Bancolombia Takes Control With 60% of Guatemala’s Banco Agromercantil, Fitch Upgrades Credit

Two years after purchasing 40% of Guatemala’s Grupo Agromercantil Holding, parent company of Grupo Financiero Agromercantil and Banco Agromercantil de Guatemala, Bancolombia (NYSE:CIB BVC:BCOLOMBIA), based in Medellín, Colombia has moved to take a controlling interest in the Central American financial concern, upping its stake to 60%.

Bancolombia president Carlos Raúl Yepes (courtesy Bancolombia)

Banco Agromercantil is the fourth largest bank in Guatemala, while Bancolombia is the largest banking brand in Colombia, and operating in nine other countries, with more than 10 million current account holders.

According to Banco Agromercantil’s Exectuve Director, Christian Schneider, “The relationship with Grupo Bancolombia as a shareholder fits perfectly with our strategy and permits us to continue growing our role as a promoter of the economic and social development of Guatemala. The strengthening of this partnership validates us as an entity of international status with vision, dynamism and capacity for growth that differentiates us from our competitors.”

The purchase follows Bancolombia’s strategy of further penetrating the Guatemalan market and solidifying its market presence in Central America, a key component of the multinational bank’s growth strategy.

“Grupo Bancolombia works to support the development of the economies where it has a presence, through local banks that work to build long term relationships with its clients, where trust, respect, quality and inclusion are essential values so that the philosophy of ‘a more human bank’ is perceptible to the public,” said Bancolombia president Carlos Raúl Yepes.

Above photo: Bancolombia’s giant world headquarters complex is a prominent feature of Medellin’s landscape.

Fitch Upgrades Banco Agromercantil’s Credit Ratings

The purchase has improved Banco Agromercantil’s standing in the eyes of debt and securities analysts. Fitch Ratings has upgraded the long term foreign currency Issuer Default Ratings (IDRs) of Banco Agromercantil de Guatemala and Agromercantil Senior Trust’s senior unsecured notes (AST) to BB+ from BB, and their long term local currency IDRs to BBB- from BB.

Fitch has taken the following rating actions on Banco Agromercantil:

• Banco Agromercantil de Guatemala, S.A.
  • Long-term foreign currency IDR upgraded to ‘BB+’ from ‘BB’;
  • Short-term foreign currency IDR affirmed at ‘B’;
  • Long-term local currency IDR upgraded to ‘BBB-‘ from ‘BB’;
  • Short-term local currency IDR upgraded to ‘F3’ from ‘B’;
  • Support rating upgraded to ‘3’ from ‘5’;
  • Support rating floor of ‘NF’ was withdrawn.
  • National scale long-term rating upgraded to ‘AAA(gtm)’ from ‘A+(gtm)’;
  • National scale short-term rating upgraded to ‘F1+(gtm)’ from ‘F1(gtm)’.
• Agromercantil Senior Trust: Long-term foreign currency loan participation notes upgraded to ‘BB+’ from ‘BB’.
• Mercom Bank Limited: National scale long-term rating upgraded to ‘AAA(gtm)’ from ‘A+(gtm)’;
• National scale short-term rating upgraded to ‘F1+(gtm)’ from ‘F1(gtm)’.

The ratings were removed from Rating Watch Positive and assigned a Stable Outlook.

• Banco Agromercantil de Guatemala, S.A. Viability Rating of ‘bb’ is unaffected:

According to the ratings agency, “Banco Agromercantil’s IDRs and national ratings reflect Fitch’s opinion that the support from its ultimate shareholder, Bancolombia (‘BBB+’/Stable Outlook) will be timely and sufficient if needed. In the agency’s opinion, Banco Agromercantil is an important subsidiary for Bancolombia, based on its role in Bancolombia’s expansion and diversification in Central America. Bancolombia’s propensity to support its new subsidiaries is influenced by the relevant reputational risk that a default from any of these entities would pose to Bancolombia, resulting in a Support rating of ‘3’. According to Fitch estimates, Banco Agromercantil accounted for approximately 5% of Bancolombia’s consolidated assets (including Banco Agromercantil’s assets) and consolidated net income, as of September 2015.”

The ratings upgrades are based on Fitch’s view of Bancolombia’s ability and propensity to support Grupo Agromercantil Holdings and its subsidiaries if needed, even in the event of sovereign or macroeconomic stress in Guatemala (local and foreign currency IDRs of ‘BB’ with Stable Outlook).

The transaction to increase Bancolombia’s stake in Grupo Agromercantil Holdings to 60% from 40% was completed on Dec. 30, 2015.