Banking on renewed strength
RESOLUTE ACTIONS TO REINFORCE THE BANKING SECTOR AND DEAL WITH LOSS-MAKING PUBLIC BANKS HAVE BEEN PRAISED BY THE INTERNATIONAL FINANCIAL COMMUNITY, IN PARTICULAR THE IMF

Earlier this year, the International Monetary Fund (IMF) praised the Colombian government for its “resolute actions in dealing with loss-making public banks and strengthening the banking system.” The global lending institution had confirmed that adequacy levels had risen and the problems with non-performing loans had all but disappeared. Special mention was made to the government’s push to bolster mortgage institutions and its efforts to spur activity in the housing and construction industries.
“Maintaining a healthy banking system could have benefits for the fiscal situation in that it would avoid possible restructuring costs and increase the authorities’ room for maneuver in the conduct of monetary policy by increasing resilience to exchange and interest rate changes,” the IMF said in a report this summer following consultations with Colombia.

Mr. Pastrana’s government is to complete the bank restructuring process by the end of the year with the privatization of Bancafe. The country’s agriculture bank, which is also completing restructuring, will stay in the hands of the public sector.
Bancafe was set up in 1953 by the country’s federation of coffee producers, but the government increased its stake in the bank to 99.99% during the entity’s 1999 financial crisis. Since then, Bancafe has been restructured into a highly profitable and mainly commercial bank with an office in Miami and successful operations in Panama. Currently, it is Colombia’s second largest bank totaling US$28.9 billion in assets with 280 branches and an 8.2% share of the market.

Pedro Nel Ospina Santa Maria President of Bancafe

“If Bancafe maintains its capitalization over the next few years, it has all the potential to increase its client base, perhaps even doubling it from its current level of 1.2 million, which will allow it to continue improving profits on a daily basis,” explains Bancafe president Pedro Nel Ospina Santa Maria.
Competition for a market slice of Colombia’s finance sector is stiff, with nearly 30 banks vying for a piece of the pie. The company best positioned in the market is without a doubt the powerful Bolivar Group of companies, which includes the nation’s fifth largest bank, Banco Davivienda.
The holding has some 13 companies operating in Colombia’s financial and insurance sectors, although the Bolivar Group prides itself in offering a wide range of other financial services. The group also owns companies in the construction, tourism and Information Technology sectors and other business areas. “Simply put, we are in the insurance and financial business, and our orientation is mainly through banking, offering mortgages, consumer loan, leasing and all types of insurance,” explains Jose Alejandro Cortes Osorio, president of the Bolivar Group.

José Alejandro Cortés Osorio President of Sociedades Bolívar

The group is betting strongly on the country’s growing insurance industry, where the liberalized economy has sparked lower premiums and where the group has adapted through innovation and restructuring to become more cost effective.
“I believe that the development of the insurance industry in Colombia as a result of the booming pension fund sector, is going to be enormous,” Mr. Cortes predicts. “In GNP terms, studies indicate that the insurance sector will comprise 28% by the year 2010. Right now it’s slightly above 12% of GNP, so in a few years there is going to be stellar growth.”

Mr. Cortes says the group’s Davivienda bank fits perfectly in the company’s strategy, most notably because of the strong synergy between its insurance division and banking operations.
“We are extremely orientated towards individuals and families. And if one wants to continue providing financial services to families such as credit cards, car loans, mortgages and all the corresponding insurance–health, life, car–you have to be able to assist the client to fit his needs and provide it all at just one office,” he says.
And that is one reason why Davivienda has invested heavily in expanding its banking channels to 250 branches, 800 ATM machines, a call center staffed by 150 people, an automated telephone banking system and, in its latest move to increase customer loyalty, an online banking portal