Colombian Update Sept 26th : What's New (s) : US Visit, Survey, Financial Sector...

AT THE UN

President Duque had his much anticipated meeting with President Trump and it went as scripted - Trump though as ever struggles to walk away without a headline and as ever made some. In the first instance Duque shared with him his plan to revoke the personal drug usage law created in 1994 (a waste of resources and more about headlines than anything else) and Trump replied that he hoped he would keep his promises as opposed to being “Just another President from Colombia” - a throw away insult of a comment which somewhat nullifies any subsequent comments about Colombia being of importance. Secondly he couldn’t resist a Venezuelan comment inferring that a military defeat of Venezuela would be easy work - after all Maduro’s soldiers ran away during the recent drone bomb - fortunately his nomination for the Southern Command Craig Faller took a more reserved tone during a Senate hearing saying there were no plans for military action either a surgical strike or more pronounced. The other main theme (discussed with VP Pence) was more funding for the refugee situation and there was the pledge of more money ($48mn for the main countries affected and this echoed the words of Faller who also offered the military's logistical support with the crisis......this final item is where the true value of the trip was to be found.

One for the mum......

FINANCIAL SECTOR The latest data for July from the financial sector was a mixed bag and overall followed the trends seen recently. Loan growth continues to splutter along at 4.8% although it should be noted that decent performance from Consumers (+7.9%) and Mortgages (+11.6%) was dragged down by the crucial Commercial sector which at 1.8% continues to be an area of disappointment, recent years with disastrous loans to entities such Electrocaribe have caused a negative impact on provisioning and one wonders how much of the weakness in this area is due to the lack of demand and how much is due to a new over cautious attitude from the banks ? NPLs within the sector have reached 5% with Bancolombia and Davivienda both above that figure however the speed at which they are growing (21.7%) is dramatically lower than a year ago when that figure stood at 46.6%. On the bright side ROAE for the sector stands at 10.8% when in July 2017 it was only at 8.6%. - still not Chile but edging in the right direction. In terms of the individual banks Aval reported the best numbers driven by Banco de Bogota, those of Davivienda were solid whilst Bancolombia’s numbers were a disappointment. The sector has the economic environment it so craves but the business sector remains a concern, the good news clearly is for the residential housing sector as mortgage applications continue to pour in.

SURVEY Fedesarrollo published their survey for September, there was better news on growth, a continued trend on inflation and contrary views on the COLCAP.

• Analysts have raised their 3Q GDP estimate by 10bps to 2.8% and 4Q is now at 2.9% however the FY number remains in line with the Central Bank at 2.7%.

• In terms of interest rates 95.2% expect no change to the 4.25% rate this year whilst the small minority are anticipating an increase to 4.50%.

• Inflation expectations are ticking upwards and for YE18 now stand at 3.27% (3.25% a month ago) with the first stop being a move to 3.20% this month.

• External factors are the biggest influence on investment decisions at this juncture with 51.3% saying that is what keeps them awake at night followed by Fiscal Policy at 25.6% - given we are still waiting on announcements from the Govt you might have thought this might have weighed more.

• The COLCAP which has been the subject of some disorderly selling has a mixed outlook, the pessimists who see a decline over the next three months has risen from 13.2% to 20.5% however on the flip side those thinking the index could rise 10% over the same period has risen from 0% to 7.7%.

• The top pick is Ecopetrol with 39.1% followed by Cementos Argos (26.1%) and Davivienda (21.7%) which leads the financial sector. Interestingly a year ago the sector most favoured was Consumer (81.8%) however at 30.4% it has fallen out of favour with Holding Companies now the preferred choice of 60.9% of those surveyed.

CENSUS I have often said that those residing in Colombia are simply too gullible when it comes to the social networks and once again we have evidence for the prosecution. Way back when before the elections the opposition to Santos was professing that the ongoing census was in some way pro-Govt and some sort of aid for a pro-Santos Candidate, well now ironically it may be there own President who suffers as a consequence. The first results are in from the DANE and as we know the Census is a key component when it comes to Government planning however the results may not be as much use as they should be. With 96.7% of the survey analyzed we have a population of just over 41.2mn, if we extrapolate that out to 100% we get 42.6mn, of course this is very back of the envelope but somewhere around that number. The Issue of course comes when we check the DANE own homepage which has a live population clock, it reads 49.96mn as of yesterday - so either clock needs re-calibration or over 7 million people (or around 2 million families) decided to complete the very simple paperwork. This goes hand in hand with low electoral turnouts and people locally need to start understanding that all these actions matter and is in fact crucial to the state in the case of the Census to providing the basic needs that society has.