NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a 'BBB-' long-term Issuer Default Rating (IDR) to Banco de Bogota (Bogota). The Rating Outlook is Stable. A full list of Bogota's ratings follows at the end of this release.
Bogota's Viability, Individual and IDRs reflect its strong franchise, clear expansion strategy, sound asset quality and reserves, consistent performance, ample, diversified funding and adequate capital base and parent support. Fitch's view of Bogota's creditworthiness is tempered by the bank's product/segment concentration in each of its core markets, the challenges that the cross-border integration BAC Credomatic (BAC) poses and its impact on operating costs.
Given its size and systemic importance, Bogota is likely to receive support from Colombia's central bank, should it be required. The central bank's ability to provide such support is reflected in Colombia's sovereign rating (rated 'BBB-' by Fitch) and drives Bogota's support floor.
An uneventful integration of BAC, that would result in higher synergies, better diversification in Colombia and Central America and sustained performance, would be credit positives for Bogota. On the other hand, a dismal performance, higher leverage and/or severely weaker asset quality that would erode the bank's capital/reserves cushion would pressure its Viability Rating and IDRs downwards.
Boasting over 140 years of history, Bogota is Colombia's second largest bank with a market share of about 15.3% by assets. Traditionally oriented to the corporate segment, the bank has recently diversified into the retail business and expanded abroad.
Following the trend of some of its regional peers, Bogota acquired (in December 2010) BAC, a retail-oriented bank with operations throughout Central America that adequately complements Bogota's traditional business. This prominent acquisition brings great growth potential but is not without risks due to the size and complexity of BAC and its operating environment.
Boosted by Colombia's sound economic performance and reflecting quite conservative credit and risk management policies, Bogota boasts a very good asset quality (30-day PDL's - including BAC - stood at 2.3% at June 2011, 'CDE's' were 3.3%) that has consistently improved in the past few years and is complemented by sufficient loan loss reserves (1.3 times [x]).
Driven by organic and inorganic growth, Bogota's performance has been quite consistent over the last few years and through the crises. Operating expenses have increased after the integration of BAC but credit cost declined in relative terms thus underpinning profitability that in spite of declining slightly remains around 2.9% for the ROAA and 22% for the ROAE.
Bogota's credit/risk culture and policies are quite conservative; by its own account, Bogota is seldom the first one to the market with new products but, remains a sound competitor with a strong know how of is core business. Product development and risk management are also sound in BAC and cross-fertilization should allow Bogota and BAC to diversify their loan portfolios and further reduce customer/product concentration.
Bogota enjoys a wide deposit customer base - more so after acquiring BAC - and quite moderate funding costs; customer deposits fund Bogota's loan portfolio in its entirety and the bank has ample access to Colombia's capital markets. Furthermore, it enjoys the full support of its shareholders as illustrated during the acquisition of BAC. Bogota plans to issue bonds in the international markets.
Fresh capital injections of about USD1.2 billion helped Bogota finance the acquisition of BAC, restore its capital and boost its capital ratios (adjusted for goodwill). Bogota's eligible capital is not among the strongest in this rating category but must be seen in line with its adequate reserves, good asset quality, sound earnings generation, conservative policies and positive economic background.
Fitch has assigned the following ratings to Banco de Bogota:
--Long-term Issuer Default Rating, 'BBB-'; Outlook Stable;
--Short-term IDR, 'F3';
--Long-term local currency IDR, 'BBB-'; Outlook Stable;
--Short-term local currency IDR, 'F3';
--Individual Rating, 'C';
--Viability Rating, 'bbb-';
--Support Rating, '3';
--Support Rating Floor, 'BB+'.
Additional information is available on www.fitchratings.com. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Financial Institutions Rating Criteria' (Aug. 16, 2011).
Applicable Criteria and Related Research:
Global Financial Institutions Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=649171
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