FORTUNE FAVORS THE BRAVE
Colombian banks have greatly expanded their operations in Central America in the last decade. The dramatic growth of the middle class and the internationalization of the Colombian economy has propelled growth. The market has shaken the shackles of the large players who used to dominate the market, with smaller institutions expanding and widening their coverage across the region.
With 40 million potential customers and several FTAs, it is easy to see why Colombian banks are looking to the wider region. Ironically enough, one of the factors that has helped propel this expansion is Colombia's expat community. Every year, approximately $9 billion flows into Colombia's banking coffers in remittances from residents in the US. Such a balance sheet has provided a healthy cushion for regional expansion projects.
The first national bank that made the jump was Bancolombia, which opened an office in Panama in 1973. The Antioquian giant became the first Colombian company to list on the New York Stock Exchange (NYSE). Bancolombia went public in Wall Street in 1995, and its price has increased significantly over the last 30 years, surging from its $14.5 IPO to $70 in early 2013. In 2016, the stock has skyrocketed and gained nearly 40% in Q1.
Bancolombia then acquired Banco Agricola in 2007, one of the most important banks in El Salvador, paying $791 million for 100% of the company. Today, Banco Agricola has the largest client portfolio in El Salvador and recently became the first bank in the country to issue $300 million in bonds to the international market. Next, Bancolombia acquired 40% of BAM Guatemala in 2012 for $217 million and a large chunk of the firm Banistmo in Panama in 2013. After taking over the two strong and solid companies, the bank consolidated its position and has been performing well.
Bancolombia is not the only Colombian bank that has successfully ventured into other markets. Six years ago Grupo Aval also decided that Central America was fertile soil. In an interview with Colombian magazine Dinero, the Vice President for financial planning and IRO for Grupo Aval, Tatiana Uribe Benninghoff, explained how “cultural affinities” and the fact that both regions speak the same language were key factors in the decision-making process. “At that time, we realized that Central America presented an interesting opportunity to diversify risks and an interesting alternative of sustainable and profitable growth,” said Benninghoff.
In 2010, Grupo Aval acquired BAC Credomatic, a Nicaraguan group regarded as one of the largest financial conglomerates in Central America. Aval purchased a big chunk of the group for roughly $2 billion and in the last five years Credomatic has more than doubled its assets from $8 billion to $18 billion since then.
In June 2015, Aval's net worth in Central America rose to $2.4 billion. The company employs 23,000 people across seven countries through 2,400 points of sale and attends to about 3 million customers. Grupo Aval still sees opportunities for growth in markets, particularly Peru, Chile, and Mexico. The company, which is headed by the Sarmiento family, one of the richest in the world, has made it clear that all three are appealing options, although no acquisitions have been announced yet.
The latest Colombian financial newcomer to Central America was Davivienda bank, which belongs to the holding Sociedades Bolivar. In 2012, Davivienda acquired the operations of HSBC in Costa Rica, Honduras, and El Salvador. To date, the firm has nearly 810,000 customers outside Colombia and in Central America its portfolio nears $4.2 billion and gross profits in the region reached $60.1 million in 2014. In Honduras as well as Costa Rica and El Salvador, the bank is among the top market players. If current growth patterns continue, it looks like more Colombian giants will be stepping beyond their borders.
FORTUNE FAVORS THE BRAVE
TABLE OF CONTENTS
Interview
Bruce Mac Master, President, National Business Association of Colombia (ANDI)
TBY talks to Bruce Mac Master, President of the National Business Association of Colombia (ANDI), on tackling obstacles to competitiveness in the economy, participating in the global value chain, and the impact of the currency devaluation.
read articleFocus: Bank Expansion Abroad
Fortune Favors the Brave
Colombian banks have greatly expanded their operations in Central America in the last decade. The dramatic growth of the middle class and the internationalization of the Colombian economy has propelled growth. The market has shaken the shackles of the large players who used to dominate the market, with smaller institutions expanding and widening their coverage across the region.
read articleInterview
Mauricio De La Mora Rodríguez, Former President, National Hydrocarbons Agency (ANH)
TBY talks to Mauricio De La Mora Rodríguez, Former President of National Hydrocarbons Agency (ANH), on promoting investment, gaining knowledge of offshore activities, and the short-term outlook.
read articleInterview
Eduardo Jaramillo Cuervo, President & CEO, General Electric (GE)
TBY talks to Eduardo Jaramillo Cuervo, President & CEO of General Electric (GE), on the role GE intends to play in developing Colombia's energy value chain and creating a diversified matrix to support the country's energy needs for years to come.
read articleInterview
Adriana Lucia Falla, General Manager, SoftManagement S.A
TBY talks to Adriana Lucia Falla, General Manager of SoftManagement S.A., on the important elements of the company's business, its key strengths compared to its competitors, and the significance of the IT sector in Colombia.
read articleInterview
Juan Martin Caicedo Ferrer, Executive President , Colombian Chamber of Infrastructure (CCI)
TBY talks to Juan Martin Caicedo Ferrer, Executive President of the Colombian Chamber of Infrastructure (CCI), on the future of infrastructure in the country, challenges, and the role of SMEs.
read articleFocus: 4G Generation
Motoring Toward Development
Colombia is looking toward the future and improving its transportation network by renewing road infrastructure, putting an end to the nation's underdevelopment in roads and highways. The government estimates that in the next four years the 4G program will dramatically enhance the Colombian economy, shortening traveling time between cities and, consequently, reducing transportation costs.
read articleFocus: Coffee
Morning Joe
Colombian coffee has an incredible reputation for its aroma, taste, and purity, which is why it is considered one of the best quality coffees in the world. This belief has not changed despite the entrance of huge producing countries such as Ethiopia, Brazil, and Vietnam into the market.
read articleReview: Education
Gold Star For You
In recent decades, Colombia made changes to nearly every level and aspect of its education system and has been exceeding the expected results, putting the country on the right track to achieve the president's goal of becoming the best educated country in the region.
read articleReview: Tourism
It's Not Magic
A reputation for violence had for many years stunted the growth of Colombia's tourism sector. But now that the country has enormously improved its image abroad, there is little to prevent it from becoming one of the most ideal destinations in Latin America.
read article
