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Rating Action: Moody's affirms BBVA Colombia's ratings, outlook stableGlobal Credit Research - 29 Apr 2021New York, April 29, 2021 -- Moody's Investors Service, ("Moody's") has affirmed all ratings and assessments assigned to BBVA Colombia S.A. (BBVA Colombia), including the bank's baa3 baseline credit assessment (BCA) as well as its Baa2 and Prime-2 local and foreign currency deposit ratings, long- and short-term respectively. The outlook on the ratings remains stable.A full list of the affected ratings and assessments is provided at the end of this press release.RATINGS RATIONALEThe affirmation of BBVA Colombia's BCA and all its ratings reflects the bank's consistent and disciplined risk management standards, which support the bank's solid franchise in Colombia, strong access to core deposits and adequate liquidity. Despite challenges to the banking system imposed by the COVID-19 pandemic, BBVA Colombia reports stable asset quality metrics that benefited from loan deferral programs and an annual growth of 4.2% in gross loans in 2020. Nonperforming loans, comprised of stage 3 assets, accounted for 5.4% of gross loans as of December 2020, just 10 basis points higher than one-year prior and slightly below the 5.5% peak reached in June 2020. Moreover, the bank's large exposure to low-risk residential mortgage and secured payroll loans, that combined accounted for 48% of gross loans in December 2020, helped to contain credit losses. We expect BBVA Colombia's conservative reserves for loan loss, equivalent to 6.2% of gross loans as of December 2020, to shield the bank from unexpected asset quality deterioration during the next outlook horizon.BBVA Colombia's profitability, like its peers, was pressured in 2020 by higher loan loss provisions raised as a precautionary measure against a possible rise in asset risks triggered by the pandemic. Net income as a percentage of tangible assets dropped to 0.67% as of December 2020, from 1.12% in the previous year. However, during the same period, the bank's ratio of pre-provision income to average risk-weighted assets (RWA) increased to 4.24% from 3.97% in 2019. For the next 12 months, as economic activity gradually recovers, we anticipate that the bank's profitability will improve, albeit to more modest levels than in previous years, due to the low interest rates in the country.Measured by Moody's preferred ratio of tangible common equity (TCE) to RWA, BBVA Colombia's capitalization increased to 9.88% in December 2020, from 8.30% one year prior, resulting mostly from a drop in RWA prompted by accounting adjustments from implementation of the Basel III framework. The bank's adequate capital ratio will benefit from higher earnings over the next outlook horizon.Moody's views BBVA Colombia's small reliance on market funding, compared to its peers in Colombia, as a credit strength because it reduces the bank's exposure to funding rollover risk. In December 2020, market funding accounted for 10.5% of tangible banking assets, while stable low-cost demand and savings deposits represented about 56% of the bank's total funding structure. Conversely, liquidity levels are not particularly high, as they have remained relatively steady between 18.5% and 22% of tangible banking assets since 2013.The stable outlook incorporates our expectation that BBVA Colombia's financial profile will remain consistent over the next 12-18 months. The bank's Baa2 global deposit ratings reflect the bank's fundamental credit strength, as evidenced by its baa3 BCA, and incorporates one notch of uplift to reflect our assessment of moderate probability of affiliate support from Spain-based parent Banco Bilbao Vizcaya Argentaria, S.A. (BBVA Spain, A2, baa2).FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSBBVA Colombia's standalone BCA could face upward pressure if the bank reports strong and steady improvement in capitalization and profitability, backed by asset quality metrics that remain in line with levels observed currently. A possible upgrade of the bank's BCA would not translate into an upgrade in deposit ratings because they are already in line with BBVA Spain's standalone BCA of baa2.The bank's standalone BCA could be lowered if asset quality and profitability metrics deteriorate substantially and consistently over the next outlook horizon. A decline in capitalization could also drive ratings down. BBVA Colombia's global deposit ratings would not fall if its BCA is downgraded by one notch because of affiliate support from its parent bank in Spain.METHODOLOGY USEDThe principal methodology used in these ratings was Banks Methodology published in March 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1261354. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.LIST OF AFFECTED RATINGS AND ASSESSMENTSThe following ratings and assessments of BBVA Colombia S.A. were affirmed:- Long-term global local currency deposit rating of Baa2, stable outlook- Short-term global local currency deposit rating of Prime-2- Long-term global foreign currency deposit rating of Baa2, stable outlook- Short-term global foreign currency deposit rating of Prime-2- Long-term global foreign currency subordinated debt rating of Baa3- Long-term local currency counterparty risk rating of Baa1- Short-term local currency counterparty risk rating of Prime-2- Long-term foreign currency counterparty risk rating of Baa1- Short-term foreign currency counterparty risk rating of Prime-2- Baseline credit assessment of baa3- Adjusted baseline credit assessment of baa2- Long-term counterparty risk assessment of Baa1(cr)- Short-term counterparty risk assessment of Prime-2(cr)..Outlook Actions:....Outlook, Remains StableREGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1263068.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Alexandre Albuquerque Vice President - Senior Analyst Financial Institutions Group Moody's America Latina Ltda. 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