EM LATAM CREDIT: Colombia's Davivienda 1Q 2025 Earnings Beat: Positive take
Banco Davivienda (DAVIVI; NR /BB+ /BB+)
• Colombia based bank Davivienda reported higher profitability, higher capitalization, decent loan growth and most importantly lower problem loans, especially in their consumer loan book.
• Return on equity was 7.2%, much better than -7.7% a year ago while loan growth was 5.9% YoY coming from strength in Colombia commercial loans. Overall, the Central American loan book grew 4.9% while Colombia increased 3.5%.
• Consolidated common equity Tier 1 (CET1) capital ratio was 11.2%, increasing from 10.95% last quarter and 10.4% a year ago. The total capital adequacy ratio (CAR) was 15.6%, which was unchanged sequentially but up 100 bps from a year ago.
• At the Colombia bank level CET1 was 12.1%, 510bps above the regulatory requirement and CAR was 18.3%, 678bps above the regulatory level.
• The past due loan ratio (PDL) was unchanged sequentially at 4.42% but was down 42 bps from a year ago. Consumer loans, where the bank has had issues in the past, was a much improved 3.92%, down from 6.04% a year ago due to improvement in the Colombia consumer loan book of 279bps.
• The improvement in loan quality allowed the bank to reduce provisions for loan losses by 51% YoY and drove the overall higher profitability for the company.
• Davivienda has one USD bond outstanding, the Tier 1 Perps (DAVIVI; B2 /NR /B) which were last quoted on Bloomberg at USD86.25 but market sources saw the bonds higher. At quarter end 2025 bonds were quoted USD87.55 and at year end 2024 they were quoted at USD86.25.
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