Colombia's largest bank Bancolombia SA (CIB) will probably report a lower net profit in the third quarter of this year than during the same period in 2008 as lending slowed and more customers defaulted on their debts.
Six analysts polled by Dow Jones Newswires expect the bank to report a median net profit of 315 billion Colombian pesos ($159 million) in the third quarter, 14% less than in the same period a year ago.
"The general trend is of a lending slowdown, lower interest rates and rising bad loans," said Estefania Leon, a banking analyst with local brokerage Correval SA.
Lending slowed and bad-loan ratios rose because of the economic downturn. As a result of increased defaults on its loans, Bancolombia probably had to set aside more cash to provision against the potential losses.
Bancolombia's bad-loan ratios are still quite manageable, said Jorge Cortes, who covers Bancolombia for holding company Corficolombiana SA.
The ratio of past-due loans to total loans for its biggest unit, the Colombian bank, stood at 3.76% at the end of September, which is below the average of 5.33% among banks in Colombia, said Jairo Lastra, a banking analyst with local brokerage Proyectar Valores SA.
"The bank is well provisioned and has no problem of liquidity," Cortes said.
At the same time, since interest rates in the country fell as the central bank lowered its key interest rate to 4% from 10% in December 2008, Bancolombia's spread between the rates it charges and the rates it pays on deposits shrank, he added.
He expects the banks to report a net profit of COP1 trillion in the full-year 2009, down from COP1.29 trillion in 2008 and very close to the level of 2007, which was COP1.09 trillion.
New York-traded shares of Bancolombia were 0.2% lower at $41.20 at 1:18 p.m. EST.
Bancolombia will report its net profit for the third quarter on Monday after the market closes. (Dow Jones)
