2017.07.2520:17:00UTC+00COLOMBIA: Moody's Raises Banking System Outlook To 'stable'

Moody's Investors Service raised from 'negative' to 'stable' the outlook for Colombia's banking system, given the recovery trend of creditors' capital levels and the dissipation of earnings pressures.

"Economic growth is gradually stabilizing following a meaningful decline in 2016," said Alcir Freitas, a Moody's Vice President. Meanwhile, credit growth will remain well below the recent-years rates of 13 to 15%, and asset risks will continue to be relatively high.

According to the credit rating agency, the Colombian banks' capital level will show modest improvement driven by robust profitability while weak credit growth limits capital consumption. However, capitalization will remain low compared to global peers given the large outstanding stock of goodwill, which offers limited loss absorption.

Moody's also said that despite its significant decline in recent years, earnings will remain strong thanks to broad net interest margins, which averaged 5.4% in 2016, and low operating expenses.