Fitch Affirms Its Rating for Bancoldex at BBB with a Stable Outlook

New York-based credit rating agency Fitch Ratings has affirmed the ratings of Banco de Comercio Exterior de Colombia S.A.’s (Bancoldex) at BBB with a stable outlook. The affirmation applies to the national development bank’s foreign currency long-term issuer default rating (IDR), local currency long-term IDR, and support rating floor.

The announcement comes less than a month after the big-three rating agency affirmed Colombia’s BBB rating, which received an improvement to stable earlier this year following the tax reform passed by the government late last year. Though Fitch noted that federal government “does not explicitly guarantee Bancoldex’s liabilities,” it considers the institution to be an “integral arm of the state” with “strategic importance” to Colombia’s official national development plan.

“Bancoldex’s ratings and outlook are aligned with those of the sovereign, reflecting Fitch’s assessment of the Colombian government’s willingness and capacity to provide timely support to Bancoldex if needed,” stated Fitch Ratings in its assessment.

Bancoldex, which counts Arco Grupo Bancoldex S.A. Compania de Financiamiento and Fiduciaria Colombiana de Comercio Exterior S.A. (Fiducoldex) affiliates, provides credit to a wide variety of banks and institutions that help to fulfill the institution’s mission of promoting development. It is majority-owned by the government.

“Although its financial profile does not drive its ratings, Bancoldex has historically reported high asset quality,” stated Fitch Ratings in its assessment. “It has recorded impaired loans greater than 90 days since 2016, although these remain low (0.7 % of gross loans at June 2017).”

The Fitch Core Capital calculation for Bancoldex will reach 36% of risk-weighted assets compared to 24% in June 2017. This is due to a regulatory change in risk weightings, according to Fitch.

“Earnings reflect the relatively low margins and low administrative costs typical of a wholesale lending business,” stated Fitch, “and funding is largely concentrated in certificates of deposit (44.0% of funding at mid-year 2017) and direct financings from a banks and multilateral institutions (34.2% of funding).”