Moody’s cuts Banco de Bogota, Grupo Aval

Moody's Investors Service said it lowered Banco de Bogota, SA's standalone baseline credit assessment (BCA) to ba1 from baa3 long-term foreign currency subordinated debt rating to Ba2 from Ba1.

Both the BCA and the subordinated debt rating were placed on review for further downgrade.

The bank's Baa2/Prime-2 local and foreign currency long- and short-term deposit and the Baa2 foreign currency senior unsecured debt ratings were also placed on review for downgrade, as were its long- and short-term counterparty risk assessments (CR Assessments) of Baa1(cr) and Prime-2(cr).

At the same time, Moody's downgraded the local and foreign currency long-term issuer ratings of Grupo Aval Acciones y Valores, SA to Ba2 from Ba1, and placed them on review for further downgrade.

The agency also downgraded Grupo Aval Ltd.’s senior unsecured foreign currency debt rating to Ba2 from Ba1; this rating is also on review for downgrade.

In lowering the baseline credit assessment to ba1, Moody's said it took into account a drop of around 110 basis points in the bank's already low adjusted capital ratio based on December 2015 estimates from 6½% a year earlier. This decrease was driven by a 52% depreciation of the Colombian peso during 2015.

Given the bank's significant dollar-denominated investments in Central America, the depreciation contributed to a 20% and 30% increase in the peso value of Banco de Bogota's risk weighted assets and goodwill, respectively, revealing in turn the susceptibility of the bank's capital position to currency swings, the agency said.

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