Post by ozgringo on Sept 13, 2016 17:56:53 GMT -5
From latinvex.com/app/article.aspx?id=2854
"David Olivares, senior credit officer for Latin America banking at Moody’s Investors Service: We have a negative outlook for Colombia’s banking system, reflecting our expectation that through 2017, business volumes will slow and asset risks will rise as low oil prices continue to be a drag on the economy. The economic deceleration will lead to a rise in unemployment while the peso’s significant depreciation over the past year will continue to fuel inflation, notwithstanding recent increases in the central bank’s benchmark interest rate. As a result, credit demand will decline and debt service capacity will weaken, especially among consumers and corporate borrowers. Banks have significant exposure to the oil and gas sector, and though the majority of these are to state-owned oil company Ecopetrol, which has weathered the oil shock reasonably well, negative surprises could yet emerge in other parts of these portfolios. Other asset risk drivers include large exposures in Central America, which is a riskier operating environment than Colombia. Although banks have prepared to manage the expected rise in loan delinquencies by building up reserves, capital remains a key weakness, stemming largely from banks’ reliance on capital instruments that do not meet international standards, keeping Colombian banks with the weakest core capitalization in Latin America. Slower loan growth and rising provisions associated with increased past-due loans will drive a decline in profitability, albeit from currently very high levels. Interest margins will also decline, though operating efficiency will remain strong as banks keep costs under control. Positively, funding profiles remain stable and liquidity is adequate, based on banks’ large holdings of Colombian government securities."
"David Olivares, senior credit officer for Latin America banking at Moody’s Investors Service: We have a negative outlook for Colombia’s banking system, reflecting our expectation that through 2017, business volumes will slow and asset risks will rise as low oil prices continue to be a drag on the economy. The economic deceleration will lead to a rise in unemployment while the peso’s significant depreciation over the past year will continue to fuel inflation, notwithstanding recent increases in the central bank’s benchmark interest rate. As a result, credit demand will decline and debt service capacity will weaken, especially among consumers and corporate borrowers. Banks have significant exposure to the oil and gas sector, and though the majority of these are to state-owned oil company Ecopetrol, which has weathered the oil shock reasonably well, negative surprises could yet emerge in other parts of these portfolios. Other asset risk drivers include large exposures in Central America, which is a riskier operating environment than Colombia. Although banks have prepared to manage the expected rise in loan delinquencies by building up reserves, capital remains a key weakness, stemming largely from banks’ reliance on capital instruments that do not meet international standards, keeping Colombian banks with the weakest core capitalization in Latin America. Slower loan growth and rising provisions associated with increased past-due loans will drive a decline in profitability, albeit from currently very high levels. Interest margins will also decline, though operating efficiency will remain strong as banks keep costs under control. Positively, funding profiles remain stable and liquidity is adequate, based on banks’ large holdings of Colombian government securities."