What Is Driving the Performance of Colombian Banks?
Colombia’s Grupo Aval, which owns banks including Banco de Bogotá, Banco de Occidente and Banco AV Villas, on Aug. 12 beat analysts’ estimates in reporting second-quarter results that CEO Luis Carlos Sarmiento Gutiérrez called the company’s “best results ever for a quarter,” with profit of nearly 950 billion pesos ($246 million). Sarmiento Gutiérrez attributed the results, in part, to a loan book that has been performing better than expected. How strong are the results of Colombian banks across the country, and what is driving their performance? How are the policies of President Iván Duque’s government, including the tax reform it is seeking, affecting the country’s banks? What are the major headwinds that Colombian banks are facing?
Alberto Bernal, chief emerging market and global strategist at XP Investments: “Colombia suffered its worst economic contraction in modern history last year. However, official data shows that the stock of the country’s nonperforming loans (NPLs) increased by only 11 percent since the beginning of the pandemic and that it now amounts to just 4.9 percent of the banking system’s aggregate loan portfolio. During the ‘good growth years’ of the mid-2000s and around 2012-2013, when the Colombian economy consistently expanded more than 5 percent annually, the NPL ratio stood at about 2.5 percent of the total stock of loans. If someone had asked me in April 2020 where Colombia’s nonperforming loan portfolio would be in the aftermath of the pandemic and the subsequent lockdowns, I would have argued that it would easily be more than 16 or 18 percent. The country’s…”Read More
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