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Banco Agrario de Colombia

Fitch Ratings Affirms Banco Agrario’s Ratings and Improves Outlook from Negative to Stable

Posted On April 13, 2017
By : Jared Wade
Comment: Off
Tag: Agriculture, Banagrario, banco agrario, Banco Agrario de Colombia, banking, banks, bogotá, Credit Rating, Farming, finance, fitch ratings, idr, issuer default rating, loans, long-term foreign currency issuer default rating, long-term local currency issuer default rating, LTFC, LTFC IDR, LTLC, LTLC IDR, ratings, Viability Rating

Last week, Fitch Ratings affirmed Banco Agrario de Colombia S.A.’s viability rating at bb. The affirmation follows the New York-based rating agency’s recent move to improve Colombia’s sovereign rating from negative to stable.

Banco Agrario (Banagrario), a state-run development bank that aims to finance projects and offer services tied to agriculture, livestock, fishing, forestry, and other rural activities, also had its long-term foreign currency and long-term local currency issuer default ratings affirmed at BBB. Fitch changed the outlook on its ratings from negative to stable.

“Banagrario’s viability rating is highly influenced by the bank’s business model and its low, although
improving, asset quality,” stated Fitch Ratings in its assessment. The agency added that Banagrario’s rating was moderately influenced by its consistent profitability, high income diversification, strong capital position, and low cost funding structure.

“In Fitch’s views, Banagrario’s business model is consistent with its key role for the development of
the government’s agricultural policy,” stated Fitch. “The bank maintains a clear focus and a strong franchise in the small and medium-sized agricultural producer markets. However, its market share in the Colombian banking system is moderate, at 3.2% of total loans and 2.5% of total deposits. In the agency’s opinion these elements strengthen the bank’s franchise in its specific segment but limit the scope of its business model and challenge the asset quality metrics.”

Fitch also noted that, while Banagrario displayed improving asset quality in 2016, it continues to lags the rest of the nation’s banking industry while its net profits also decreased last year and it remains tied to Colombia’s higher-risk agriculture sector.

But on the positive side of the ledger, according to Fitch Ratings, the Bogotá-based institution has achieved high income diversification — through stable income “generated by valuation of held-to-maturity instruments” — and lowered its non-performing loans ratio to 5.89% on the strength of an improved collections process.

“Banagrario’s profitability is consistent and supports a stable internal capital generation and good
capital levels,” stated Fitch Ratings. “The bank’s profitability is underpinned by high income diversification, as an important proportion of stable income is generated by valuation of held-to-maturity instruments. In Fitch’s opinion, Banagrario’s profitability is sustainable in the medium term but remains sensitive to changes in asset quality.”

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About the Author
Jared Wade is editor in chief of Finance Colombia. He is a Bogotá-based journalist with 15 years of experience covering topics including business, financial services, Latin America, and sports. Email him at jared.wade(at) financecolombia.com or follow him on Twitter at @Jared_Wade.
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