central America, following in the footsteps of its larger competitors, Banco de Bogota and Bancolombia.

Formed as a mortgage provider – its name loosely translates as ‘bank for the home’, and the image of a house is still very much present in the corporate logo – Davivienda’s lending portfolio is now dominated by corporate loans. As of May 2012, the bank’s commercial loans represented more than 60% of total net lending, while mortgages were just 7.7%. Consumer loans and microfinance represented 29% and 2.9% of the total, respectively.

Davivienda is very much taking advantage of Colombia’s growing demands from families, individuals, the expanding middle classes and, increasingly, businesses, all of which are growing on the back of the country’s bubbling economic prospects.

Looking at the last available full-year results, in 2011, Davivienda’s loans-to-assets ratio was the second highest among Colombia’s top lenders, according to The Banker’s Top 1000 World Banks ranking, at 73.54%. The bank also showed the second lowest cost-to-income ratio, at 38.72%. A broader customer base, an increasingly diversified product offering and a more efficient management system have translated into good financial results and in 2011 the bank’s pre-tax profit grew by an impressive 117.39%, dwarfing Banco de Bogota and Bancolombia’s 35.35% and 12.41%.

In total profit terms, much still has to be done to narrow the gap with the top two lenders, which closed 2011 with $969m and $1.1bn, respectively, against Davivienda’s $422m. As for the first six months of 2012, Davivienda’s pre-tax profit was 472bn pesos ($266m), 30.6% higher than the first six months of the previous year.


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