Commercial Loan Rates 2015Industrial loan interest 2015
"These dynamics cancel out the surplus spreads and increase the risks of interest losses on bonds, namely subordinated bonds." A number of other determinants make CMBS 1.0 and 2.0 trades more susceptible to adverse exchange rates. For example, some of these operations involve interest rates swaps at the credit line management stage.
Despite a weakening of the Columbian economies in recent years, the country's bank sectors remain robust. Most of the effect is felt in the outside world, in particular through changes in currency rates. Meanwhile, credit expansion continued to be relatively robust until mid-2016, when the combination of low levels of capital spending and higher interest rates had a significant adverse effect on commercial credit.
Nevertheless, despite the slowdown in 2016 in the rate of increase in gross domestic product, the proportion of the banking and insurance sub-sector rose from 6% to 6.5%. Loan activity is projected to accelerate as the pace of economic acceleration picks up by 2017, while other key performance measures - such as non-performing loans or NPLs, viability and capitalization - continue to be relatively resilient. From the turn of the millennium until 2014, the proportion of business loan finance provided by the individual sectors increased sharply.
It can be assumed that this upwards movement will be confirmed in the years to come as the business climate is improving and further progress towards greater fiscal integration - as well as higher investments in electronic bank infrastructures (see analysis) - continues to be made. However, since 2008, some USD 11 billion has been spent on building or strengthening our regional footprint, with a particular emphasis on the C. A. values of those securities of Europe's emerging financiers.
The Colombian Financial Supervisory Authority (Superintendencia Financiera de Colombia, SFC), the regulatory authority for the Colombian financial services branch, reports that 25 commercial financial institutions were in business at the beginning of 2017, 10 of which are wholly or partly owned by foreigners. Central bank lending is strongly focused in the hand of the country's three large and long-dominated business groups:
Bancolombia, part of the GEA, is the biggest individual institution with a 25.25% stake in all retail loans in the state. Grupo Aval is, however, slightly bigger in size since its four banks comprise 26 companies. Davivienda, part of GEB, accounts for another large proportion of retail loans, 14.
Together, these three groups of economies hold almost two third (65.81%) of retail loans in the state. Forty-five per cent of retail loans, while no other institution in the economy accounts for more than six per cent of the population. Even though the financial services industry is predominantly large local companies, there are few constraints on overseas players and several major international financial institutions are present in Colombia.
8 per cent of Colombian retail loans at the end of 2016. Among the main international actors in the economy, besides BBVA, are Banco Corpbanca, Banco GNB Sudameris, Colpatria, Santander and Citibank, which in November 2016 withdrew its plans to dispose of its retail business in the State.
Whereas more than 90% of loans in Colombia are granted by commercial banking, there are also a number of other actors. In early 2017, there were five finance companies (including three overseas ), five finance co-operatives, 15 specialised formal finance institutes and 11 officially incorporated developing countries lending subsidiaries. Only the latter group grants a significant amount of loans, which amounts to 6.
However, even the biggest of these banks borrows less than the smallest of the Grupo Aval conglomerate's banks. In addition to these official banks, the finance system comprises a large number of companies that grant loans, such as factors and wage accounting, but which are not the responsibility of SFC.
According to Luis Carlos Rodríguez, Chairman of Covalsa, a locally based business finance solution provider, a number of high-profile cases of corporate malpractice and malpractice have unfortunately affected the image of this whole business last year. "That' s a shame because it can limit the legitimate expansion of the finance industry, as well as the responsibility to provide loans to those who do not have direct contact with the loans from the mainstream banks," Rodríguez said to OBG.
"We need solid regulations across the whole finance industry and increased effort to enhance finance training so that consumer awareness of the nature of the available product increases," he added. Consequently, the public administrations are making an effort to put in place a new system of regulations after presenting a bill in December 2016 updating the current Payment Orders Act (Ley de Libranza).
The adoption of the revised Act is expected in 2017. However, FDI activity remained at a modest rate, with Bancolombia disclosing in January 2016 that it had increased its shareholding in the Guatemalan Banco Agromercantil to 60% two years after acquiring a 40% shareholding in the creditor. Bancolombia also reported in September 2016 the opening of a $55 million operation center with Banco Agrícola in El Salvador.
Davivienda concluded the acquisition of Bolivar Leasing at the beginning of 2016, thus increasing its position in this area. In October 2016, Bancolombia and Leasing Bancolombia combined into a unified group. In 1997, the Colombian economy was down by 5% of GNP, but then the Colombian economy suffered a losing ten-year period.
Loans in the consumer goods segment declined to only 21% of GNP in 2000 and did not return to 1997 levels until 2007. Over the past ten years, the bank system has continued to deepen, with a peak of 52 credits. 1 percent in 2015. In 2017, the combined effect of better macroeconomic performance and lower interest rates should stimulate borrowing again and further deepen the functioning of the global finance system in the longer run.
Since then, banks' credit portfolio rates have fallen from a notional level of over 20% at the beginning of 2012 in the wake of the slowdown in the global economy. Credit expansion even grew at double-digit rates until mid-2016, but this rate of expansion decelerated significantly in the second half of the year as the Federal Reserve increased interest rates to curb pressure on inflation and further weakened the pace of globalisation.
Prior to 20 January 2017, loan portfolio grew by 7% as the aggregate notional amount stood at BOP401trn (USD 120.3 billion). Whereas a modest increase in credit is anticipated for 2017 as a whole, especially with falling interest rates, no increase is anticipated. For the year as a whole, Camilo Pérez, Banco de Bogotá's Research Manager, forecasts credit to grow by only 8% in real terms.
They account for around 56% of overall banking loans, or in short CP 224. 6 trillion ($67.38 billion), by the end of January 2017 the commercial loan business is the most important driving force for the entire loan business. Thus, the strong deceleration in economic activity in this loan sector from around 16% at the beginning of 2016 to 2.7% at the end of January 2017 - which in actual fact means a loan contraction was the main driving force behind the general downturn in loan expansion in the reporting year.
In turn, lower investments, which fell by 2.9% in the fourth quarter of 2016 (see Economic chapter), were one of the main factors driving the reduction in commercial loan activity. Investments, especially in the area of infrastructures, are anticipated to increase again in the course of 2017, which will help the overall economic situation to speed up from the 2016 level.
As a result, commercial loans should recover. Once upon a time, with annual rates of around 25% in January 2012, credit to consumers was the most vibrant credit area. Though it has somewhat weakened this momentum, with half the rate of economic expansion until early 2014, for example, it has been one of the most robust credit sectors for the past two years.
In spite of the all-time low level of consumption credit indices in January 2017, credit expansion even accelerated to 13.4%. Behind commercial credit, personal credit is the second biggest credit sector with a share of 112 COPs. The sub-segments of both state-subsidised and non-subsidised mortgages are showing robust economic expansion. Total mortgages business was the most vibrant sector, with 13.6% p.a. increase until the end of January 2017.
Whilst below the level of over 20% achieved in mid-2014, GDP grew impressively given the current economic climate. In the aftermath of the subprime mortgage crises of the end of the 1990s, banking was very hesitant to extend loans to the residential sector, a tendency that has continued into recent years.
That means that there is still considerable scope for further expansion of mortgages in the mid term. 2 trillion ($3.36 billion) in January 2017, or 2.8% of aggregate credit volume, microfinance is by far the smallest sector, and its rates of increase are tending to be more volatile than others. Thus, with a GDP increase of around 20% in January 2015, it was the most dynamically growing sector, which had dropped to around 4% by the beginning of 2016.
During 2016, economic activity slightly increased, to reach 7.2% at the end of January 2017, in line with the overall loan expansion outturn. The Colombian finance system had total net worth of BOP524 as at 31 December 2016. By contrast, net profit for 2016 was net profit for the year COP 11. 4 per cent was attributable to non-German banks - an increase of 22 per cent compared with 2015.
from 36% in the year 2015 to 17 in 2016, while the total investment yield increased from 2.19% to 2.61% over the same time frame. In the midst of the general weakening of the economy and higher interest rates, the rise in the number of non-performing loans was not particularly significant in 2016, and by November of this year had reached 3.3% across all loan portfolios.
In the Commercial (2.5%) and Mortgages (2.3%) sectors, net new money was slightly lower, with a relatively shallow 2016 development. On the other hand, NDPs in the consumers (5.1%) and micro-credits ( 7.4%) sectors were higher and grew more strongly. 8 percent in the commercial sector, 136. 2 per cent for credit to consumers, while the aggregation is 142.
3 per cent in all credit sectors. NDPs are often seen as a delayed economic performance measure that only deteriorates some period after the start of the macro-economic cycle, indicating that a further worsening may be possible in 2017. In particular, credit exposures could come under particular strain as, for example, the jobless figure increases over the course of the year.
On the other hand, the pressure on companies and budgets can be compensated by the Fed's choice to launch a downward interest cycle in December 2016. "Colombia's banks did not record a significant increase in the number of NDPs last year. Looking to the future, however, we see some macro-economic issues that will affect the industry, especially those affecting policy choices by key banks," Juan Carlos Mora, Bancolombia's Governor, said to OBG.
After peaking at 17.3% in February 2013, the capitalization ratio of the entire bank industry has fallen only slightly since then. at the end of 2016, well above the 9% mandatory level. However, capitalization rates within the banks varied widely, from a low of 11.02% at Banco Popular to a high of 40.
BBVA, the leader in this industry, operated with a lower degree of capitalization of 12.94%, but was optimistic that it would be able to draw on the equity of its mother institution when needed. Moody's raised its industry forecast from "stable" to "negative" in July 2016, referring to the declining volume of sales and the difficult overall economy.
Given that pressure on prices has increased in recent years, the Colombian Federal Reserve - the Banco de la República - switched to an interest increase from the end of 2015 and raised the interest rates from 4.5% in August 2015 to a high of 7.75% in August 2016. However, in December 2016, the Federal Reserve introduced an easing cyclical programme as pressure on prices eased, taking the market by surprise with a fall of 25bps.
Following a pause in January 2017, the Fed lowered the base lending interest at its February session by a further 25 bps, and by April 2017 the nation's base lending interest was 6.5%. The Colombian Bankers Federation Asobancaria, for its part, forecasts that the benchmark interest rates will drop to 6% by the end of 2017, while some more optimistic economists expect even more hostile measures from the CBB.
Colombia's change in monetar y policies had the anticipated effect on the sovereign bond market, with the TES interest rate structure curves levelling off in the first few week of 2017. A further important innovation was the introduction of IFRS financial reporting in 2015, which became mandatory for all companies in 2016," he said.
In 2016 and 2017, one of the main regulation measures concerns the risks internalised by large groups of banks, which includes the concentration of cross-border group activity. In the first part of 2017, as part of these conglomerate regulation endeavours, Congressional was in the midst of reviewing the Ley de Conglomerados Financieros (Financial conglomerates law).
The intention was to strengthen and formalize the SFC' s current authority to govern domestic banks' holdings. Finance Technologies (Fintech) is another emerging area of the global finance and finance industry that is rapidly evolving but not yet well controlled. 61% of Colombians over 15 years of age have no accounts, a level well above the 49% Latin America and Canary Islands averaging.
In recent years, the number of Colombians using the Web and electronic banking has increased sharply, with rapid technological development leading to significant economic expansion (see analysis). Promising to be a blessing for economic integration. In 2017-18, commercial loans for infrastructural purposes are likely to be an important engine of economic expansion for both the loans of the retail segment and the wider business world.
In the longer run, the degree to which the proportion of loans from the consumer debt pyramid in the economies is lagging behind other economies in the wider area indicates that there is still much room for further domestic expansion. Similarly, the persistently low level of bankarisation indicates that attempts at fiscal integration should support loan expansion and further investments and innovations in electronic banking. At the same time, the Bank's focus on integration should be on the development of the market for electronic products.
In addition, the increasing formalization of the labor markets and the increasing willingness of the banking sector to provide loans to small enterprises should help boost loan expansion in 2017 and beyond.