Lending among Colombian banks will likely slow this year to 10-15%, analyst at local brokerage Interbolsa José Fernando Restrepo told BNamericas.
After growing at 30% plus rates in 2007, lending in Colombia including leasing kept decelerating in the year ended November 2008, rising 18% to reach 175tn pesos (US$78.4bn). The slowdown was prompted by tighter monetary policy and a less vibrant economy.
By segment, growth in the year ended November 30 was the following: commercial, 13.7%; consumer, 12%; mortgage, 21.2%; and microloans, 42.6%.
Slower economic expansion will be one of the main causes behind the reduction in lending this year, a factor already reflected in weaker consumer confidence and poorer industrial and commercial activity, all of which will lower loan demand this year, Restrepo said.
"On the other hand, banks have tightened their requirements to disburse loans to protect their financial health in the face of a slower economy," he said.
According to Colombia's national statistics agency, the country's pace of economic growth slowed to 3.1% in 3Q08 from 3.8% in the previous quarter and 8% in 2007.
The government is expecting GDP to expand 4% this year.
Still, relatively strong loan volume and higher interest rates increased Colombian bank earnings 32% in the first 11 months of 2008 compared to the same period in 2007 to 4.55tn pesos. The figure equals a 20.8% annualized ROE.
However, Restrepo believes more sluggish loan growth and higher non-performing loan (NPL) ratios will eat into bank profits this year, albeit not significantly.
As of end-November, NPLs kept raising at a faster rate than total loans, leading to a deterioration of asset quality, especially in consumer and commercial loans.
The past-due loan ratio worsened to 4.3% as of November 30 from 3.4% a year ago, with the total amount of past-due loans jumping 53.3% to 6.6tn pesos.
Interest rates - which were lowered by 50 basis points last month from 10% - will not play a relevant role in Colombia's banking sector this year, Restrepo said.
"Competition keeps loan interest rates within very tight ranges," he said.
The central bank hiked the benchmark interest rate in July to 10% and kept it there for months in a bid to curb rising inflation.
Combined with the global slowdown, high interest rates have been blamed for having reduced demand for consumer products in the country.
On Monday (Jan 5), the central bank's board said it may keep cutting lending rates to curb slowing economic growth and boost domestic demand as long as inflation remains under control.
Colombian banks' combined assets and equity stood at 215tn pesos and 25.6tn pesos respectively as of end-November. Their capital adequacy ratio stood at 13.4% at the same date.
