Fitch: Colombian Banks Face Greater Challenges from Recent Acquisitions Abroad
NEW YORK--(BUSINESS WIRE)--After a series of successful cross-border acquisitions over the past few years, the transactions carried out more recently present greater challenges for Colombian banks, according to a Fitch Ratings report published today.
'While Bancolombia and Banco de Bogota's first acquisitions in Central America were well capitalized and highly profitable with financial ratios similar to or even exceeding the Colombian banks' metrics, the entities involved in the second acquisition wave at this point may lack such stellar performance,' said Rene Medrano, Senior Director and Central American banking analyst in Fitch's Latin America Group.
Although the Colombian banks' recent expansion abroad further consolidates their footprint in Central America, it also imposes challenges on the acquirers, temporarily pushing capital ratios toward the lower end of their respective rating categories.
'Given the scale and speed at which capital has been deployed over the past few years and the already high goodwill undermining the overall quality of the banks' capital bases, there is little room for additional acquisitions in the near term without it affecting the acquirers' credit profile and ratings,' said Diego Alcazar, Director and Colombian banking analyst in Fitch's Latin America Group. 'However, some groups have recently made vested efforts to enhance their capital bases and this has helped mitigate some of our concerns,' added Alcazar.
Colombian banks' management teams have a proven track record in acquiring and successfully integrating operations, both in their home country and abroad. While Davivienda has already achieved notable improvements in some of its Central American operations since their acquisition in late 2012, similar trends are expected for Bancolombia's and Banco de Bogota's most recent acquisitions.
However, any additional transactions in the near future could stretch managerial and execution capacity beyond a reasonable level and jeopardize the integration of the most recent acquisitions. Therefore, the current process will require close monitoring and improved management tools to better gauge the different trends and risks overseas.
For more information, the full report titled 'Colombian Banks' Expansion Abroad - Additional Acquisitions more Challenging' is available on the Fitch web site at www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research: Colombian Banks -- Expansion Abroad (Additional Acquisitions More Challenging)