Colombia Itau Corpbanca Colombia S.A. · Itau Colombia’s ratings also consider its tight capital levels, weak profitability and sound risk management, as well as its strong liquidity

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www.fitchratings.com March 29, 2019

Colombia

Itau Corpbanca Colombia S.A. Full Rating Report

Key Rating Drivers

VR Drives IDRs: Itau Corpbanca Colombia S.A.’s (Itau Colombia) Viability Rating (VR) is

highly influenced by its company profile and resilient asset quality.

Itau Colombia’s ratings also consider its tight capital levels, weak profitability and sound risk

management, as well as its strong liquidity management in line with the Colombian banking

market and Basel III internal considerations.

Itau Group Regional Expansion: Itau Colombia was created in 2012 as part of the regional

expansion strategy of its parent, Itau Corpbanca (formerly Corpbanca). This strategy was

complemented by Banco Itau Corpbanca’s integration with its ultimate parent in Brazil.

The Colombian franchise has already benefited from Itau Group’s strong risk management

culture and adoption of the Itau brand. It should see additional benefits once the business

model in Colombia is completed.

Resilient Asset Quality: The Colombian market experienced lingering systemic asset

deterioration during 2018, but Itau Colombia’s asset quality leveled off ahead of its local peers

and is showing signs of improvement. Impairment fluctuates between 2.9% and 3.1% during

the year, in contrast with the Colombian banking system, which reached 3.7% at

September 2018. The economic slowdown had an impact on the bank’s portfolio quality, but

troubled legacy corporate loans continue to weigh on asset quality.

Adjusted Capital Ratios: Fitch Ratings perceives the bank’s capital as relatively tight,

although there is some comfort when considering Itau Colombia’s ample loan loss reserves,

good asset quality and sound risk management. Its current capitalization metrics are lower than

those of similarly rated peers (universal commercial banks in a ‘bbb’ operating environment);

Fitch considers this one of the constraints on the bank’s VR.

Weak Profitability: Itau Colombia’s profitability has been low as it adapts to the new business

model and a low economic cycle. Pressures on loan impairment charges, technological

integration, brand launch and strategic adjustments constrained operational revenues

generated during the past three years. Fitch expects Itau Colombia’s profitability to gradually

improve in the coming years, while the bank further supports the parent’s revenue and

geographic diversification strategy.

Sound Liquidity Levels: The bank maintains good liquidity levels, which provide some relief

from managing the concentrated liability structure. The moderate franchise gives a limited

competitive advantage and generally influences funding costs. However, the deposit structure

is working toward a composition of stable resources, in line with the more conservative liquidity

policies and liquidity coverage ratios; this includes mid- to long-term time deposits, domestic

and overseas bond issuances and increased retail funding.

Rating Sensitivities

Limited Upside Potential: There is limited upside potential in Itau Colombia’s ratings over the

short to medium term given its medium size and low profitability.

Decline in Asset Quality: Negative rating action could arise from a material deterioration in

asset quality that further erodes the bank’s Fitch core capital (FCC) ratio below 9% or

profitability or loan reserve coverage of impaired loans below 100%.

Ratings

Itau Corpbanca Colombia S.A.

Long-Term Foreign Currency IDR BBB–

Short-Term Foreign Currency IDR F3

Long-Term Local Currency IDR BBB–

Short-Term Local Currency IDR F3

Viability Rating bbb–

Support Rating 3

Support Rating Floor BB+

Sovereign Risk

Foreign Currency Long-Term IDR BBB

Local Currency Long-Term IDR BBB

Outlooks

Foreign Currency Long-Term IDR Stable

Local Currency Long-Term IDR Stable

Sovereign Foreign Currency Long-Term IDR Stable

Sovereign Local Currency Long-Term IDR Stable

Financial Data

Itau Corpbanca Colombia S.A.

(COP Bil.) 9/30/17 12/31/17

Total Assets (USD Mil.) 10,185.3 10,467.9

Total Assets 30,449.8 31,106.8

Total Equity 3,557.4 3,575.2

Operating Profit (1.7) 99.8

Published Net Income (29.2) 22.1

Comprehensive Income (22.3) (63.6)

Operating Profit/ Weighted Risks (%) (0.01) 0.39

Impaired Loans/ Gross Loans (%) 3.09 2.93

Fitch Core Capital/ Weighted Risks (%) 9.64 9.52

Tier 1 Ratio (%) 9.23 9.10

Loans/ Customer Deposits (%) 118.42 115.33

Related Research

Fitch Ratings 2019 Outlook: Latin American Banks (December 2018)

Analysts Robert Stoll +1 212 908-9155 [email protected]

Sergio Pena +571 484-6770 [email protected]

https://www.fitchratings.com/site/re/10052685


mailto:[email protected]

mailto:[email protected]

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Itau Corpbanca Colombia S.A. 2

March 29, 2019

Operating Environment

Lingering Asset Quality Problems

The Colombian banking sector outlook has been revised to stable from negative since Fitch

expects banks’ financial metrics to stabilize or improve slightly during 2019, aided by a slow

recovery in loan growth and positive developments in recent asset quality problems.

The implementation of new capital regulations will also likely boost loss-absorption capacity.

Nevertheless, Fitch notes that Colombian banks still show slower than expected recovery in asset

quality ratios, a higher burden of credit costs on profitability and weaker capital ratios than those

of relatively similar regional peers.

Fitch expects Colombia’s gradual economic recovery to support loan growth, asset quality

improvement and better profitability. Fitch believes the deterioration of asset quality metrics

most likely peaked in 2Q18–3Q18 and expects a mild improvement over the next 18 months.

Asset quality deterioration also affected reserve coverage ratios, although these continue to be

in line with the bank’s ratings and are expected to recover somewhat in 2019.

Despite improving macroeconomic conditions in Colombia, new headwinds regarding

international markets, underpinned by monetary policy normalization and ongoing political

uncertainty, as well as oil price volatility and the pass-through to the exchange rate, represent

downside risks to the bank’s financial performance.

Company Profile

Itau’s Group Regional Expansion

Itau Colombia was created in 2012 as part of the regional expansion strategy of its parent, Itau

Corpbanca. At the moment, Itau Colombia is also being integrated with its ultimate parent, the

Itau Group. The integration with the Itau Group has benefited the Colombian franchise as it has

integrated the parent company’s strong risk management culture and adopted its brand.

The move is expected to confer additional benefits on the Colombian subsidiary as it completes

its adoption of the Itau Group’s business model over the next two years.

Itau Colombia is the seventh largest bank in Colombia, and its operation covers corporate,

commercial, consumer and mortgage loans. This bank is very conservative in terms of risk

appetite and it does not have pricing power. Under a universal banking strategy and the

acquisition of two commercial banks, Itau Colombia has a market share of 4.7% (September

2018), the sixth largest economic group and the third largest international franchise. It currently

has 162 offices in 30 cities nationwide, 173 ATMs, 456,000 customers, 3,511 employees and four

subsidiaries that fulfil the banking strategy. Itau Colombia’s business model comprises all

business segments, with revenues coming largely from intermediation, trading and recurrent

banking services.

Management and Strategy

Adopting Itau’s Business Model

The management team has a high degree of depth and experience and counts on the support

of the parent, to align its strategy with Group. There is direct line of report with its respective

areas in Chile. The bank’s operations enjoy the supervision and support of managers from the

different areas of the parent organization, to whom they report directly. The Colombian

operations are part of Itau’s presence in Latin America and the parent has been proactive in

securing the hiring and retention of top managers to implement its business model and

ensuring the following of conservative credit policies with a mix of people from Colombia, Brazil

and Chile.

Related Criteria

Bank Rating Criteria (October 2018)


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Itau Colombia’s board of directors is composed of nine members, including five independents.

Their backgrounds are varied, but they have significant business experience. The board

actively participates in different committees, as well as approves and oversees corporate

integrity. They are also responsible for strategy, performance and internal controls. During the

past two years, management has worked to establish the corporate governance standards for

Itau in Colombia and Chile. In Fitch’s opinion, Itau Colombia’s corporate governance is well in

line with the region’s best practices, has adequate corporate governance codes for its

operations and fulfils all of the matrix requirements in Brazil and Chile. For this reason the

influence is neutral to ratings.

Implementing Itau’s Business Model

Itau Colombia is running its strategy for the next couple of years, to adopt Itau’s business model

throughout its organization, with a rollout to its customers during 2018–2019. The process will

imply unifying core banking operations and a gradual launch of the Itau brand to the market.

The second stage includes the design of a worth-value strategy to offer to the market starting with

the wholesale portfolio and following with the retail portfolio in 2019 as well as develop its digital

strategies for its target market. Fitch considers the regional presence and consolidate business

model of the parent as the main strength to consolidate Itau’s footprint in the country and

permeate its corporate culture, identity and risk appetite within the Colombian operation.

The bank’s corporate strategy is based on a clear segmentation of its target markets and

fosters its regional platform. On the corporate side the objective is offer the array of products

and services to meet customer needs focus in five premises: sales model, competitive products,

efficiency, risk control and synergies with the bank subsidiaries. Itau Colombia segments its

target market into corporates, financial institutions, government entities, Latam companies with

interests in the Colombian market and specialized sectors such as infrastructure and energy. In

addition, the bank attends midsized companies and the real estate sector. During 2019 the

entity will focus its effort in the strategic plan execution, tickets according target markets, deep

and strength it customer relationships, increase the profitability for specialized products, cash

management and the launch of the second stage for big companies.

In retail lending, 2019 will be a year of implementing the new business strategy supported in six

objectives: differentiated worth-value strategy, new array of more profitable products,

adjustments in credits and collections, digital strategy to improve clients’ experience,

strengthening the customer experience between digital and physical channels, and synergies

with the wholesale bank. The retail portfolio is in a review process to close the gap with its

competitors in terms of cost of funding, client allocation by profitability and differentiating the

value offered to each segment, including efforts in credit cards, fees scheme, revolving lines,

debit cards and an integral offer of savings and investment products and services.

Itau Colombia has been receiving a lot of support from the main parent in Brazil.

Technological combination of platforms is complete and ahead of schedule as well as the Itau’s

brand launched in all the offices. The bank continues with the Itau’s strategy within Colombian

market. Digital strategy, retail banking reorientation, focus on quality of service and the phase two

of its matrix corporate culture were part of the fulfilment of is strategic objectives during 2018.

Although Itau Colombia’s strategy was affected by weaker economic cycles in Colombia,

competitors’ acquisitions and focus on more profitable products that impacted the market share,

the bank was able to fulfil its objectives even with a more cautious approach via its focus on its

core business.

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Risk Appetite

Conservative Underwriting Standards Aligned with the Parent

The bank is mostly oriented to the corporate segment and plans to continue its gradual

penetration of retail banking. Itau’s underwriting standards are conservative as illustrated by its

good loan quality ratios, and follow a parent of defined exposure limits, collateral requirements

and internal risk ratings. The bank’s risk management structure is fully integrated with that of its

parent, and it applies all of Itau’s global risk management policies in Chile and Brazil. The risk

appetite of the entity follows a global statement, core and specific risk metrics and

capital consumption.

Credit risk policies are set by the board of directors of Chile and Colombia, which also are in

charge of defining credit portfolio limits, approving related party transactions and following

monthly results. The main financial risk of the bank is credit risk. This is given the importance of

its credit portfolio, representing 66% of its assets at December 2018. Itau Colombia has

established risk management practices following not only local regulatory standards but also

fully integrated with those of its parent.

The bank’s risk management structure is under the responsibility of the risk vice-presidency. This

unit is responsible to design and implement policies and controls that are approved by the board

and discussed in the respective committees. Meanwhile the credit department, which reports

directly to the CEO is in charge or the origination process and business strategy.

The securities investment segment’s main objective is to preserve liquidity, managing structural

mismatches and generate financial results through trading and sell of products and services. Itau

Colombia’s liquidity and market risk appetite are set by the board following its parent guidance.

Adequate Risk Controls

The credit risk to which the bank is exposed is mitigated by adequate diversification by economic

sector and a moderate concentration in the largest debtors. The combination of a low risk appetite,

improved risk management processes and a more stringent collection process should continue to

sustain the loan portfolio’s good performance. However, moderate loan concentration could lead

to more volatile levels of impaired loans under less favorable economic conditions compared with

the top players that have more diversified portfolios by debtor.

Corporate credit analysis includes industry studies to identify significant risks in its target

markets, limits by sector, segmentation by type of banking, quantitative and qualitative analysis

and specific origination models. The approvals are made by consensus and attribution levels.

Meanwhile, retail banking is supported by internal risk models and decision rules, including

analysis of customer profiles, pre-approvals models, internal behavior, target market, payment

ability and consulting credit bureaus. It also includes vintage analysis, customer and product

segmentation and a detailed delinquencies follow-up for each stage of non-performing loans.

Monitor process follows a periodic assessment of payment, a watch and a follow up system.

The collection process has internal and external resources to control the portfolio’s asset

deterioration and minimize losses, which is clearly documented in credit portfolio management

policies. The watch list, rate loans in five categories which include reason to be classified in

each category and follow up actions to assess different recovery plans. Additionally, there are

improvements in the use of guaranties and great agility in the recovery process.

Loan impairment charges follow reference models of the Superintendencia Financiera de

Colombia in conjunction with its parent’s models.

Operational risk exposure is monitored continuously and follows local regulator rules as well as

SOX controls. The operational risk model is based on three lines of defense that flow through

the entire organization and follow business continuity planning: 1) business and support areas;

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2) internal control areas, compliance and operational risk unit; and 3) audit. Additionally the

bank counts with robust contingency plans to allow the bank and its subsidiaries operate under

stress conditions.

Risk Appetite Adjustments to Grow into the Culture and Strategy

of the Parent

Itau Colombia has been working extensively to fit into the culture and strategy of the parent to

grow both its wholesale and retail presence in Colombia. The bank has reviewed most of its

credit portfolios and where needed made conservative provisions in 2016 and 2017.

The economic slowdown continued defining a cautious risk appetite (2018: GDP growth 2.7%)

for Itau, who decided not participate in projects that could allocate more capital as well as

looking for tickets aligned with its business strategy. This factors and markets movements in

retail segment explain the decrease in assets and deposits impacting Itau’s market share.

Limited Market Risk

The bank follows policies and procedures of its parent organization to handle market risk.

Risk exposures are related with interest rates, currency, derivatives and market positions in local

index (DTF, IPC, UVR and IBR). Additionally, most of the bank’s counterparties are highly rated

international banks. Policies and limits have been modified according to Basel III guidelines under

stress scenarios, different levels of limits and new financial risk models. All of these changes are

set by the asset and liabilities committee and approved by the board. The financial risk unit

monitors compliance with these policies and limits.

For the structural interest rate risk exposure, the bank performs sensitivity analysis of interest-

bearing assets and liabilities with financial cost to evaluate the impact of interest rate changes

in the net interest margin and capital. Itau calculates the regulatory and its internal VaR model

under stress scenarios that helps to sizing all balance sheet risk positions. Additional tools

include back-testing models, stress situations, sensitivity analysis, generate alerts and defined

operation limits that help to monitor risk exposures at different levels.

Financial Profile

Asset Quality

Resilient Asset Quality

The Colombian market experienced lingering systemic asset deterioration during 2018, but Itau

Colombia’s asset quality leveled off ahead of its local peers and is showing signs of

improvement. Impairment fluctuates between 2.9% and 3.1% during the year, in contrast with

the Colombian banking system, which reached 3.7% at September 2018. The focus on

implement Itau’s strategy for its commercial and retail loan portfolio narrow asset growth;

however the legacy of corporate loans in difficulties continues explaining part of asset

deterioration. Broken down by segment, corporate portfolio deteriorates 30 basis points (bps) in

contrast with the 100-bp asset deterioration of the system; retail portfolio improves its asset

Asset Quality (%) 9/30/18 2017 2016 2015

Growth of Gross Loans (0.97) (3.10) (2.30) 11.00

Impaired Loans/Gross Loans 3.09 2.93 2.10 1.40

Reserves for Impaired Loans/Impaired Loans 171.10 187.00 253.50 310.45

Impaired Loans less Reserves for Impaired Loans/Fitch Core Capital (10.05) (24.40) (30.64) (28.01)

Loan Impairment Charges/Average Gross Loans 2.75 2.00 2.79 2.42

Source: Itau Colombia.

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quality in 110 bps and the systems improved in 60 bps, meanwhile mortgage deterioration of

80 bps was above the 20 bps of the system.

The diversification by economic sector is wide and the proportion of foreign currency loans is low.

Concentration by industry does not exceed 10% of loan portfolio. Obligor concentrations

decrease to moderate levels (top 20 equaling 13% of gross loans as of December 2018 versus

14% as of December 2017), and none of them have concentrations above 10% of regulatory

capital. One of the top 20 customers, from the infrastructure sector and a concentration of less

than 1% of total asset and 4.2% of capital, continues under surveillance because of its

deterioration. The level of provisions for the top 20 past due loans range between 35% and 100%

and are continuously monitored.

Chargeoffs increased to 2.5%, restructured loans decreased to 3% of loan portfolio from 3.8%

in 2017 and reserve coverage remains high (170%) due to matrix requirements and its

conservative profile. In Fitch’s view, reserve levels give an adequate cushion to protect loan

portfolio deterioration. Maturity structure of the portfolio is concentrated in the medium and

long term.

Other Earning Assets

Securities investment portfolio represents 18% of total assets. The portfolio’s main objective is

to preserve liquidity as well as manage structural mismatches and generate financial results.

Approximately 85% of the investment portfolio is in securities from the government (mainly

Colombian government), and the rest is a diversified mix of securities from local

financial institutions.

Earnings and Profitability

Challenge in Profitability

Itau Colombia’s profitability has been low as it adapts to the new business model and a low

economic cycle. Pressures on loan impairment charges, technological integration, brand

launch and strategic adjustments constrained operational revenues generated during the last

three years. Fitch expects Itau’s profitability to gradually improve in the coming years, while the

bank further supports the parent’s revenue and geographic diversification strategy.

Revenues are supported by the limited growth of balance-sheet, changes in the deposit

structure, asset quality performance and influenced by the bank’s market position. Deploy of

the commercial strategy and advances in consumer portfolio toward more profitable and

competitive products redirect the volume of operating income while a stable intervention rate

allowed adjust the funding strategy to more diversify funding sources and longer term liabilities.

Both effects in the asset and liability side contribute with the spreads and the increase in the

net interest margin up to 3.65% from 3.31% in 2017.

Treasury operations and fees constitute important and recurrent operating revenue contributions

that allow offset the low interest margins, however FX losses during the last part of 2018 reduce

Profitability Metrics (%) 9/30/18 2017 2016 2015

Net Interest Income/Average Earning Assets 3.65 3.31 2.79 3.71

Non-interest Expense/Gross Revenues 64.38 61.67 55.43 49.45

Loans and Securities Impairment Charges/Pre-impairment Operating Profit 100.39 85.01 95.63 65.02

Operating Profit/Average Total Assets (0.01) 0.31 0.10 1.00

Operating Profit/Risk-weighted Assets (0.01) 0.40 0.13 1.14

Operating Profit/Average Equity (0.06) 2.70 0.92 8.87


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the profit generation. In Fitch’s view, profitability will remain as a challenge over the rating horizon,

though opportunities for improvement in the medium term are good as the bank achieves synergy

gains, controls loan deterioration and enhances its earnings diversification. Operating profit to risk

weighted assets remains weak at negative 0.2% as of September 2018. This was well below

regional peers at 1.75% for the same period and below the average of the past two years of

0.26%.

Operating Expenses and Loan Loss Provisions

The entity continued its efforts to control operating costs, personnel expenses related with

organizational changes, and complete the core banking implementations. Efficiency levels are

expected to remain around 60% for 2019 and converge to banking system average of 48% in

the medium term. Loan impairment charges (LIC) were explained by the systemic asset

deterioration which impact the bank during 2018, the legacy of the corporate names, added to

its parent more conservative standards that pressure the pre-impairment operating profits.

Itau expects the efforts of the complete revision of the loan portfolio as well as better results in

the collection process and better vintages oriented by the new business strategy contributes

with a decrease in the weight of the provisions on the operational profitability.

Capitalization and Leverage

Tight Capital

The bank’s capital is deemed sufficient considering its ample loan loss reserves, sound asset

quality and risk management. However, its current capitalization metrics compare unfavorably

with similarly rated international peers (universal commercial banks in a ‘bbb’ operating

environment), and Fitch considers this one of the constraints on the bank’s VR. The bank’s

FCC ratio was 9.64% at September 2018, underpinned by asset value decrease and net

income losses.

The bank’s outstanding subordinated debt is eligible from a regulatory capital perspective, but

these bonds are not considered equity under Fitch’s criteria, but rather as liabilities.

New capital rules under Basel III standards will begin in Colombia during the second quarter of

2019 with a 4.5 years schedule of full implementation. Under the new standards, Itau Colombia’s

capital ratios will benefit for changes in the risk weighted assets and Fitch do not anticipate

significant pressures for the new capital requirements during the implementation period or

additional capital needs under a scenario of conservative risk management and gradual business

growth. Although it’s not considered in the rating assessment by Fitch, the entity benefits from

being part of a larger group and ordinary support if required should be feasible.

Funding and Liquidity

Capitalization (%) 9/30/18 2017 2016 2015

Fitch Core Capital/Weighted Risk 9.64 9.52 9.55 9.00

Tangible Common Equity/Tangible Assets 7.80 7.64 7.45 7.43

Core Tier 1 Regulatory Capital Ratio 9.23 9.10 9.38 9.00

Regulatory Capital Ratio 13.62 12.31 12.71 12.18


Funding (%) 9/30/18 2017 2016 2015

Loans/Customer Deposits 118.42 115.33 104.87 95.86

Customer Deposits/Total Funding (Excluding Derivatives) 71.73 72.24 76.26 83.83


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Strong Liquidity Management

The integration process with Itau includes Basel III guidelines. As Itau Colombia’s policies are

highly integrated with its parent in Chile, it strengthened its liquidity position and improved its

funding structure to help reduce the structural asset and liabilities mismatch. In Fitch’s opinion,

the bank maintains good liquidity levels that allow managing the concentrated liability structure

with some comfort, and these sound liquidity management standards are a positive rating

factor. Additionally, it is working to reduce dependence on major depositors, increase lower

cost funds and capture institutional resources to generate income for financial services. It also

has contingency plans, if necessary, for bank and systemic crises as well as scenario cases

and alerts to identify liquidity risk.

Itau Colombia enjoys a broad and growing customer base that funds 72% of the bank’s

operations. The deposit base has also been highly stable in recent years. The moderate franchise

gives a limited competitive advantage and generally influences the funding cost. The deposit

structure established in 2016 aims for a composition change toward stable resources in line with

the new liquidity policies and liquidity coverage ratios, this includes mid to long term time deposits,

continuous bonds issuance, locally and abroad, and increase in retail funding.

Additional funding sources include senior and subordinated bond issuances in the local market,

credit lines in foreign currencies and rediscount lines with local development banks and

multilaterals. Deposit concentration in the top 20 largest depositors decrease up to 14% at

YE18 from 28% in 2017 as part of the process of reduce concentration on institutional investors

and financial institutions.

Support

Moderate Systemic Importance

The bank’s Support Rating (SR) of ‘3’ and Support Rating Floor (SRF) of ‘BB+’ are driven by its

moderate systemic importance and share of retail deposits, although this is still modest

compared to domestic systemically important banks. Fitch believes there is a modest

probability of receiving sovereign support if the bank were to need it, which underpins its SR

and SRF. SRFs indicate the minimum level to which the entity’s Long-Term IDRs could fall as

long as Fitch does not change its view on potential sovereign support.

Additionally, although Fitch considers that the subsidiary’s credit profile is mostly independent

from that of its parent, the VR may be pressured in the scenario of further downgrades of the

ultimate parent, Itau Unibanco Holding (IDR of ‘BB’/Stable) because under Fitch’s criteria, the

intrinsic credit profile of a subsidiary bank cannot be completely delinked from that of

its parent.

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Banco Itau CorpBanca Colombia SA — Income Statement

Nine Months Third-Quarter 9/30/18

a 2017

a 2016

a 2015

a

(Years Ended Dec. 31) (USD Mil.) (COP Bil.) (COP Bil.) (COP Bil.) (COP Bil.)

Interest Income on Loans 549.0 1,641.4 2,423.0 2,442.7 2,062.1

Other Interest Income 5.9 17.5 49.0 60.9 43.3

Dividend Income 1.9 5.8 5.2 4.2 5.0

Gross Interest and Dividend Income 556.8 1,664.7 2,477.2 2,507.8 2,110.4

Interest Expense on Customer Deposits 208.3 622.8 1,128.7 1,306.3 809.6

Other Interest Expense 94.6 282.9 394.1 362.2 267.6

Total Interest Expense 303.0 905.7 1,522.8 1,668.5 1,077.2

Net Interest Income 253.9 759.0 954.4 839.3 1,033.2

Net Fees and Commissions 35.6 106.5 176.1 179.4 181.4

Net Gains (Losses) on Trading and Derivatives 7.9 23.5 6.3 150.7 319.2

Net Gains (Losses) on Assets and Liabilities at FV 68.6 205.0 431.7 552.6 72.2

Net Gains (Losses) on Other Securities 5.1 15.3 13.1 18.6 10.3

Net Insurance Income N.A. N.A. N.A. N.A. N.A.

Other Operating Income 40.6 121.4 152.9 24.8 199.9

Total Non-Interest Operating Income 157.8 471.7 780.1 926.1 783.0

Total Operating Income 411.7 1,230.7 1,734.5 1,765.4 1,816.2

Personnel Expenses 99.1 296.4 400.4 345.9 337.7

Other Operating Expenses 165.9 495.9 670.8 583.5 560.5

Total Non-Interest Expenses 265.0 792.3 1,071.2 929.4 898.2

Equity-accounted Profit/(Loss) — Operating N.A. N.A. N.A. N.A. N.A.

Pre-Impairment Operating Profit 146.6 438.4 663.3 836.0 918.0

Loan Impairment Charge 149.8 447.7 448.2 638.3 530.6

Securities and Other Credit Impairment Charges (2.5) (7.6) 117.8 163.3 66.3

Operating Profit (0.6) (1.7) 97.3 34.4 321.1

Equity-accounted Profit/(Loss) — Non-operating N.A. N.A. N.A. N.A. N.A.

Goodwill Impairment N.A. N.A. N.A. N.A. N.A.

Non-recurring Income N.A. N.A. N.A. 0.0 3.4

Non-recurring Expense 9.0 26.8 0.0 0.0 0.6

Change in Fair Value of Own Debt N.A. N.A. N.A. N.A. N.A.

Other Non-operating Income and Expenses N.A. N.A. N.A. N.A. N.A.

Pre-tax Profit (9.5) (28.5) 97.3 34.4 323.9

Tax Expense 0.2 0.7 75.2 62.2 95.1

Profit/Loss from Discontinued Operations N.A. N.A. N.A. N.A. N.A.

Net Income (9.8) (29.2) 22.1 (27.8) 228.8

Change in Value of AFS Investments N.A. N.A. N.A. N.A. N.A.

Revaluation of Fixed Assets N.A. N.A. N.A. N.A. N.A.

Currency Translation Differences 0.3 0.8 0.0 3.2 60.5

Remaining OCI Gains/(Losses) 2.0 6.1 (85.7) (41.3) 117.5

Fitch Comprehensive Income (7.5) (22.3) (63.6) (65.9) 406.8

Memo: Profit Allocation to Non-controlling Interests 0.0 0.1 0.3 (0.4) 0.4

Memo: Net Income after Allocation to Non-controlling Interests (9.8) (29.3) 21.8 (27.4) 228.4

Memo: Common Dividends Relating to the Period N.A. N.A. N.A. N.A. N.A.

Memo: Preferred Dividends and Interest on Hybrid Capital Accounted for as Equity Related to the Period

N.A. N.A. N.A. N.A. N.A.

aExchange rate: Third Quarter 2018 – USD1 = COP2,989.58; 2017 – USD1 = COP2,971.63; 2016 – USD1 = COP3,000.71; 2015 – USD1 = COP3,149.47;

N.A. – Not available. Source: Banco Itau CorpBanca Colombia SA.

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Banco Itau CorpBanca Colombia SA — Balance Sheet


a 2017

a 2016

a 2015

a


Assets

Loans

Residential Mortgage Loans 910.7 2,722.6 2,511.0 2,364.8 2,214.7

Other Mortgage Loans N.A. N.A. N.A. N.A. N.A.

Other Consumer/Retail Loans 1,450.4 4,336.2 4,709.6 5,054.0 5,047.1

Corporate and Commercial Loans 4,849.0 14,496.6 14,546.4 15,046.3 15,722.4

Other Loans N.A. N.A. N.A. N.A. N.A.

Less: Loan Loss Allowances 381.3 1,139.9 1,194.2 1,193.4 1,000.9

Net Loans 6,828.9 20,415.5 20,572.8 21,271.7 21,983.3

Gross Loans 7,210.2 21,555.4 21,767.0 22,465.1 22,984.2

Memo: Impaired Loans Included Above 304.8 666.1 638.7 470.8 322.4

Memo: Specific Loan Loss Allowances N.A. N.A. N.A. N.A. N.A.

Other Earning Assets

Loans and Advances to Banks 158.5 473.7 862.4 1,529.9 886.8

Reverse Repos and Securities Borrowing 78.9 235.9 174.6 875.2 347.5

Derivatives 120.1 359.0 441.1 415.2 724.2

Trading Securities and at FV through Income 65.1 194.6 5,387.1 4,460.3 1,037.8

Securities at FV through OCI/Available for Sale 1,615.9 4,830.8 25.7 96.3 4,090.3

Securities at Amortized Cost/Held to Maturity 104.1 311.2 400.8 484.5 494.2

Other Securities N.A. N.A. N.A. N.A. 121.9

Total Securities 1,785.1 5,336.6 5,813.6 5,041.1 5,744.2

Memo: Government Securities included Above 1,518.7 4,540.3 4,905.9 3,536.6 3,645.3

Memo: Total Securities Pledged N.A. N.A. N.A. N.A. N.A.

Equity Investments in Associates N.A. N.A. N.A. N.A. N.A.

Investments in Property N.A. N.A. N.A. N.A. N.A.

Insurance Assets N.A. N.A. N.A. N.A. N.A.

Other Earning Assets 84.9 253.8 125.7 69.8 25.8

Total Earning Assets 9,056.3 27,074.5 27,990.2 29,202.9 29,711.8

Non-Earning Assets

Cash and Due from Banks 394.8 1,180.2 946.3 1,645.9 1,653.3

Memo: Mandatory Reserves Included Above N.A. N.A. N.A. N.A. N.A.

Foreclosed Assets N.A. N.A. N.A. N.A. N.A.

Fixed Assets 50.5 151.1 332.2 319.2 464.8

Goodwill 242.3 724.4 724.4 724.4 724.4

Other Intangibles 186.2 556.7 574.2 570.7 604.9

Current Tax Assets 73.0 218.2 171.4 102.5 244.9

Deferred Tax Assets 110.0 328.8 120.4 155.6 260.3

Discontinued Operations N.A. N.A. N.A. N.A. N.A.

Other Assets 72.2 215.9 247.7 241.7 258.9

Total Assets 10,185.3 30,449.8 31,106.8 32,962.9 33,923.3


N.A. – Not available. Continued on next page. Source: Banco Itau CorpBanca Colombia SA.

7,349.0 20,430.4 20,512.2 19,155.9 17,118.8 12,547.6

Banks


March 29, 2019

Banco Itau CorpBanca Colombia SA — Balance Sheet (Continued)


a 2017

a 2016

a 2015

a


Liabilities and Equity

Interest-Bearing Liabilities

Total Customer Deposits 6,088.4 18,201.9 18,873.8 21,422.4 23,976.7

Deposits from Banks 17.2 51.3 60.7 45.7 0.0

Repos and Securities Lending 650.5 1,944.6 1,992.2 2,197.5 1,109.3

Commercial Paper and Short-term Borrowings 626.6 1,873.4 1,935.7 1,330.4 1,618.9

Customer Deposits and Short-term Funding 7,382.7 22,071.2 22,862.4 24,996.0 26,704.9

Senior Unsecured Debt 817.5 1,394.8 1,363.3 1,567.3 431.5

Subordinated Borrowing 287.8 860.4 872.7 1,022.3 1,080.0

Covered Bonds N.A. N.A. N.A. N.A. N.A.

Other Long-term Funding N.A. 1,049.2 1,028.5 506.1 385.9

Total Long-term Funding 1,105.3 3,304.4 3,264.5 3,095.7 1,897.4

Memo: o/w Matures in Less Than One Year N.A. N.A. N.A. N.A. N.A.

Trading Liabilities N.A. N.A. N.A. N.A. N.A.

Total Funding 8,488.0 25,375.6 26,126.9 28,091.7 28,602.3

Derivatives 84.1 251.4 281.8 229.4 432.4

Total Funding and Derivatives 8,572.1 25,627.0 26,408.7 28,321.1 29,034.7

Non-Interest Bearing Liabilities

Fair Value Portion of Debt N.A. N.A. N.A. N.A. N.A.

Credit Impairment Reserves N.A. N.A. N.A. N.A. N.A.

Reserves for Pensions and Other 116.0 346.7 307.8 238.5 259.8

Current Tax Liabilities N.A. N.A. N.A. 0.0 0.0

Deferred Tax Liabilities 163.5 488.7 329.9 347.2 455.1

Other Deferred Liabilities N.A. N.A. N.A. N.A. N.A.

Discontinued Operations N.A. N.A. N.A. N.A. N.A.

Insurance Liabilities N.A. N.A. N.A. N.A. N.A.

Other Liabilities 143.8 430.0 485.2 402.8 421.8

Total Liabilities 8,995.4 26,892.4 27,531.6 29,309.6 30,171.4

Hybrid Capital

Preferred Shares and Hybrid Capital Accounted for as Debt N.A. N.A. N.A. N.A. N.A.

Preferred Shares and Hybrid Capital Accounted for as Equity N.A. N.A. N.A. N.A. N.A.

Equity

Common Equity 1,189.9 3,557.3 3,574.9 3,652.9 3,751.5

Non-controlling Interest 0.0 0.1 0.3 0.4 0.4

Securities Revaluation Reserves N.A. N.A. N.A. N.A. N.A.

Foreign Exchange Revaluation Reserves N.A. N.A. N.A. N.A. N.A.

Fixed Asset Revaluations and Other Accumulated OCI N.A. N.A. N.A. N.A. N.A.

Total Equity 1,189.9 3,557.4 3,575.2 3,653.3 3,751.9

Memo: Equity plus Preferred Shares and Hybrid Capital Accounted for as Equity 1,189.9 3,557.4 3,575.2 3,653.3 3,751.9

Total Liabilities and Equity 10,185.3 30,449.8 31,106.8 32,962.9 33,923.3

Memo: Fitch Core Capital 761.4 2,276.3 2,276.6 2,358.2 2,422.6



Banks


March 29, 2019

Banco Itau CorpBanca Colombia SA — Summary Analytics

(%, Years Ended Dec. 31)

Nine Months First-Quarter

9/30/18 2017 2016 2015

Interest Ratios

Interest Income/Average Earning Assets 8.01 8.58 8.38 7.58

Interest Income on Loans/Average Gross Loans 10.08 10.83 10.66 9.40

Interest Expense on Customer Deposits/Average Customer Deposits 4.52 5.57 5.72 3.74

Interest Expense/Average Interest-bearing Liabilities 4.60 5.58 5.77 3.99

Net Interest Income/Average Earning Assets 3.65 3.31 2.80 3.71

Net Interest Income Less Loan Impairment Charges/Average Earning Assets 1.50 1.75 0.67 1.81

Net Interest Income Less Preferred Stock Dividend/Average Earning Assets 3.65 3.31 2.80 3.71

Other Operating Profitability Ratios

Operating Profit/Risk Weighted Assets (0.01) 0.39 0.13 1.14

Non-Interest Expense/Gross Revenues 64.38 61.76 52.65 49.45

Loans and Securities Impairment Charges/Pre-impairment Operating Profit 100.39 85.33 95.89 65.02

Operating Profit/Average Total Assets (0.01) 0.30 0.10 1.00

Non-Interest Income/Gross Revenues 38.33 44.98 52.46 43.11

Non-Interest Expense/Average Total Assets 3.41 3.33 2.73 2.81

Pre-impairment Operating Profit/Average Equity 16.43 18.39 22.29 25.36

Pre-impairment Operating Profit/Average Total Assets 1.89 2.06 2.46 2.87

Operating Profit/Average Equity (0.06) 2.70 0.92 8.87

Other Profitability Ratios

Net Income/Average Total Equity (1.09) 0.61 (0.74) 6.32

Net Income/Average Total Assets (0.13) 0.07 (0.08) 0.71

Fitch Comprehensive Income/Average Total Equity (0.84) (1.76) (1.76) 11.24

Fitch Comprehensive Income/Average Total Assets (0.10) (0.20) (0.19) 1.27

Taxes/Pre-tax Profit (2.46) 77.29 180.81 29.36

Net Income/Risk Weighted Assets (0.16) 0.09 (0.11) 0.81

Capitalization

FCC/FCC-Adjusted Risk Weighted Assets 9.64 9.52 9.55 9.00

Tangible Common Equity/Tangible Assets 7.80 7.64 7.45 7.43

Equity/Total Assets 11.68 11.49 11.08 11.06

Basel Leverage Ratio N.A. N.A. N.A. N.A.

Common Equity Tier 1 Capital Ratio 9.23 9.10 9.38 N.A.

Fully Loaded Common Equity Tier 1 Capital Ratio N.A. N.A. N.A. N.A.

Tier 1 Capital Ratio 13.62 12.31 12.71 8.08

Total Capital Ratio 13.62 12.31 12.71 12.18

Impaired Loans less Loan Loss Allowances/Fitch Core Capital (10.05) (24.40) (30.64) (28.01)

Impaired Loans less Loan Loss Allowances/Equity (6.43) (15.54) (19.78) (18.08)

Cash Dividends Paid and Declared/Net Income N.A. N.A. N.A. N.A.

Risk Weighted Assets/Total Assets 81.75 81.08 78.82 83.28

Risk Weighted Assets — Standardized/Risk Weighted Assets N.A. N.A. N.A. N.A.

Risk Weighted Assets — Advanced Method/Risk Weighted Assets N.A. N.A. N.A. N.A.

Loan Quality

Impaired Loans/Gross Loans 3.09 2.93 2.10 1.40

Growth of Gross Loans (0.97) (3.11) (2.26) 11.03

Loan Loss Allowances/Impaired Loans 171.13 186.97 253.48 310.45

Loan Impairment Charges/Average Gross Loans 2.75 2.00 2.79 2.42

Growth of Total Assets (2.11) (5.63) (2.83) 11.33

Loan Loss Allowances/Gross Loans 5.29 5.49 5.31 4.35

Net Charge-offs/Average Gross Loans 2.76 1.80 1.73 (1.88)

Impaired Loans + Foreclosed Assets/Gross Loans + Foreclosed Assets 4.23 2.93 2.10 1.40

Funding and Liquidity

Loans/Customer Deposits 118.42 115.33 104.87 95.86

Liquidity Coverage Ratio 107.00 139.80 115.57 N.A.

Customer Deposits/Total Funding (including Preferred Shares and Hybrids) 71.73 72.24 76.26 83.83

Interbank Assets/Interbank Liabilities 923.39 1,420.76 3,347.70 N.A.

Net Stable Funding Ratio 90.40 90.40 91.64 N.A.

Growth of Total Customer Deposits (3.56) (11.90) (10.65) 20.15


Banks


March 29, 2019

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Documents

Colombia Itau Corpbanca Colombia S.A. · Itau Colombia’s ratings also consider its tight capital levels, weak profitability and sound risk management, as well as its strong liquidity