Luis Carlos Sarmiento Gutiérrez • The Internationalization Of The Banking System

Photo: courtesy of Grupo Aval

CEO, GRUPO AVAL
2011 DYNAMIC CEO OF THE YEAR

Grupo Aval is a successful example of a major trend in Latin America: the international expansion of the banking system.

Luis Carlos Sarmiento Gutiérrez, son of the builder and banker Luis Carlos Sarmiento Angulo, has taken the reins of the family business, the largest financial conglomerate in Colombia and one of the most important in Central America. This organization expanded its assets at a rate of 19 percent per year and its revenues by 14 percent per year between 2008 and 2012. Latin Trade spoke with the CEO.

 

When was the decision made to expand Grupo Aval into Central America?

The process of internationalization began at the start of the 21st century, although it wasn’t necessarily going to be in Central America. At that time, we did an analysis of which countries could be the most interesting for Grupo Aval in South, Central and North America.

We looked at Chile, a very interesting country but one that already had many banks, which suggested to us returns wouldn’t be very high. After that, we looked at Uruguay and Paraguay, which appeared to be very small for that objective. Brazil, on the other hand, was very large. Bolivia, Ecuador and Venezuela seemed to be on a political system contrary to that of Colombia. In the case of Peru, we saw it as being very interesting, but we didn’t find an option that merited expansion to that destination.

In Central America, we didn’t find any one country that could be interesting by itself. However, the region as a whole seemed to be attractive because the population is similar to that of Colombia (although the gross domestic product is considerably smaller), and we saw a possibility of a spectacular return.

We didn’t consider the U.S. because the current regulations affect companies based in other countries. Finally, we looked at the Caribbean, but we decided against that area because the countries had low credit ratings.

After several years, we finally decided that Central America would be interesting, but only if we acquired a bank that had a presence in all of the countries. In 2010, we discovered that General Electric had decided to sell BAC Credomatic. This would be the start of the expansion.

 

What was the main worry at that time?

This was the first time we had carried out an international expansion. We also worried about management training and currency risk. All of this was always under control.  The results of this experience have been unbeatable.

 

What ‘s the next step in International growth?

We are looking for opportunities to buy in those countries of Central America where we have a presence through BAC, but where our market share is 10 percent or less. That has happened with Banco Reformador in Guatemala and BBVA Panamá in Panama. For now, we just want to consolidate our presence in Central America.

 

How do you make a decision in the group?

Decisions start off as a recommendation that someone makes and then builds. There comes a point where there is a detailed analysis of the opportunity that has been identified. At the end, they are decisions that are made very quickly, which gives us a competitive advantage over others because the group that makes the decisions within Aval is small. It’s a team delegated by the board of directors and usually the persons delegated are my father and I.

 

Who discusses it?

The decisions are discussed among hundreds of people before they are adopted as a final position.

 

What is the most important decision that has been made in the Latin American financial sector in the last 20 years?

It’s the decision that groups from different countries have made to regionalize, to go beyond their own borders and to strengthen themselves.

 

What do you believe are the characteristics that differentiate the new business leaders of Latin America like yourself from the previous generation of leaders who headed the large companies?

It’s the more international vision. Many new leaders now manage companies with a tradition. The previous generation faced the problem of administering new companies, where decisions are of a very different nature.

 

What do you take from the previous generation?

From the previous generation, we conserve the experience they bring: their teachings cannot be replaced by academic education.

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