As a result of this announcement, the existing credit risk ratings for Aval Fiduciaria and Fiduciaria de Occidente, as well as the quality ratings for investment management for Fiduciaria Bogotá, Fiduciaria de Occidente, and Aval Fiduciaria, will remain unchanged. Fitch’s conclusion is based on the financial strength of the publicly traded parent company, Grupo Aval (NYSE: AVAL, BVC: AVAL-C).

Fitch’s position is supported by Grupo Aval’s international issuer default rating of ‘BB+’ with a negative outlook. The ratings agency also considered Grupo Aval’s management’s strategic and operational plan, which is focused on consolidating a leading entity in terms of assets under management, capturing synergies, and incorporating best practices from each fiduciary company into internal processes. At this stage, Fitch has not identified any changes in the individual credit profiles or the governance frameworks for investment management that would justify a rating action.

However, the agency noted that executing the consolidation and integration plan could lead to operational and business adjustments. Fitch will monitor these changes as the regulatory and corporate processes advance. The agency will continue to evaluate key implementation milestones, performance metrics, the evolution of operational risks, and the stabilization of each process. Fitch stated that it will communicate any developments that could lead to a rating action in the future.

Grupo Aval at the Bolsa de Valores de Colombia. Photo credit: Grupo Aval/Facebook.

The arrangement, which marks the first international syndicated facility arranged for BAC Guatemala, was 1.7x oversubscribed and attracted “the interest of financial institutions from Europe, Asia, Central America, and the Caribbean, all of which represent new banking relationships for the bank,” said the Panama City-based Bladex in a statement.

Bladex, widely known as the Foreign Trade Bank of Latin America since being founded in 1979 by a coalition of Latin American central banks, also stated that proceeds from the facility will be used to finance BAC Guatemala’s trade loan portfolio.

Bladex, which maintains an office in Bogotá, was the bookrunner, administrative agent, and sole lead arranger of the facility, said the bank.

“This transaction marks the second syndicated facility to the BAC Credomatic Group led by Bladex,” said Felipe Suarez, head of loan structuring and distribution at Bladex. “We are very pleased to bring new banking relationships and to provide medium-term financing to BAC Guatemala.”

BAC Credomatic, which is owned by Colombian financial-focused holding company Grupo Aval Acciones y Valores S.A., is a major Central American banking group that maintains operations in each of the region’s Spanish-speaking countries: Mexico, Panama, Costa Rica, Nicaragua, Guatemala, Honduras, and El Salvador. BAC Credomatic is the number-one credit card issuer and merchant-acquiring franchise in Central America, according to Bladex,

The improved outlook mirrors a similar revision Fitch made to the nation of Colombia’s sovereign rating earlier this year and reflects the Bogotá-based financial institution’s “solid and consistent financial performance, sound asset quality and reserves, conservative credit and risk policies, and its ample and diversified funding base,” stated Fitch in a statement.

The rating agency did, however, note that “capitalization remains the bank’s main credit weakness” compared to similarly rated emerging market banks. It added that the ratings for Colombia’s second largest bank remain constrained by “the operating environment of the jurisdictions in which Bogota’s businesses are performed.”

Specifically, Fitch also affirmed Banco de Bogota’s viability rating at bbb and issuer default ratings at BBB.

One recent positive development for Banco de Bogotá was the deconsolidation of Corficolombiana from its financial statements. This “positively influenced overall profitability in 2016,” stated Fitch, by allowing the bank to register a gain of 2.2 trillion pesos (more than $700 million USD) “as a result of the difference between the fair value of the bank’s investment in Corficolombiana at the date when control was lost and its book value at that date, plus reclassification of other comprehensive income items to income for the period.”

Furthermore, the big-three rating agency expects the bank to show a loan growth rate of between 10%-12% in the medium term with stable operating expenses and relatively low funding costs. Banco de Bogotá also ended 2016 with an operating-profit-to-risk-weighted-assets ratio at a “robust” 2.8% along with “conservative credit and strong risk management policies [that] have resulted in good asset quality despite a challenging economic environment in Colombia and Central America,” stated Fitch.

In full, Fitch Ratings has set the following ratings for Banco de Bogotá and related companies:

Banco de Bogota

• Long-Term Foreign Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-term foreign currency IDR at ‘F2’
• Long-term local currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-term local currency IDR at ‘F2’
• Viability rating at ‘bbb’
• Subordinated debt rating at ‘BBB-‘
• Support rating at ‘2’
• Support rating floor at ‘BBB-‘

Grupo Aval Acciones y Valores S.A.

• Long-term Foreign Currency IDR at ‘BBB’ outlook revised to stable from negative
• Short-Term Foreign Currency IDR at ‘F3’
• Long-Term Local Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Local Currency IDR at ‘F3’
• Support rating at ‘5’
• Support rating floor at ‘NF’

Grupo Aval Limited

• Senior unsecured guaranteed debt issued by Grupo Aval Ltd. at ‘BBB’

Banco de Occidente

• Long-Term Foreign Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Foreign Currency IDR at ‘F3’
• Long-Term Local Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Local Currency IDR at ‘F3’
• Viability rating at ‘bbb’
• Support Rating at ‘2’
• National Scale Long-Term Rating at ‘AAA(col)’; outlook stable
• National Scale Short-Term Rating at ‘F1+(col)’

Corficolombiana

• Long-Term Foreign Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Foreign Currency IDR at ‘F2’
• Long-Term Local Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Local Currency IDR at ‘F2’
• Support Rating at ‘2’
• National Scale Long-Term Rating at ‘AAA(col)’; outlook stable
• National Scale Short-Term Rating at ‘F1+(col)’

CIC

• Long-Term Foreign Currency IDR at ‘BBB’; outlook revised to stable from negative
• Short-Term Foreign Currency IDR at ‘F2’
• Support Rating at ‘2’

Fiduciaria Corficolombiana S.A.

• National Scale Long-Term Rating at ‘AAA(col)’; outlook stable
• National Scale Short-Term Rating at ‘F1+(col)’

Photo credit: Jared Wade