Bancolombia considers acquisitions across region
MEDELLIN, Colombia (Reuters) - Bancolombia BIC.CN(CIB.N) is considering acquisitions in Latin America when the right opportunity arises, and it may use capital markets for financing if necessary, its chief executive said.
Colombia's biggest lender is on the lookout for acquisitions of brokerages, fiduciary funds and banks from Mexico to Chile, Carlos Raul Yepes said in an interview for the Reuters Latin America Summit. No purchase is imminent, he said.
"Our strategy is not to wait and see what's being sold, it's to go and look for what we want ... We would wait to buy when acquisitions are at the right price."
The bank's sale in the first quarter of almost $1 billion in shares, and record bond sales last year, have set up Bancolombia to acquire regional assets without needing to raise new financing, Yepes said. "But if something big came along that we don't already have, we always have the facility to go to the public markets," he said.
The bank's board on Monday night agreed to issue up to 3 billion pesos ($1.63 billion) in local bonds. It did not say how the funds would be used.
"We want to take advantage of the liquidity in the market," Yepes told Reuters on Tuesday. The bonds could be issued this year, he said
He reflected on how much faster it is to raise capital now than in the past. When Bancolombia issued American Depositary Receipts in 1995 it took almost a year to raise $72 million.
"We just raised close to $1 billion in three hours," he said of the share issue earlier this year.
Colombia is emerging from almost half a century of war, and foreign investors are flooding its financial sector to tap its new stability, growing numbers of banking clients and increasing consumer spending.
"Acquisitions are always on the radar for companies like Bancolombia," said Jose Fernando Restrepo, head of economic investigations at brokerage Interbolsa. "Buying overseas banks would give it bigger income diversification."
Bancolombia in 2007 paid $900 million for a bank in El Salvador.
While the United States and many European countries struggle to shore up their fiscal accounts, Colombia's financial management, buoyant economy and security advances were rewarded last year with a coveted investment grade.
Colombia lost its investment rating more than a decade ago after a financial crisis that shuttered banks and left many households laden with debt. The higher rating comes on the heels of military victories against rebels that heralded a wave of foreign investment, both direct and portfolio.
The confidence also brought a slew of new middle-class customers to Colombian banks, which increased lending for big-ticket items like cars and real estate, prompting stern words from the central bank that residents were becoming too indebted.
Colombia's central bank on Monday held its benchmark interest rate steady at 5.25 percent for the third straight month. Previously, policymakers raised the rate by 2.25 percentage points in a bid to stem inflationary pressure and cool the pace of lending. The government said earlier this month that it would adopt additional reserve requirements on new consumer credit to improve bank portfolios as the size of past due loans increased.
Yepes said he supports government moves to ease bank credit, which is now beginning to slow.
"Colombia has learned from what happened in 1998, learned from the global Asian crisis, learned from the crisis of 2008 - that hit us hard - and so we back entirely the central bank and the finance ministry because they are capable of anticipating a cycle in the economy," he said.
Colombian consumer credit grew 25 percent in 2011.
"The measures are opportune and aimed at slowing consumer spending," Yepes said from the bank's plush offices in Medellin.
Yepes reckons Colombia is in better shape now than during the 2008 world financial crisis to face fallout from Europe's economic troubles, though he is worried about how Europe's "polarized" political environment could morph into legislation that would affect trade in Latin America, and Bancolombia.
"There is a marked polarization in European society; the wounds of the past haven't been healed ... My big worry is that this continues to deepen and eventually it turns into legislation or it turns into subsidies or protectionism or trade barriers and finally it impacts us," he said.
"A financial institution like Bancolombia is a proxy for the economy."
Bancolombia is the banking arm of Grupo Empresarial Antioqueno, Colombia's biggest conglomerate, which is built around one hundred or so businesses, ranging from financial services to cement and processed foods. Each unit is a partner of the other.
Bancolombia's shares have fallen 0.8 percent in the past 12 months, while the IGBC Index has gained 3.7 percent. The bank's net income rose 16 percent in 2011 to $935 million.
Yepes said Wall Street is beginning to raise concerns about Brazil, its banking system and economy.
"In circles in New York they are talking about what's happening with Brazilian banks, what's happening with the Brazilian economy. So far, we don't know if it's part of a cycle or a tendency.
"If something happens in Brazil, that's a problem."
(Additional reporting by Nelson Bocanegra; Editing by Daniel Wallis, W Simon and John Wallace)
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