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Background Reading in English:
Colombian Shake Up
The entry of Spanish banks is dramatically changing Colombia's banking
sector.
BY ADAM THOMSON
BOGOTA - As president of Spanish-based Banco Santander in Colombia,
Gabriel Jaramillo has no illusions about the current state of the local banking sector. "By all measures, it is one of the most inefficient in the world," he says.
But he and his competitors know all that is about to change. Since Banco Santander announced its entry into the market last year, together with another Spanish giant, Banco Bilbao Vizcaya (BBV), Colombia's financial sector has started to undergo a dramatic shake-up. And in a market where competition is increasingly becoming about size, the appearance of foreign players has local groups scrambling to consolidate their positions.
In late August, Banco Industrial Colombiano (BIC), owned by the powerful Sindicato Antioque¤o group, announced that it would merge with Banco de Colombia to create the country's largest bank, with 16.5% of the entire banking system's assets.
The announcement took analysts by surprise. Only months before, the
Gilinski family, majority shareholders in Banco de Colombia, were on the verge of signing a deal with Spanish Banco Central Hispanoamericano.
"The transaction was very important for us," explains Jaime Alberto
Vel squez, BIC's financial vice-president. "The entry of many new
competitors, especially the Spanish, demanded a strategic move on our
part to establish a more solid competitive position."
With combined assets of US$5.3 billion, the new bank will dislodge Banco Ganadero - 40%-owned by BBV - from its number one position in the market.
The country's biggest financial services group has also been busy
consolidating its position. The Luis Carlos Sarmiento Angulo
Organization bought 55% of the savings and loan corporation Ahorram s in August. The $106 million acquisition reaffirmed the group's dominant position in the market, with ownership of three major banks with combined assets of almost 25% of Colombia's banking system.
In a market where profits for the first semester grew 51%, the jostling did not stop there. In response to the local groups, Banco Santander confirmed the $93 million purchase of Invercr‚dito, a consumer loan company. The purchase follows Santander's acquisition of a 55% stake in Bancoquia for $142 million in July.
"Buying Invercr‚dito was a major element in buying Bancoquia," says
Jaramillo. "The consumer finance group has the longest experience of
consumer lending in Colombian and it is a platform that we want to grow into."
Analysts agree the recent spate of acquisitions is just the first phase of a process which will end revolutionizing the local banking industry.
"We are going to witness some drastic changes in the local banking
sector over the next few years," says Edward Hopperton, head of research at the Colombia office of Santander Investment. "Five years from now, there will only be half a dozen big players in Colombia," he adds. That compares with some eight or nine major players at the moment.
Already, the groups are contemplating mergers. The Sarmiento
Organization plans to merge Ahorram s with another savings and loan
corporation in its possession, Las Villas. And Banco Santander will
merge Invercr‚dito before year's end.
Customers are beginning to see the benefits of the greater competition. Visiting a typical bank in Colombia can often turn into an hour-long ordeal. Many of the country's banks are still not online, for example. That means cashing a check can involve crossing the city to get to the branch where the check was issued.
"Banking is a nightmare," says Marta V squez, a disenchanted account
holder with one of the main banks. "Everything always takes so long."
But that is changing. Banco Santander recently announced an investment
plan of $50 million over the next 18 months to bring in the latest
banking technology and develop a series of new products for the
Colombian market.
Local banking groups like Granahorrar are devising new lines of credit
for their clients. And there has been a recent marketing war between
banks trying to lure clients with offers of monthly prize draws.
Experts say that the pattern of acquisitions and mergers will continue
in the future, with the local groups trying to defend their interests by increasing market share.
But that is hardly a concern for Jaramillo. "It does not worry me one
bit," he says. "If we have played a role in the restructuring of
Colombia's financial system, I think that is fantastic for the consumer, the economy and the sector as a whole."
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