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