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Fitch affirms Bancolombia's national ratings, maintains Rating Watch Negative on IDRs

FitchRatings on July 18 affirmed BancolombiaS.A.'s national long-term rating at AAA(col) and its short-term ratingat F1+. The outlook is stable.

However,Fitch also maintained its Rating Watch Negative on the bank's IDR ratings, includingits long-term foreign and local currency IDR rating of BBB+ and its short-term IDRrating of F2.

The agencyalso maintained its Rating Watch Negative on Bancolombia's subsidiaries, , and Banistmo S.A., whichall have the same long-term and short-term IDR ratings as their parent.

In thecase of Bancolombia, Fitch attributed the action to a decline in its capital ratiosin 2015 caused by various factors including changes in accounting standards withthe introduction of IFRS in Colombia, the depreciation of the local currency andthe consolidation of Panamanian subsidiary GrupoAgromercantil Holding SA.

Goingforward, Bancolombia's recapitalization plan includes assumptions such as moderategrowth, higher margins, increased retained earnings and local currency stability.

In addition,in Fitch's view, Bancolombia's slower growth and sustained internal capital generationcould help to strengthen its capital ratios over the next year amid a stable economicenvironment and more stable exchange rates.

Evenso, Fitch does not expect the bank's capitalization ratio to return to levels seenin 2014 during this period.

Bancolombia'sasset quality indicators have been relatively stable partly due to strong loan growth,although they are slightly weaker than other large Colombian banks after "afew large exposures" in the commercial sector led to a modest deteriorationin 2015, Fitch noted.

However,given Bancolombia's conservative risk approach, Fitch expects the bank to maintainasset-quality ratios in line with its current ratings level.

Finally,the ratings of Bancolombia and its international subsidiaries will remain on RatingWatch Negative pending further review of the bank's recapitalization plans, Fitchnoted.