Cartagena de Indias, Colombia — Luis Carlos Sarmiento Gutiérrez, president of Colombian holding company Grupo Aval, participated in the 57th Banking Convention in Cartagena de Indias, Colombia, this week, and offered his take on how the country’s economy is performing, access to credit, and the reforms proposed by President Gustavo Petro.
In an exclusive interview with Bloomberg Línea, Sarmiento gave his explanations as to why credit is beginning to be affected and what may happen in the coming months.
“There are two issues right now. One is the lack of growth that responds to a slowdown in the economy, there is business uncertainty, and while that exists companies will try to rake on as little credit as possible,” he said.
However, he explained that there are also reasons why individuals are thinking twice before getting into debt.
“On the other hand, we are beginning to see an increase in unemployment and that will lead people to refrain from taking out loans for the time being. There is a slowdown in demand, and consumer credit is starting to deteriorate for the same reasons at the end of the day. So this is a year in which portfolio growth will surely be below the nominal growth of the country, not real but nominal,” Sarmiento said.
Interest rates
Regarding the moment in which interest rates will start to fall, he said “2023 is a transition year. Hopefully, when the reforms are completed, the market will absorb what the reforms say, the market will stabilize, uncertainty will be reduced, and, hopefully, at that moment, the economy will start to grow again”.
Once that happens, Sarmiento said, there will be room for interest rates to enter a process of reduction, which should be gradual.
“Rates will actually come down when the cost of funds comes down and provisions stabilize. Before that, efforts can be made and rates can be lowered in certain products and in certain credit categories that actually respond more to the financial system trying to protect the portfolio. When the cost of funds starts to go down, and that will come later, at least with the lowering of rates by the central bank (Banco de la República) when a margin compression can be managed, then the rates will really start to go down”.
Regarding President Petro’s speeches and his constant blaming of banks and business leaders as the ones responsible for many of Colombia’s inequities, Sarmiento preferred not to offer an opinion, but assured that he will adapt to the conditions.
“I do not have an opinion, I dedicate myself to work and I will adapt to whatever comes,” he said.
However, he did offer his vision on what has been proposed to Congress to reform the health and pension systems and the labor policy in the country, but he warned that the definitive concept will have to be given when the bills have been debated.
“I see good things and worrying things in all the reforms, but they have good things, we have to see what comes out of Congress. It is premature to talk about them because the pension reform is the only one that has passed the committee stage, the others are stalled. We have to wait to see what comes, and when we have more information we will be able to give better answers,” Sarmiento said.
With respect to the business of the financial conglomerate he leads, Sarmiento made reference to the future of Dale, the virtual wallet of Grupo Aval that competes with other platforms such as Nequi and DaviPlata.
“I see Dale doing very well. In a very short time it has increased its number of users a lot. It must be taken into account that it was a latecomer to the market and as such it has to wait and build its customer base and that will take some time”.