Colombia Stocks Headed For Seventh-Straight Decline

Colombian stocks down 4% since July 30, but are 3.2% higher since Jan. 1

Bancolombia shares down 12% since last week's second-quarter earnings

Colombia's economy slowing; oil output stalled

Colombian stocks are trading in the red for a seventh-straight session as the share prices of banks and oil companies fall due to weak second-quarter earnings, a slowdown in the local economy and rising rebel violence.

The Colcap index, considered a benchmark for the Colombian Stock Exchange, is at 1621 points Wednesday, 1.0% lower on the day and nearly 4% lower from when the slump began July 30. 

For the year, the Colcap is 3.2% higher.

Leading declines over the past few days has been Colombia's top bank, Bancolombia SA (CIB, BCOLOMBIA.BO), whose shares are down 4.3% wednesday at COP23,920 ($13.39) and are 12% lower since the bank released its earnings report last week.

The bank posted second-quarter consolidated net income of $198 million, an 8.1% decline from the same quarter a year earlier as operating expenses soared. 

Daniel Lozano, an economist at brokerage Serfinco in Bogotá, said it wasn't so much the decline in profits that spooked investors as it was the bank's continued deterioration in asset quality.

"It's still not at alarming levels, and the bank certainly has the capacity and strength to continue to generate income and revenues," Mr. Lozano said. "

But investors are cautious as they look at bank's rise in non-performing loans."

Three months ago, Serfinco reduced its view on Bancolombia to "neutral" from "overweight" when it began spotting an increase in nonperforming loans.

Bancolombia's past-due loans those more than 30 days overdue totaled 3% of its total portfolio at the end of last quarter, which isn't a huge increase from the 2.7% of the total at the end of the first quarter. 

But the total loan portfolio has been rising steadily, which makes any incremental percentage rise in past due loans significant.

The problems for shareholders of the Medellin based bank come as Colombia's economy begins to slow down. 

The economy, after growing 6.1% in the final quarter of 2.011, year on year, saw growth slow to 4.7% in the first quarter. 

Lower prices globally for oil, which is Colombia's main export and accounts for half of all the country's export earnings, is seen as a main cause of the slowdown.

Additionally, Colombian oil production itself is starting to decline after a multiyear boom, which the government blames on rebel attacks on pipelines that have caused a bottleneck in efforts to get crude oil to ports for export. 

Colombia oil output in June was 934,000 barrels a day, 0.5% less than the 939,000 barrels a day produced in that month of 2.011 and 0.2% less than the 936,000 barrels a day produced in may of this year.