Fitch IBCA Ratings - Press Releases -Colombia's Banco Santander

Fitch

Established in 1913

Colombia's Banco Santander Rated By Fitch IBCA
26 May 1998

FITCH IBCA FINANCIAL WIRE (FFW)--NY--5/26/98: Fitch IBCA rates Banco Santander Colombia long-term debt 'BBB-' (BBB minus) and short-term 'B'. Formerly known as Bancoquia, Banco Santander Colombia was Colombia's eighth largest bank measured by total assets at end-1997.

The bank adopted its current name after the acquisition in May 1997 of 55% of its share capital by a wholly owned subsidiary of Spain's Banco Santander S.A. Newly appointed management has set out to change the bank's image, reorganize its operations, overhaul the IT systems and build up loan loss reserves. Non-recurrent loan loss provisions, coupled with charges resulting from the reorganization program, hampered the bank's performance during 1997, leading it to post a net loss of COP 71.5 billion for the year.

In addition to its commercial banking activities, Banco Santander Colombia has specialized subsidiaries engaging in consumer finance and leasing, custodial and fiduciary services, and has a branch in Panama. Although the bank has traditionally concentrated in commercial lending, in September 1997, it acquired the country's second largest consumer finance company in an effort to boost its consumer lending business. The bank's asset quality deteriorated slightly following the acquisition. However, as a result of a conservative provisioning policy, loan loss cover at 63.6% was among the highest in the country at end-1997. Its capital adequacy ratio, calculated according to local guidelines, was 11.7% at end-March 1998.

It is still too early to clearly judge the success of Banco Santander Colombia's reorganization program. A high cost base mars its performance, competition is intensifying and margins are under pressure. However, Fitch IBCA believes management has taken the right steps and the critical issues have been addressed. As the bank has not yet reached its full potential, it should be in a strong competitive position when its reorganization program is concluded.

For more information, call Charles Prescott, Victor Lohle or Steve Hussey, in London 44-171-417-4222.

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