BBVA becomes leader of the Colombia mortgage market after acquiring Granahorrar  
  
  The acquisition is valued at €348m. 
Mortgages are growing at 29% per annum in Colombia and the authorities expect 1.2m dwellings will be built in the next 10 years. 
The operation will add value for BBVA’s shareholders from day one, it fits in with group strategy and it does not affect the risk profile. 
Vitalino Nafría says, “The acquisition of Granahorrar is related to the favourable macroeconomic prospects in Colombia and the strong recovery of its financial system”. 
Luis Juango said, “Granahorrar has more than 20 years of experience in the Colombian mortgage business and is a perfect fit for our portfolio of products and services”. 
Approval of the operation is subject to Colombian and Spanish authorities. 
FOGAFIN (the Colombian banking supervisor) today announced that BBVA Colombia was the winner in a process to acquire Granahorrar with a bid of 970,000m Colombian pesos (4m or €348m). BBVA thus becomes leader of the Colombian mortgage market where recent economic developments have created a climate of growth, confidence and stability. The operation meets the two basic requirements of BBVA’s profitable growth strategy. Operations must add value for shareholders from day one and fit the group’s strategy.

The acquisition is subject to approval by banking authorities in Colombia and Spain. Moreover it will not modify the BBVA Group’s risk profile.

Granahorrar is one of the leaders in the Colombian mortgage market with a 15.2% market share. It has 132 branches that complement BBVA Colombia’s present network of 256. In 2004, Granahorrar had net attributable profit of m; ROE (return on equity) was 20.9% and the non-performing loans ratio was only 3.2%.

Purchase of Granahorrar makes BBVA the second largest bank in Colombia with an 11.57% market share in lending and outright leadership in mortgages (21.21%).

Expansion of lending

After the results of the bid process were announced, Vitalino Nafría, manager of BBVA’s Americas Area, said, “The decision to take part in the bidding for Granahorrar is due to favourable macroeconomic prospects in Colombia and the strong recovery of its financial system after the crisis.

 “The addition of Granahorrar will generate important synergy and strengthen BBVA’s position as one the top banks in Colombia with clear leadership in the mortgage market.”

The acquisition of Granahorrar confirms the BBVA Group’s commitment to expanding lending in Latin America. In a similar operation last year in Mexico, BBVA Bancomer acquired Hipotecaria Nacional, the leading lender in the mortgage market. BBVA Bancomer and Hipotecaria Nacional have a combined 29.4% share of the Mexican mortgage market, nearly double that of its nearest rival.

Luis Juango, executive chairman of BBVA Colombia, said, “Granahorrar has more than 20 years of experience in the Colombian mortgage business and it is a perfect complement to our branch network, products and services”.

“This is another demonstration of BBVA’s faith in the Colombian economy”. He pointed to the construction sector as the “main driver of the local economy” and drew attention to four basic statistics:

According to the latest figures, construction work in progress has increased 21%. 
Cement sales are up 41%. 
The percentage of home ownership in Colombia is 20% lower than the Latin-American average, pointing to growth opportunities ahead. 
In the last six months, mortgages have grown at a rate of 29%. 
Mr Juango explained that Colombia is a country of great opportunities. Since BBVA arrived nine years ago it has continued to lend with complete confidence in the country. This is evidence of its long-term commitment to growth and innovation in the local financial market.

Colombia is one of the five biggest countries in Latin America with 46m inhabitants, GDP is 2 billion and it has a wealth of resources. In recent years the economy has been growing strongly at around 4% in a context of macroeconomic stability. The steps taken by the government have helped to tame inflation and bring down interest rates. Both these figures are single digits at the present time.

The markets have responded to the improvements. Country risk has improved substantially with a fall of 143 basis points in the last 12 months. Futhermore Colombian stocks surged 94.3% last year (the biggest gainers in Latin America). Lastly, the Colombian peso has revalued 20% against the USD over last two years.                                                                               

As a result the banking sector recovered strongly, generating profits in the last four years. In 2004 ROE reached 22.6% and non-performing loans fell from 11% in 2000 to 3.3% in 2004.