Bancolombia's acquisition of BAM unlikely to impact on rating

Following the announcement in September of Bancolombia’s agreement to acquire a 20 percent stake in Banco Agromercantil de Guatemala (BAM), Fitch Ratings reported Friday that any negative impact would be manageable.

With this transaction, Bancolombia will own 60 percent of BAM. According to the Fitch report, the further acquisition of BAM is in line with the bank’s broader strategy for growth. This is due to Panama and Guatemala being key markets for growth in the region. Fitch states that Bancolombia is expected to have sufficient resources and the necessary knowledge base to avoid the risks associated with mergers and acquisitions.

They also report that profitability for Bancolombia will likely not be greatly impacted. The bank is expected to have a Fitch Core Capital (FCC) ratio of 30 to 50 basis points. They also report that the FCC rating could fall by approximately 10 percent over a short-term period and gradually increase if profitability remains stable, as is expected.

The reporting agency states that Bancolombia will be able to increase its standing in Central America alongside its competitiveness. As it stands the transaction, valued at approximately $180 million, is not anticipated to have an impact on the bank’s credit or its rating.