LatAm Banks - The Banking Watcher: Colombia banks: Improving profitability despite macro pressures

Research evidence excerpt

LatAm Banks - The Banking Watcher: Colombia banks: Improving profitability despite macro pressures

Global Research

22 June 2026ab

LatAm Banks – The Banking Watcher Equities

Latin AmericaColombia banks: Improving profitability

despite macro pressures Financial

Thiago Batista, CFA

Analyst

thiago.batista@ubs.com

Improving banking fundamentals amid macro pressure +55-11-3513 6518

Despite a more challenging macro backdrop, Colombia’s economy and banking

Beatriz Shinye

fundamentals are showing encouraging signs of resilience. GDP growth is expected

Associate Analyst

to average around 2.5% over 2026–28, outperforming Chile, while loan growth is beatriz.shinye@ubs.com

gradually recovering after a prolonged slowdown, led by microcredit and +55-11-2767 6569

mortgages. Importantly, asset quality has surprised positively, with 30-day NPLs

declining by 80bps YoY to 3.8% in April 2026 and coverage remaining strong at 143%.

Combined with deposits growing slightly faster than loans and a declining cost of

risk - down to 2.1% from 2.3% a year ago - these trends suggest improving industry

fundamentals, even amid higher interest rates and political uncertainty.

ROAE outperforming its historical average for the industry

Profitability has continued to improve, with ROAE now running well above historical

levels, supported by lower provisioning and higher financial leverage. The decline in

credit costs - with the cost of risk trending below its long-term average - alongside a

recovery in NII in early 2026, has more than offset higher operating expenses and a

slightly higher effective tax rate. As a result, ROAE reached 13.6% in 2025 and

further improved to 14.4% in April 2026, compared with a historical average of

11.5%, even after the negative impact from the wealth tax introduced in 1Q26.