Serving Colombia, and beyond...

Banco Davivienda – Colombia’s third-largest bank – works with both personal and business clients, and is currently carrying out its plan of expansion into the American market following an initial public offering (IPO) last year. With a local long-term Fitch credit rating of AAA, Banco Davivienda is also focused on bringing access to banking to a wider spectrum of Colombians.

Amidst a booming economy, Efraín Forero, President of Banco Davivienda, comments on the country’s improved investment grade and shares his views on what is making Colombia such an enticing destination option for foreign investors: “There are two factors that have attracted investment. On the one hand, we have improved, surmounted, and consolidated our security issue. On the other hand, we have adequately managed our macro economy and taxes. Therefore, many investors who could not invest in the past are now able to join those who are already investing in the country.”

Although he is certain that the difficulties which the American and European economies are experiencing will affect the country’s trade and growth capacity, he is also sure opportunities are on the horizon for local businesses.

The country’s development has taken it from being catalogued as nonviable by the Organization of the United States (OEA) and the United Nations (UN) to becoming one of the top 10 investment destinations favored by Fred Hochberg, President of the Export-Import Bank of the U.S. (Ex-Im Bank).

The human factor is essential at the bank. Our organization centers on people. Efraín Forero, President of Banco Davivienda

Mr. Forero acknowledges the importance of maintaining strong ties with developed economies, however he also recognizes the potential and significance of other emerging economies. “We must work a lot and more consistently in the long term to strengthen our relationships with Asia Pacific,” he says.

Successfully growing

Banco Davivienda is growing alongside the country’s prosperity. As part of Sociedades Bolívar, the bank successfully entered the capital market in 2010. “We became the principal issuer with most investors at that time; we had about 82,000 investors, so we had to distribute shares in smaller amounts than expected in order to give each investor a small part of our early offer,” says Mr. Forero.

The bank is experiencing an extraordinary process of growth and strengthening. It closed 2011 with assets of $4.8 billion and it is currently preparing to list on Wall Street.

“We are quite a new institution, recently founded in 1972, when other banks had already been incorporated, and our diversification process actually started in the year 2000. Ever since then, we have managed to raise participation from 4% to 12%,” says Mr. Forero.

Earlier this year, Banco Davivienda announced the purchase of banking giant HSBC’s operations in Costa Rica, El Salvador and Honduras for an estimated $801 million. The next step in the company’s expansion strategy is a seven-year term issuance of external subordinated bonds amounting to $500 million during the first semester of 2012.

This move is aimed at increasing capital while simultaneously issuing local shares. “These subordinate bonds will be placed on the international market with collaboration by JP Morgan Bank and Credit Suisse in order to perform this issue for about $350 million, which might offer that instrument, our country and Davivienda a great opportunity,” says Mr. Forero.

Continued growth

Currently positioned as the third bank in Colombia, Banco Davivienda has crossed international borders and established itself in Panama and Miami. “Our goal in the Miami operation will be to empower and boost our entire commercial activity, namely, funding Colombian companies, but we also expect to create a branch to serve Colombians living in Miami,” says Mr. Forero. 

Last year, the Securities Exchange Commission authorized Banco Davivienda to convert its Miami operation into an international branch, and the entity is now concentrated on providing an even wider range of services to its clients, both at home and abroad.
Regional development plans include interests in Peru, Chile and Panama, where sustained economic expansion and growing middle classes will offer the bank a chance to contribute to these communities. “As the middle class rises, the banking industry will need to step up its game and offer innovative products to cater their needs,” says Maria Mercedes Cuellar, President of the Colombian banking association Asobancaria.

Social inclusion

Among of the sectors that have greatly contributed to Colombia’s boom are mining and energy. Regarding revenues generated by these industries, which President Santos has already announced will be directed into other sectors, the role of banking entities will undoubtedly take on a pivotal role. “The main role of banking will be the ability to act as a funding, structuring and linking institution toward capital markets,” says Mr. Forero.

Strengthening sectors will require increasing the access of the population to banking services. “In this respect, Banco Davivienda has started a really revolutionary initiative with an electronic wallet we call DaviPlata. We launched it in February last year and it is available for absolutely every Colombian,” says Mr. Forero.

Free of charge, DaviPlata is the first mobile money service in Colombia. Today more than 460,000 people have accessed it, 250,000 of whom had had no previous contact with the banking sector. This mechanism is expected to facilitate the distribution of state subsidies to 3.5 million families across the country and could save on distribution costs, estimated at around 20% of the total amount of subsidies. Moreover, tracking of funds will be possible through electronic means.

Mr. Forero says, “Such information is extremely valuable for the state because it formalizes the cash economy. It is equally important for bank institutions since it will help them to get to know those people and subsequently use that knowledge to offer them savings services, as well as micro-insurance and micro-credits, in a structured manner and based on a person’s background.”

The bank’s social inclusion aims are further reflected in its other projects, which include social housing schemes. “Banking will play an essential role in President Santos’ development plan in the areas of energy, infrastructure and housing. We hope to build more than 1 million houses, quite an ambitious goal. Therefore, this year we are spending twice the amount as last year, and the construction process has been simply outstanding; this also includes great initiatives to fund and execute housing macro-projects,” says Mr. Forero.

Banco Davivienda is playing a key role in both funding and structuring the entire infrastructure needed to perform these macro-projects, funding social housing and real estate locally.