S&P Global Ratings lowered the long-term ratings on Banco Davivienda, FDN (Financiera de Desarrollo Nacional), and Findeter (Banco de Desarrollo Territorial) to ‘BB+’ from ‘BBB-‘ after the same rating action on Colombia’s sovereign currency rating. Additionally, S&P lowered its short-term rating on Banco Davivienda and Findeter (Banco de Desarrollo Territorial) to ‘B’ from ‘A-3’. The stable outlook on these banks continues mirroring that on Colombia overall. At the same, time S&P lowered the issue-level rating on Findeter’s senior unsecured notes to ‘BB+’ from ‘BBB-‘.
The downgrade of the sovereign follows the withdrawal of a fiscal reform introduced to Colombia’s congress in a context of high spending pressures, which has resulted in a significantly lower likelihood of Colombia improving its fiscal position following a recent and marked deterioration. Given the country’s high external vulnerability and moderate economic profile (balanced by adequate institutions and monetary credibility), Colombia’s debt, stabilizing at about 60% of GDP during 2021-2024, and relatively large fiscal deficits are no longer consistent with an investment-grade (‘BBB-‘ or higher) foreign currency rating.
The downgrade of the two government-owned development banks reflects their very important economic roles and links to the government. Similarly, the ratings on the sovereign cap those on Banco Davivienda, given the commercial bank’s large exposure to country risk and the highly sensitive nature of its businesses to sovereign stress. Finally, S&P says the rating actions do not reflect a deterioration in the entities’ stand-alone credit profiles (SACPs).