Link to Fitch Ratings' Report: Peer Review: Colombian State Banks (Banco Agrario de Colombia, Banco de Comercio Exterior de Colombia, Financiera de Desarrollo Nacional and Financiera de Desarrollo Territorial)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=876885

Fitch Ratings has published a peer review of four state-owned financial institutions in Colombia: Banco Agrario de Colombia S.A. (Banagrario), Banco de Comercio Exterior de Colombia S.A. (Bancoldex), Financiera de Desarrollo Nacional S.A. (FDN) and Financiera de Desarrollo Territorial S.A. (Findeter).

While these state banks represent a relatively small portion of the Colombian financial system, they play important roles in their respective target markets (e.g. infrastructure, agriculture, export finance, and business development). Moreover, as countercyclical public sector investments, particularly in infrastructure, are expected to provide an important stimulus to economic growth, the activities of the country's development banks have taken on a higher relevance. FDN and Bancoldex in particular, are in the process of broadening their services and are poised to significantly increase portfolio and asset growth.

As part of its Nov. 20, 2015 review, Fitch affirmed the national and international ratings of the four institutions, which are aligned with the ratings of the Colombian sovereign (Long-Term IDR of 'BBB' with a Stable Outlook), reflecting Fitch's assessment of the government's willingness and capacity to provide timely support if needed. In Fitch's view, these institutions are integral arms of the state given their strategic importance in the country's National Development Plan and the state's majority ownership. Fitch has also affirmed Banagrario's Viability Rating of 'bb'.

Although administratively autonomous, the government of Colombia has influence on state banks to different degrees, manifesting primarily in the appointment of directors. In Fitch's view, FDN and Banagrario have made the most progress in improving their corporate governance standards.

The wholesale lenders, Bancoldex, FDN and Findeter, stand out for their exceptional portfolio quality, with nonperforming loans (NPLs) at or near 0%. Conversely, the retail agricultural bank, Banagrario, reported NPLs and restructured loans that were materially higher than the Colombian system average, mitigated by high collateral coverage, including government guarantees.

Financial performance also differed between the wholesale and retail institutions. While Banagrario reported stable and robust operating profits above the banking system average, the wholesale lending institutions, Bancoldex, FDN and Findeter, exhibited thinner margins. Negative loan growth at Bancoldex and FDN contributed to declines in pre-impairment operating profits at June 2015. At Findeter, a more diversified funding base drove an increase in interest expense in 2015.

Banagrario's funding is derived from a balanced mix of diversified deposits and state agency funding. Findeter and Bancoldex have made strides in diversifying funding through issuances and long-term credit lines, and, in the case of Findeter, loan securitizations. FDN, currently funded entirely by equity, is contemplating accessing international debt markets.

Fitch has published press releases for each of these banks which are available on 'www.fitchratings.com.' These RACs include each issuer's key rating drivers and sensitivities as well as the list of all rating actions taken.

Additional information is available on www.fitchratings.com

Related Research

2016 Outlook: Andean Banks (Forking Paths: Colombia, Ecuador, Peru and Venezuela)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874088

Banco Agrario de Colombia, S.A.

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=875294

Banco de Comercio Exterior de Colombia S.A.

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868586

Colombia

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866432

Financiera de Desarrollo Nacional

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=866707

Financiera de Desarrollo Territorial S.A.

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=874936

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