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ManagementReport
2014Second Half
Table of Contents
1. Our Bank ....................................................................................................4• Corporate Governance • Recognition of Our Work • Our Ratings
2. Our Operational Environment...............................................................22• International Context • Colombia • Central American Economic Environment• Colombian Banking System • Central American Banking System
3. Our Financial Results ..............................................................................34• Consolidated Financial Statements • Non-Consolidated Statements • Bank Affiliate Statements
4. Our Bank at the Service of Customers.................................................52• Our Banks
Corporate Banking Governmental and Institutional Banking Social Banking SME Banking Microenterprise Banking Microfinance Banking Personal Banking Preferential and Premium Banking
• Products and Services • Cash and Foreign Currency • Service Channels • Customer Service
5. Innovation and Technology ..................................................................98
6. Our Shareholders and Investors.........................................................106
7. Developing Human Talent to Grow....................................................112
8. Our Commitment to Stakeholders.....................................................122
9. Relevant Information............................................................................138
We build
We are building a bank that
promotes social and economic development opportunities
BankOur
Chap
ter 1
La Ovejería project financed by Banco de Bogotá. Ipiales, Nariño.
Our history begins on November 15, 1870, when Banco de Bogotá was founded as Colombia’s first bank. Our commitment and tradition have supported the growth of our stakeholders for more than 144 years, making us one of the leaders of the Colombian financial system.
With our high quality standards, our capable human talent and our modern technology, we are able to provide comprehensive, timely solutions to our clients and contribute to the wellbeing and development of our country.
As at 2014, the Bank’s consolidated assets stood at COP 118,367 billion, while the net loan portfolio was valued at
1. Our Bank
We are a bank that is committed to the progress of both Colombia and our
stakeholders.
COP 69,485 billion, deposits at COP 74,303 billion and net profits at COP 1,389 billion. We now operate in 12 countries within the region with 1,477 offices, 3,375 ATMs and 10,093 banking correspondents1. We also offer 24-hour service via our call center2 and online platforms.
Banco de Bogotá, a Regional Bank
BARBADOS
UNITED STATES
MIAMI
NEW YORK
12 Countries
17.0 Million Customers
43,684 Employees
1,477 Branches
3,375 ATMs
COP $118.4 Trillion in Assets
COP $69.5 Trillion in Net Loans
COP $74.3 Trillion in Deposits
COP $1.4 Trillion in Net Profits
Standing from left to right: Juan María Robledo Uribe, José Fernando Isaza Delgado, Sergio Arboleda Casas, Ana María Cuéllar Jaramillo, Alfonso de la Espriella Ossío and Alejandro Figueroa Jaramillo. Seated from left to right: Jorge Iván Villegas Montoya, Álvaro Velásquez Cock, Guillermo Perry Rubio, Luis Carlos Sarmiento Gutiérrez, Sergio Uribe Arboleda and Carlos Arcesio Paz Bautista.
1 Banking Correspondents located in Colombia.2 Telephone service hours may vary according to country.
Management Report•Second Half 20146 7Chapter 1•Our Bank
Corporate GovernanceAs an institution committed to efficient and transparent management that generates sustainability for our shareholders, clients, employees and other stakeholders, we have a solid corporate governance structure led by the General Meeting of Shareholders.
68.7% 8.3% 11.8% 11.2%
Other Companies
Organización
Sarmiento Angulo
Paz Bautista
GroupOthers
Bank’s Main Shareholders, December 31, 2014
This structure is one of our greatest strengths. Its leaders are driven to meet economic objectives and strengthen our role as main players in the development and financial sectors of the countries in which we are active.
With our high standards for the quality and security of our services, and our actions characterized by ethical principles and efficient management, we constantly strive for our corporate governance model to reflect best practices.
In this sense, the decisions of our Board of Directors, made up of members with extensive experience within the financial
sector, are focused on managing risk through the development of a control system that takes into account increasingly structured and functional internal and external mechanisms for the organization.
Our general Corporate Governance policies can be found in the document “Banco de Bogotá Corporate Governance Practices”, which comprises: Bylaws, Corporate Governance Code, Code of Ethics and Audit Committee Rules of Procedure3.
We have the following control mechanisms and corporate governance bodies:
Governing Bodies: General Shareholders’ Meeting.
Administrative Bodies: Board of Directors, Board of Directors’ Supporting Committees (Audit Committee, Credit Committee, Credit and Treasury Risk Committee, Assets and Liabilities Technical Committee, Comprehensive Risk Management Committee), Presidency, Executive Vice-presidency and Vice-presidencies.
Control Mechanisms: Internal Control System, Internal Control Bodies and Risk Management Systems (Credit Risk, Liquidity Risk, Market Risk, Operational Risk, and Money Laundering and Terrorist Financing Risk).
Internal Control Bodies: Board of Directors and the Office of the Comptroller.
External Control Bodies: Statutory Auditing Firm, Financial Superintendence of Colombia, Securities Market Self-Regulator, American authorities for US banking agencies, as well the different supervisory bodies in the other countries where we operate.
Corporate Governance Compliance Bodies: General Shareholders’ Meeting, Board of Directors and Presidency.
Based on this corporate governance structure, there are a series of regulations and standards managed by the Bank’s steering and management bodies that are intended to manage risk within a clearly defined control framework.
III Banco de Bogotá College of Supervisors
In order to strengthen the relationship of the Bank and its subsidiaries abroad with regulatory authorities in the countries where we are active, the Third Meeting of the Banco de Bogotá College of Supervisors was held November 25 and 26, 2014, with supervisors from Colombia, Panama, El Salvador, Nicaragua, Honduras, Guatemala and Costa Rica. This forum allowed Supervisors invited by the Colombian Financial Superintendence to exchange opinions and ideas about various regulatory topics.
3 These documents are published on the Bank’s web page, www.bancodebogota.com, Investor Relations / Corporate Governance section.
III Banco de Bogotá College of Supervisors, November 2014.
Management Report•Second Half 20148 9Chapter 1•Our Bank
Our Board of Directors
Primary Members Alternate Members
Luis Carlos Sarmiento Gutiérrez Guillermo Perry Rubio
Sergio Uribe Arboleda Jorge Iván Villegas Montoya
Alfonso de la Espriella Ossío Ana María Cuéllar Jaramillo
Carlos Arcesio Paz Bautista Sergio Arboleda Casas
José Fernando Isaza Delgado Álvaro Velásquez Cock
Board of Directors Advisor
Luis Carlos Sarmiento Angulo
Financial Ombudsman
Octavio Gutiérrez Díaz
Statutory Auditing Firm
KPMG Ltda.
Represented by:
Pedro Ángel Preciado Villarraga
T.P.30723-T
Commitment to Ethics
Ethics and transparency, fundamental pillars of our corporate identity, are built through elements of our organizational culture. With them, we promote principles, values and behavior to instill these great ideals in our employees.
These initiatives are based upon corporate governance, and their purpose is to ensure efficient and proper management of the resources we manage.
These initiatives are implemented through:
•Our mission, vision, corporate values and established strategic objectives.
•The Code of Ethics, which sets out values and principles and guides executives’ and employees’ daily activities.
•Senior management’s formal definition of the basic principles that govern our Bank, as set forth in the Corporate Governance Code and various internal codes, manuals and standards published in full and available to all employees through the Bank’s intranet.
•Procedures that enable employees at all levels in the organization to have the knowledge, skills, attitudes and values necessary to perform their duties within an effective internal control framework.
Our mission, vision and corporate values are the compass that charts the course we wish to follow and reflect. We thus define each of the criteria and premises that define our organization’s identity.
Management Report•Second Half 201410 11Chapter 1•Our Bank
• To be the leading bank in Colombia and Central America, growing with the progress of its customers, human resources, shareholders and country.
• To be the benchmark in universal banking for outstanding customer service, greater efficiency and innovation in Colombia.
•To be a leading bank in Colombia in the business and individual banking markets, and in the social, government and institutional sectors.
• To be a bank that is always at the forefront in offering its customers solutions that allow them to enjoy a satisfactory banking experience.
• To provide the best support for the growth and progress of its customers, because it values them and is willing and available to advise them, while providing them with quick, timely, friendly and high-quality service.
• To be a bank that achieves leadership objectives in terms of the efficiency, profitability, earnings and value generation that shareholders expect.
• To be a bank that boasts a group of talented team members who work with ingenuity, dedication, efficiency, speed, commitment and loyalty, who are goal-oriented and motivated by the pride of belonging to an institution that provides them with wellbeing and enables them to grow.
• To be a bank that, by example and through support, proves its commitment to develop and internalize its values, generating growth, harmony and benefits for the community's wellbeing.
Honesty
Vision
Mission
CommitmentWe identify with our Bank and feel we are an integral part of its success.
We act in an ethical and responsible manner, building trust among our customers.
We value ourselves and accept each other’s integrity.
Respect
CorporateValues
Service
EfficiencyWe use resources in an optimal and intelli-gent manner.
We consider service to be principle of life.
We work with enthusiasm.
Leadership
Below are the pillars that form an essential part of our identity and our organizational culture:
As part of our commitment, we comply with all applicable laws and regulations in the countries where we operate. We also honor international regulations concerning social and environmental conducts.
We respect, promote and defend human rights as the foundation of economic, social and environmental development for current and future generations. We condemn any type of discrimination
on the basis of age, gender, race, social origin, religion, nationality, political affiliation, sexual orientation, disability, or discrimination of any other type. We do not tolerate child labor.
These principles reinforce the good practices we have always followed. They also encourage the participation of stakeholders and employees at every level of the organization to ensure sustainable growth.
Julián Sinisterra Reyes,Credit Card Vice-president; Fernando Pineda Otálora, Commercial Vice-president and Regional Directors for the SME Banking.
Management Report•Second Half 201412 13Chapter 1•Our Bank
Universal bank with a wide product and service portfolio in Colombia and
abroad, through international affiliates and agencies.
Central American Financial Group, with banking operations and credit cards
in every Central American country4
Financial corporation with a broad portfolio of products specialized in Private
Banking, Investment Banking, and Cash and Equity Market Investments
Legally compliant Corporate Fiduciary Agreements and Trusteeships.
Pension and Severance Funds Management.
Stock Brokerage Firm (Securities Trading Intermediation and Management
of Securities Funds).
General Warehouse, Customs Agent and Comprehensive Logistics Operator.
Technical and Administrative Services Company.
Entities with International Licenses to carry
out banking business abroad.
Entities authorized to carry out international Banking
Operations abroad with a focus on serving Banco de
Bogotá’s Corporate, Institutional, SME and Individual clients.
Entity with Panamanian General License authorized to
carry out banking business in the local market.
President: Alejandro Figueroa Jaramillo
Panama Branch
President: Ernesto Castegnaro Odio
President: Jose Elías Melo Acosta
President: Miguel Largacha Martínez
President: César Prado Villegas
President: Daniel Humberto Gómez Martínez
President: Pedro Echeverría Manosalva
General Manager: Adriana Cuervo Barreto
General Manager: José Alberto Santana Martínez General Manager: María Fernanda Blanco Hernández
General Manager: Alfonso García General Manager: John Kennedy
General Manager: José Alberto Santana Martínez
Banco de Bogotá and its Group of Affiliates
4 In December 2013, BAC Credomatic acquired Guatemala’s Grupo Financiero Reformador. In December 2014, BAC International Bank merged with Banco BAC de Panamá (previously BBVA Panamá), which had been acquired in December 2013 by Banco de Bogotá through its affiliate Leasing Bogotá S.A. Panamá.
Organizational Structure
Banco de Bogotá Executive Management
General Shareholders’ Meeting
Financial Ombudsman Statutory Auditing Firm
Board of Directors
PresidentAlejandro Figueroa J.
General SecretariatAlberto Pérez V.
Credit Committee
Credit and Treasury Risk Committee
Audit Committee
Executive Vice-presidencyJuan María Robledo
SME and Personal Banking
Vice-presidencyFernando Pineda
Government, Institutional and Social Banking Vice-presidencyLiliana de Plaza
Corporate Banking Vice-presidency Rafael Arango
Credit Cards Vice-presidencyJulián Sinisterra
Financial Vice-presidencyMaría Luisa Rojas
Legal ManagementJosé Joaquín Díaz
Credit and Treasury Risk Management
Carlos Nieto
General ComptrollerGustavo Arturo Peláez
Control and Compliance Unit
Luis Bernardo Quevedo
International and Treasury Vice-presidency
Germán Salazar
Systems and Operations Vice-presidencyJaime Gamboa
Administrative Vice-presidency
Luis Carlos Moreno
Credit Vice-presidencyCésar Castellanos
Assets and Liabilities Technical Committee
Management Control and Support Areas Business Areas Support Areas
Comprenhensive Risk Management Committee
Management Report•Second Half 201414 15Chapter 1•Our Bank
Banco de Bogotá and its AffiliatesDirect and Indirect Share
All shares are ordinary
AFFILIATES IN COLOMBIA
FOREIGNAFFILIATES
Ficentro(Panama)49.78%
Leasing Bogotá Panamá
(Panama)100%
Bogotá Finance Corp.
(Cayman Islands)100%
Banco de BogotáPanamá100%
Corficolombiana38.19%
Casa de Bolsa22.79%
Almaviva94.92%
FiduciariaBogotá
94.99%
Porvenir36.51%
Megalínea94.90%
Banco de Bogotá Nassau Ltd. (Bahamas)BAC Credomatic Inc.(British Virgin Isles)5
DirectIndirect
Direct + Indirect
61.74%95.81%
46.91%
99.56%
38.95% 10.40%
100%
49.78%0.88%
AGENCIES AND BRANCHES
ABROAD
100%
Panama Branch
5 In December 2013, BAC Credomatic acquired Guatemala’s Grupo Financiero Reformador. In December 2014, BAC International Bank merged with Banco BAC de Panamá (previously BBVA Panamá), which had been acquired in December 2013 by Banco de Bogotá through its affiliate Leasing Bogotá S.A. Panamá.
The Banker Bank of the year in Colombia 2014
In 2014, we continued to be recognized as Colombia's number one Bank
BAC Credomatichas been recognized as the
best bank in Central America
EuromoneyBest Bank in Central America 2014
CompassbrandingMost Valuable Brand in Colombia
Global FinanceMejor Banco en Comercio Exterior en Colombia
Mejor Proveedor de Moneda Extranjera en Colombia
Global FinanceBest Foreign Trade Bank in Colombia
Best Provider of Foreign Currency in Colombia
Euromoney Mejor Banco en Colombia 2014
Euromoney Best Bank in Colombia 2014
The Banker Top 1000
Bank number 1 in Colombia
Management Report•Second Half 201416 17Chapter 1•Our Bank
Recognition of Our WorkThanks to the commitment of our shareholders and employees and the trust of our clients, in 2014, we were recognized as the best bank in Colombia by various specialized international publications, all of which highlighted our strong financial results.
These distinctions inspire us to continue generating value propositions to support our clients and drive sustainable growth in the 12 countries in which we operate.
Euromoney: Banco de Bogotá, “Best Bank in Colombia 2014”
In its July 2014 issue, this English magazine awarded Banco de Bogotá “Best Bank in Colombia” honors for the seventh time. The publication highlighted the expansion of Banco de Bogotá in Central America and Colombia through the acquisitions of the Grupo Financiero Reformador in Guatemala, BBVA Panamá in Panama and the Fondo de Pensiones y Cesantías Horizonte in Colombia in 2013.
It also praised our financial results, principally in terms of profitability, asset quality and growth.
The Banker: Top 1000, Best Bank in Colombia
In July 2014, the English magazine The Banker, part of the Financial Times publishing group, named Banco de Bogotá as the top Colombian bank in the “Top 1000 World Banks 2014” ranking. Banco de Bogotá was ranked tenth among all Latin American banks. This rating takes into account the financial and patrimonial equity of banking entities worldwide.
The Banker: Banco de Bogotá, “Bank of the Year in Colombia 2014”
In its November 2014 edition, this prestigious magazine named Banco de Bogotá as the 2014 “Bank of the Year” in Colombia, recognizing our strong competitive position in Colombia and Central America, fortified by various acquisitions in 2013.
The publication highlighted the diversification of our funding assets as well as our capacity to generate income related to different banking products and services such as credit cards, mortgages and payroll loans. It also mentioned our development of non-traditional transaction channels.
Global Finance: “Best Foreign Trade Bank in Colombia” and “Best Provider ofForeign Currency in Colombia”
Financial magazine Global Finance recognized Banco de Bogotá as Colombia’s “Best Provider of Foreign Currency 2015” and its “Best Foreign Trade Bank 2015”. These awards were based on transaction volume, global coverage, customer service and competitiveness in pricing and technological innovation, among other aspects.
Compassbranding: Most Valuable Brand
Banco de Bogotá topped the list as the most valuable service brand in Colombia. A valuation study conducted by Compassbranding placed the Bank in its highest brand value category, with more than USD 2 billion. Banco de Bogotá is the only Colombian company in this category.
To perform the valuation, Compassbranding researches various financial and market aspects to evaluate the brand risk and review variables such as quality of service, geographic coverage, leadership, support and tradition.
Affiliate Awards and Acknowledgments, Second Semester 2014
Euromoney: BAC Credomatic “Best Bank in Central America 2014”
In July 2014, the English publication Euromoney selected BAC as the “Best Bank in Central America and the Caribbean”. The magazine recognized BAC Credomatic as the Central American bank best prepared to take advantage of stronger commercial and financial relationships in the region thanks to its presence in Guatemala, Honduras, El Salvador, Nicaragua, Costa Rica, Panama and Mexico.
Corporación Publicitaria de Colombia S.A.: “First Place in Brand Recognition and Publicity in the Pensions and Severance Funds Category”
According to a brand tracking study conducted by the Corporación Publicitaria de Colombia S.A., Porvenir maintained its first-place position in brand recognition and publicity in the Pensions and Severance Funds category. Porvenir had a 30.1% annual recall score as at November 2014.
International advertising agency Ogilvy and Mather: “National Pride Award – DAVID”
Porvenir was recognized for promoting Colombian pride and culture by international advertising agency Ogilvy and Mather.
Instituto Latinoamericano de Comercio Electrónico (“Latin American Institute of E-Commerce”) and Cámara de Comercio Electrónico (“Electronic Chamber of Commerce”) “E-commerce Award”
Porvenir was recognized for its “Servifácil Porvenir” electronic service strategy in the Financial Services and Internet Banking category.
Asociación Colombiana de Contact Centers y BPO: “Best Technological Contribution 2014”
Porvenir was recognized as making the “Best Technological Contribution” with its “Tecnología al servicio de nuestro clientes” (“Technology to serve our clients”) project executed through Ventas y Servicios S.A.
Organización 100% Legal Colombia: “100% Legal IP Certification”
Fidubogotá’s business practices related to intellectual property and copyright protections were certified as “100% Legal IP.”
Management Report•Second Half 201418 19Chapter 1•Our Bank
xxxxxx
International Ratings Local Ratings
Issuer Outlook Outlook OutlookForeign Currency - LT Baa2 Stable BBB+ Stable BBB- StableForeign Currency - ST P-2 F 2 A-3Local Currency - LT Baa1 Negative BBB+ Stable BBB- Stable AAALocal Currency - ST P-2 F 2 A-3 BRC1+Financial Strength C- NegativeBonds Outlook
Subordinated Bonds 2008 AA+Subordinated Bonds 2010 AA+Ordinary Bonds in dollars(Maturity 2017)
Baa1 Negative BBB+ BBB-
Subordinated Bonds (Maturity 2023)
Baa3 Negative BBB
* All ratings are investment grade ratings
From the analysis carried out by the various ratings agencies, the following aspects were highlighted:
•Moody’s Investors Service: In July 2014, the agency raised the ratings for Banco de Bogotá’s deposits and ordinary bonds in foreign currency to Baa2/P-2 and Baa1, respectively; the rating for debt in Colombia was also increased to Baa2. Furthermore, the agency affirmed its ratings for local currency debt and for foreign currency subordinated bonds.
According to Moody’s, the ratings given to Banco de Bogotá reflect adequate risk management policies, strong income generation thanks to wide margins and an efficient cost structure, a broad funding base, and the Bank’s position in Colombia and Central America.
On March 16, 2015, Moody’s announced a new rating methodology that resulted in a downward revision for Banco de Bogotá.
•Fitch Ratings: In July 2014, Fitch improved the Banco de
Bogotá’s long-term rating to BBB+ with a stable outlook. The sovereign debt rating in Colombia remained at BBB. The agency stated that its ratings reflect the Bank’s strength in Colombia and Central America, the quality of its assets, its conservative risk policies, its solid performance, its diversified funding and its adequate levels of capital.
•Standard & Poor’s: In August 2014, S&P confirmed all of its ratings for the Bank with a stable outlook on the basis of the Bank’s strong market position in Colombia and Central America, its moderate levels of capital and profits, its adequate risk position and liquidity, and its diverse sources of funding.
•BRC Standard & Poor’s: In December 2014, the local agency BRC upheld its highest ratings for the Bank (AAA/BRC1+) in line with local standards, emphasizing that the ratings are a reflection of the Bank’s strong position in the Colombian market, its leadership in Central America and its strategic approach, all of which have made it possible for the Bank to continue posting positive results over time.
RatingsAs at December 2014, Banco de Bogotá’s main financial instruments have been rated Investment Grade by three major internatio-nal rating agencies: Moody’s Investors Service, Fitch Ratings and Standard & Poor’s. The Bank has also been granted the highest ratings under local standards by BRC Standard & Poor’s.
Management Report•Second Half 201420
“I want to thank Banco de Bogotá for helping make my dream of owning a house come true
through its housing program in Ipiales. There are about 675 families that escaped conflict
zones that can now provide proper housing for their children.
Banco de Bogotá’s support has been very important in my life. Thanks to the loan I received, I
was able to open my own restaurant and help create a better life for my three children.”
Ema Narváez, beneficiary of the La Ovejería Project through the Colombian government’s free housing program. Ipiales, Nariño.