Internationalisation is the name of the game in the banking industry today. Major banking players across the globe are taking pains to bring their products and services to underserved markets in the hope of securing a foothold in the region and tapping lucrative opportunities. However, with expansion into new and unfamiliar territories come a number of challenges, chiefly, those regarding competitiveness.

After establishing a high profile in Chile, CorpBanca has set its sights on neighbouring Colombia as it looks to diversify its operations and benefit from the country’s burgeoning economy. Having spent the past few years pursuing an aggressive M&A campaign, the bank has repositioned and restructured to expand upon its presence in South America and bring its products and services to an underserved Colombian market. We spoke to CorpBanca Colombia’s CEO Jaime Munita about Colombia’s banking climate and some of the challenges the bank has come up against throughout its internationalisation process.

How important is banking for Colombia’s economic development?
It’s extremely important. Colombia’s banking system is growing at approximately 16 percent on an annual basis, so it’s clearly a very important driver of the economy. One of the major goals for us is to grow organically – at least at the same rate as the financial system. Though we consider it to be challenging, we believe there are significant opportunities for growth given the relatively low levels of banking penetration in Colombia. There are a number of major economic reasons for banking in Colombia.

We must also take into account the size of the local market in Columbia, which has a population of over 47 million people compared with 17 to 18 million people in Chile (see Fig.1). This opens windows of opportunities to grow at strong rates. The country as a whole represents a very good opportunity to increase our balance sheet in a market that is growing very well economy-wise. It is one that is stable from a social and political point of view, and is proving increasingly attractive for investors seeking to make good on its potential.

What are the key challenges for banking in Colombia at present?
Well I think that the challenge is to have a more profitable banking industry through increasing efficiency, cross-selling and asset quality.

I think the other important key aspect to bear in mind is how risk might vary in certain regions of Colombia, which means you have to know the specifics of the market. That being said, this doesn’t necessarily take anything away from the country in terms of potential.

Can you take us through CorpBanca’s introduction to Colombia?
First of all, we arrived in Colombia in 2012 and assumed control of Banco Santander in May of that year. We then proceeded to rebrand the bank shortly after, changing the name from Banco Santander to CorpBanca Colombia. Over the following six months, we worked to adjust all the branches appropriately.

Later we saw an opportunity to buy Helm Bank, which was very complementary with CorpBanca Colombia. After the acquisition of Helm Bank in August 2013 we worked very hard on the integration process to design the strategy, the corporate structure and the operating and IT models that we wanted to implement as a new bank.

In January 2014 we started executing the strategy, and in June the legal merger was materialised. With the legal merger we completed an important stage in the integration process and we must now continue to work it into one platform. We hope to finalise the IT migration by the end of 2015.

In a nutshell, CorpBanca has spread its activities in many areas consolidating as the fifth largest financial group in Colombia, with a 6.5 percent share of the market. With our current capital base we can grow and expand in new segments or participate in project finance such as upcoming public infrastructure projects – a core area for CorpBanca in Chile.

How has CorpBanca influenced key developments in Colombia’s banking sector?
To draw any conclusions now would be premature, as we are relatively new to the Colombian market and thus far we have been focusing on the merger process of two close acquisitions. To mark a trend we aim to provide a wide and personalised financial offer combined with the highest standards of quality and services.

Tell us about the bank’s internationalisation plans and what they consist of
CorpBanca’s vision is to build a larger platform for growth and profitability, thereby increasing its future profit generation potential.

With these acquisitions, CorpBanca aims to support Chilean companies in their expansion through Latin America and to participate in the growing Colombian banking industry, one of the most attractive worldwide.

The Colombian high market’s potential is based on the strong outlook of its economy (rated at investment-grade by Standard & Poor’s, Moody’s and Fitch Ratings) and the lower penetration that its banking industry currently shows. The high professional level of executives and employees in the Colombian capital market, and CorpBanca’s expertise in successfully developing winning strategies in a deeper banking system, such as the Chilean system, are two of the key factors underpinning the expected success of this acquisition.

CorpBanca acquired two first-class banks in Colombia. The high quality of its executives, customers, loan portfolio and deposit base, as well as its well defined strategic plans are key elements that support the confidence to enter this market, continuing the development, without the need to implement changes. The merged bank has become a bigger player across all product lines, with a balanced mix of businesses focused on commercial and retail operations.

The next step in Colombia would be acquiring up to 100 percent of CorpBanca Colombia ownership, a process that is part of the announced Banco Itaú/CorpBanca merger. Nowadays in order to reach that participation in Colombia, CorpBanca would have to subscribe a significant capital increase to satisfy Chilean regulatory restrictions regarding foreign investment (up to 40 percent of bank economic equity).

How has the decision to expand changed CorpBanca’s philosophy and strategy?
The CorpBanca Group is better diversified for being in different countries. For 2014 we expect around 4.8 percent economic growth in Colombia, given that the different sectors and the financial industry are performing very well. This is a larger growth rate than Chile (which has an expected growth rate between 2 and 2.5 percent), so the given added value is part of CorpBanca’s growth strategy and diversification philosophy to maintain on the top.

What issues has CorpBanca encountered throughout the internationalisation process thus far?
Key challenges have been accounting reporting and applicable regulation for foreign investment, considering that CorpBanca was pioneer as Chilean bank in expanding abroad.

What are CorpBanca’s ambitions for the future?
CorpBanca’s ambition is to become a leading banking platform for future expansion in Latin America, specifically in Chile, Colombia, Peru, and Central America. The pending merger between Banco Itaú Chile and CorpBanca goes some way toward capturing this goal.

As a result of the partnership, the merged bank (Itaú-CorpBanca) will reap several benefits:

• The combined franchise will have a greater scale and resources to compete more effectively;
• It will have greater market share in Chile by gross loans with an approximate 12.3 percent market share (excluding gross loans from CorpBanca Colombia and Helm Bank);
• It will have the opportunity to partner with a premier Latin American franchise;
• The ability to leverage Itaú Unibanco’s strong global client relationships;
• A combined entity with the potential to generate significant synergies in Chile;
• A sustainable dividend flow supported by greater scale and earnings capability of the combined enterprise.

Moreover, the transaction enables the creation of additional synergies through optimisation of cost structures; savings derived from enhanced branch networks; relevant savings derived from scalable IT systems; the improvement in cost of funding; and the ability to further leverage Tier I Capital – in line with CorpBanca’s efficiency and profitability strategy.

The new Chilean Bank is expected to be the fourth largest private bank in Chile, with $46bn in assets, $35bn in loans, $27bn in deposits and a capital strengthened by the $652m capital increase that Itaú Unibanco will inject into Itaú Chile prior to the merger. With this greater scale, the institution will be able to exploit various cross-selling opportunities at an expected lower cost of funding.

CorpBanca is now at the expectation for the relevant regulatory authorisations as part of the steps to follow to cement the pending merger with Banco Itaú Chile.