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Moody's Investors Service Inc.

Moody's Affirms Bancolombia's Ratings Amid Challenges in Colombia and Central America

Strategic Insights

— 2 min read

Bancolombia S.A., the largest bank in Colombia, has been rated by Moody's Investors Service, which has affirmed its Baa2 long-term local and foreign currency bank deposit ratings due to the bank's strong earnings generation and stable core funding. The Baseline Credit Assessment (BCA) of ba1 and adjusted BCA of ba1 were also affirmed, reflecting the bank's resilient business model and robust earnings. However, the risk of problem loans remains high, with a ratio of 5.6% of gross loans as of March 2025. Moody's notes that this risk is mitigated by sufficient loan loss reserves and moderate capitalization. The affirmation of Bancolombia's ratings takes into account the recently completed corporate restructuring, which has resulted in the spin-off of several subsidiaries and the assumption of ownership by Grupo Cibest S.A. The spin-off is expected to improve the bank's financial and business profile, with most subsidiaries now under the control of Grupo Cibest. This change in ownership structure is expected to result in a more favorable macro profile for Colombia, reducing the bank's problem loan ratio and improving its capitalization.

Key Takeaways:

  • Bancolombia's Baa2 long-term local and foreign currency bank deposit ratings have been affirmed by Moody's, reflecting the bank's strong earnings generation and stable core funding.
  • The Baseline Credit Assessment (BCA) of ba1 and adjusted BCA of ba1 were also affirmed, highlighting the bank's resilient business model and robust earnings.
  • The risk of problem loans remains high, with a ratio of 5.6% of gross loans as of March 2025, although this risk is mitigated by sufficient loan loss reserves and moderate capitalization.
  • The bank's capitalization is expected to decline from current levels of 10.8% due to reduced risk-weighted assets and the removal of goodwill generated by Central American subsidiaries.
  • Profitability is projected to remain robust, supported by Bancolombia's dominant position in the Colombian banking sector and a funding structure that benefits from a large and steady share of core deposits in Colombia.
  • A negative outlook on the bank's ratings is aligned with the negative outlook on Colombia's Baa2 sovereign debt rating, which could lead to a downgrade of the bank's deposit ratings if the sovereign's debt rating is downgraded.
  • An expected improvement in the bank's macro profile for Colombia is expected to result from the spin-off of several subsidiaries and the assumption of ownership by Grupo Cibest S.A.

Statistics:

  • Bancolombia's problem loan ratio: 5.6% of gross loans as of March 2025
  • Loan loss reserves: 94% of Stage 3 loans in March 2025
  • Capitalization: 10.8% (tangible common equity to risk-weighted assets) as of December 2024
  • Bancolombia's market share in Colombia: 25% in 2024
  • Liquid assets as a percentage of tangible assets: expected to decline due to the spin-off of Central American banks
  • Colombia's Baa2 sovereign debt rating: negative outlook

Sources:

  • Moody's Ratings: Moody's affirms Bancolombia's ratings (Moody's Investors Service, February 2025)
  • Moody's Rating Methodologies: Banks (Moody's Investors Service, November 2024)
  • Grupo Cibest S.A.: Press release on corporate restructuring (Group Cibest S.A., May 16, 2025)

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