The slowdown in the economy recorded last year affected many financial institutions in the country, due to the collapse of the loan portfolio, especially the consumer portfolio, which had to make provisions of millions of dollars, which hit their profits. With only a month left to end last year, the balance sheet of the National Financial Institution is in the red with the results of 21 of the 62 credit institutions operating in the country. Nine banks, 10 financial institutions and two financial cooperatives.
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The president of the Association of Banks and Financial Institutions (Asobankaria), Jonathan Malacon, pointed this out during the inauguration of its annual treasury congress last week. While the Colombian economy grew by 0.9 percent last year, 31 percent of banking institutions posted losses.An odd number in terms of gross domestic product (GDP), the eighth worst result of the last 100 years.”
The arrears submitted by the financial watchdog at the end of last November showed a 53.4 per cent decline in the profits of credit institutions year-on-year.
“The lower the growth of the portfolio, the more its decline and the higher the costs
Funding has put pressure on the organization's profits and profitability,” notes a recent analysis by Grupo Pancolombia.
In fact, Credit placements recorded a real annual decline of 6.12 percent at the end of last November, while the non-performing portfolio increased by 29 percent in real terms. Driven by microcredit (48.8 percent actual year) and consumer (38.8 percent) segments.
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“An environment of low housing spending and investment, high interest rates
and lower supply and demand for credit, along with the cost of financing
The higher it is and the higher the decline in the portfolio, implied that
The portfolio benchmark will continue to peak at 5.1 percent in 2020, with levels seen during the pandemic,” PanColumbia Group analysts indicated.
The deterioration has demanded higher allocations from companies, which increased by 3.6 trillion pesos last year, with reserves of 42.5 trillion.
Despite the preliminary results, Malacon says there is “no financial crisis” and highlights three basic criteria defined by the International Monetary Fund (IMF) that allow to conclude that the local financial system is sound: Flexible financial institutions, international regulatory standards and adequate monitoring and supervision.
“Today the credit level of the banking system in Colombia is 16 percent, which exceeds the regulatory minimum of 9 percent. And, in terms of liquidity, although the CFEN (Net Constant Funding Ratio) is a very demanding measure, Colombian banks today exceed it by 115 percent. Both in terms of capital and liquidity, financial The system is above regulatory standards,” he highlighted.
During the same conference, the bank's manager Leonardo Villar, after reviewing last year's financial system statistics, indicated that companies' profits will be much lower than in 2022, highlighting a painful situation. This reflects the necessary adjustment process.
“It would have been much more painful to postpone it in time, and if the credit bubble that we saw in mid-2022 continued to grow until it burst more dramatically. Fortunately, this adjustment has occurred in such a way that the equity strength of the financial system remains at a very high level.The officer insisted.
Credit institutions' profits totaled 7.41 trillion pesos at the end of last November, with 97.7 percent attributable to banks operating in the country, according to a Superfinanciera report.