BOGOTA Colombia will remain a hot spot for foreign banks in the coming years as low credit penetration provides ample room for growth, the head of its second-biggest bank said on Friday, while he explores regional opportunities with special attention in Peru.
"There's a lot of interest. Every day there's another bank announcing that they have arrived," Alejandro Figueroa, head of Banco de Bogota BBO.CN, told the Reuters Latin America Investment Summit.
As the financial sectors of some developed nations are in turmoil, Colombia has entered its heyday, attracting big-name foreign banks like Canada's Scotia Bank and Chile's Corp Banca, while robust local players try their hand at expanding across Latin America.
Colombia is emerging from almost a half-century of war, attracting foreign investors to its financial sector to tap into its newly won stability, growing banking clientele and high consumer spending.
That new stability helped bring in about $16.7 billion in foreign direct investment last year, with more than $1.7 billion to the financial sector.
Drawn by Colombia's low banking penetration and strong regulatory framework, foreign financial entities hope to attract new clients from the millions that still keep their cash under the mattress or live in remote areas where there are few banks.
Just 40 percent of Colombians residents and companies have any sort of loans, Figueroa said, which prompted Banco de Bogota to enter the mortgage business last year.
"Colombia has a lot of opportunities because it has levels of bank penetration below other similar countries, with credit penetration around 40 percent of GDP," said Figueroa, who has a master's in economics from Harvard University and has been head of the bank since 1988. "It's one of the big challenges we face as a sector, deepening the financial sector."
"About 75 percent of our credit is in the business sector and we want to grow on the consumer and mortgage end too, become a universal bank," said Figueroa in a rare interview at his Bogota office.
Banco de Bogota, the oldest bank in Colombia at about 143 years, has assets worth 49 trillion pesos ($26.48 billion) and liabilities of 39.5 trillion pesos. Its net income in the first quarter increased 26 percent to 385 billion pesos versus a year earlier.
While the United States and many European countries struggle to shore up their fiscal accounts, Colombia's financial management and security advances have been awarded with an investment grade from three major Wall Street agencies.
Colombia lost its investment grade more than a decade ago after a financial crisis in 1999 shuttered banks and left many Colombians laden with debt.
Banco de Bogota is conservative when it comes to taking risks, Figueroa said.
"The accumulation of past experiences and past crises have made us very careful in terms of managing risk."
Even as foreign investors make efforts to enter the rapidly growing nation of 46 million people, Colombia's biggest banks are seeking investment opportunities abroad as they outgrow the local market.
Figueroa is also keeping an eye on possibilities outside of Colombia following the 2010 purchase in Central America of BAC Credomatic - which was worth $1.9 billion and was the second biggest in the region.
"We continue to look for opportunities. The problem is that every time there's an opportunity, there are many competitors who want to participate as well, so it's not easy. The competition is hard."
"Among the countries that are really interesting is Peru; in countries like Chile and Brazil the banks are already very big and so it becomes more difficult."
(Additional reporting by Eduardo Garcia; Editing by Lisa Shumaker)