OREANDA-NEWS. Fitch Ratings has assigned international ratings to Banco de Comercio Exterior de Colombia S.A. (Bancoldex) and has affirmed its national ratings. The Rating Outlook is Stable. A full list of rating actions is at the end of this rating action commentary.

KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SENIOR DEBT
Bancoldex's ratings are aligned with those of the Sovereign, reflecting Fitch's assessment of the Colombian government's willingness and capacity to provide timely support to Bancoldex if needed. Although the Colombian government does not explicitly guarantee Bancoldex's liabilities, Fitch views the entity as an integral arm of the state given its status as a Special Official Institution, its strategic importance to the implementation of the country's National Development Plan, and its majority ownership by state bodies, specifically the Ministry of Commerce, Industry and Tourism and the Ministry of Finance and Public Credit, which together held 99.7% of shares at Dec. 31, 2014.

Bancoldex is one of Colombia's wholesale development banks. Since 2003, its role has expanded from a trade finance institution focused on the facilitation of export credit, to a general business development bank to support the growth of companies in all sectors of the Colombian economy, with a specific focus on small- and medium-sized enterprises. It does this primarily though the provision of wholesale credit and guarantees to financial institutions.

Bancoldex is in the process of redefining its business model over the longer term. It has announced its intention to raise capital from external sources, pursue greater scale and study the expansion of its services to include direct, retail credit. Such plans, however, are in early stages of consideration and a material dilution of the government's ownership is not expected in the short or medium terms.

The bank's IDRs and National ratings reflect Bancoldex's excellent asset quality and high levels of reserves. In keeping with the bank's business model as a wholesale lender, the bank's loan portfolio reflects low impairments (0.3% of gross loans at Dec. 31, 2014) and significant exposure to the country's largest financial institutions. The top 20 credits accounted for more than 60% of gross loans at March 31, 2015. By policy, Bancoldex maintains loan loss reserves in excess of 4% of gross loans which mitigates high borrower concentration.

Bancoldex's financial performance improved in 2014 (ROAA of 1% compared to 0.7% the year prior) but remains limited by low margins, in keeping with its business model and social mission. Non-interest income deriving from trading, fees, leasing operations and dividends provide important support to earnings and contributed 59% of gross revenues in 2014. While Bancoldex's profitability is well below the Colombian banking system average, it is in line with other development banks in the region.

Bancoldex maintains an adequate funding profile with adequate coverage of liabilities by maturity. The bank sources funding primarily from long-term certificates of deposit, direct financings from international financial institutions and bond issuances. A short-term mismatch of assets and liabilities is more than compensated by the bank's liquid investment portfolio in local currency and access to lines of credit in U.S. dollars totalling USD1.1 billion at March 31, 2015.

Bancoldex's capital position represents a key strength. At Dec. 31, 2014, Bancoldex reported total regulatory capital of 18%, a moderate decrease from the prior year, but higher than the banking system average. Bancoldex's capital position benefits from low asset growth and high asset quality. Fitch views current capital levels as appropriate given Bancoldex's modest levels of internal capital generation and high borrower concentration. In Fitch's view, any long term plans to increase the bank's risk appetite or pursue more aggressive growth should be accompanied by sustained improvement in the bank's internal capital generation.

The bank's outstanding ordinary bonds are senior unsecured and therefore are rated in line with the issuer.

The Stable Outlook is in line with Fitch's outlook of the Sovereign.

RATING SENSITIVITIES
IDRS, NATIONAL RATINGS AND SENIOR DEBT
The bank's IDRs, National and senior debt ratings are sensitive to a change in Fitch's assessment of the Colombian government's willingness or capacity to provide support, if needed.

Fitch has taken the following rating actions:

Banco de Comercio Exterior de Colombia S.A.

--Long-term Issuer Default Rating (IDR) assigned 'BBB'; Outlook Stable;
--Short-term IDR assigned 'F2';
--Local Currency Long-term IDR assigned 'BBB+';
--Local Currency short-term IDR assigned 'F2';
--Support Rating assigned at '2';
--Support Rating Floor assigned 'BBB';
--Long-term national-scale rating affirmed at 'AAA(col)'; Outlook Stable;
--Short-term national-scale rating affirmed at 'F1+(col)';
--Senior unsecured bond issuance affirmed at 'AAA(col)'.