Colombian Banks’ Profits Down 43% in 2023

In 2023, Colombia faced an economic slowdown, marked by reduced consumer spending and tighter access to credit due to elevated interest rates. This shift resulted in Colombian banks and financial institutions witnessing a 43% decrease in profits compared to 2022.

Data from the Financial Superintendence, the regulatory body for the banking and financial sectors, revealed that by the end of 2023, banks earned 8.1 trillion Colombian pesos in profits. This amount was a significant drop from the 14.2 trillion Colombian pesos reported in the previous year.

Despite the currency recovery, 2023 was a complex year for the Colombian economy. With interest rates anchored at 13.25% since May, the pressure on credit life marked an economic slowdown characterized by a sharp drop in consumption, despite record foreign investment.

Mixed results, with downward trends

The banks that earned the most were Bancolombia ($5.9 billion); Banco de Bogota ($1.02 billion); Citibank ($755,701 million); Banco de Occidente ($430,603 million); BBVA Colombia ($194,688 million), and J.P. Morgan Colombia ($114,233 million).

On the other hand, among the financial entities that recorded losses were: Bancamía S.A. (-$41,584 million), Mibanco (-$90,388 million), Lulo Bank (-$99,795 million), AV Villas (-$117,126 million) and Banco Pichincha (-$133,118 million). The largest losses were observed in Banco Falabella (-$221,419 million), Scotiabank Colpatria (-$300,303 million) and Banco Popular (-$347,409 million).

With these balances, it is evident that out of the 29 banks at the end of last year, eight recorded losses, while only three presented a positive result compared to 2022. In any case, the total solvency of the banks stood at 16.5%, five percentage points above the regulatory minimum of the Superintendency of Finance.

Debt with banks increases

In December, customer debt with banks recorded its seventh consecutive month of negative real annual growth, in line with the macroeconomic environment. Specifically, compared to December 2022, the balance increased at a real annual rate of 26.9%, driven by microcredit delinquency, which recorded positive data and an upward trend for the ninth consecutive month.

Despite the fact that in December the issuing bank began the path of lowering rates, which was confirmed in January, it is expected that the effects on the economy will still take a few months, so this negative situation will be reproduced during the first part of 2024. However, it is expected that cheaper credit, as well as clearly falling inflation, will help banks’ earnings to rebound, especially in the second half of the year.

In this sense, and after months of calls from the Colombian government and economic agents from all over the country, the central bank seems to have consolidated the path to lower the pressure on credit and lower rates. Despite the IMF report, which recommends caution in lowering rates in order to control inflation, the good CPI data could encourage central bank managers to be more generous with decreases that have been very timid up to now.