The Colombian Bank Miracle

BanksIn the midst of the worst global financial crisis in the past 80 years, Colombian banks are doing very well. How did they manage it? Will they be able to avoid the difficult international climate?
March 10, 2009

While the most powerful banks in the world are in intensive care waiting for a miracle to save them from bankruptcy, the Colombian financial system enjoys good health.
That is surprising, because most would think that everyone would be suffering during this crisis. But it isn´t so. Financial results from 2008 show an enormous contrast. Unlike what is happening in the United States where bank losses have totaled 367 billion USD (2.6 percent of the GDP) and shareholders have lost big. In Colombia the 18 banks that operate in the market earned 3.8 trillion pesos (1.5 billion USD), 30 percent more than in 2007 and out of that amount about half will be returned over to shareholders via dividends.

Credit that has been scarce in many countries continues to be available in Colombia, as the banks have sufficient liquidity to provide loans. Last year, despite the economic slow-down, loan portfolios grew almost 18 percent and overdue debts are still at low levels, or at least are not worrying.

The Colombian government didn´t have to get involved in order to save banks, as is happening in almost every country because local banks have sufficient capital.

Although the Colombian financial shares have also been punished by the stock market, the impact has been worse in the case of the big U.S. and European institutions, whose share prices have collapsed. While the international markets lost confidence in the big international banks, in Colombia several financial institutions this year have issued bonds that have been snatched up by investors.