Q3 2021 Grupo Aval Acciones y Valores SA Earnings Call
Welcome to group, one third quarter 2021 consolidated results conference call.
My name is show that and I will be your operator for today's call.
Grupo Bal extra honestly, you'll notice S. Yeah, Groupon is an issuer of securities in Colombia, and the United States as such it is subject to compliance with securities regulation in Colombia, and applicable U S Securities regulation.
<unk> is also subject to the inspection and supervision of the superintendency of finance as holding company of the of all financial conglomerate.
Our consolidated financial information included in this document is presented in accordance with I FRS. That's currently issued by the eight I E. S. P.
Details of the calculations of non-GAAP measures, such as rollout and dry among others are explained when required in this report.
This report includes forward looking statements in some cases you can identify these forward looking statements by words, such as May well shoot expects plans anticipates believes estimates predicts potential or continue or the negative of these and other comparable words.
Actual results and events may differ materially from those anticipated herein as a consequence of changes in general economic and business conditions.
Changes in interest and currency rates and other risks described from time to time in our filings with the eastern us and although I know what I see in the photos and the S E C.
Recipients of this document are responsible for the assessment and use of the information provided herein.
Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review update or correct. The information provided in this report included any forward looking statements and do not intend to provide any update for such material developments prior to our.
Next earnings report.
The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description.
When applicable in this document we refer to billions of thousands of millions.
At this time all participants are in a listen only mode. Later, we will conduct a question and answer session.
I will now turn the call over to Mr. Luiz Carlos have menthol with Japanese Chief Executive Officer.
Mr. Luiz Carlos had been thoughts you have it you may begin.
Good morning, and thank you all for joining this quarter's conference call.
To jump right into it I'm happy to say that Grupo all posted its best pre tax income for a quarter during the third quarter of this year.
And even despite a 200 billion business nonrecurring tax expense the company delivered strong net income in the quarter.
As in previous calls I will cover the following subjects and overview of our macro scenario a quick update of our loan relief programs. The progress of our digital efforts and the main highlights of our financial performance.
This call I will also update our progress regarding our recent announcement of the <unk> spin off transaction.
In general during the third quarter global economies continued to show robust growth, while inflation has crept up causing central banks to tighten monetary policies and supply chain disrupted during the worst of the pandemic struggled to regain some sense of normality.
Sport vaccination programs have shown affectivity and does most countries are allowing it to citizens to return to the lives. They had before the pandemic, albeit mostly to those who have been vaccinated and even so conditioned to new sanitary and Prudential.
Right.
Colombia has not been an exception.
Beginning of November 48 million doses have been administered and 22 million persons have been fully vaccinated at.
At the end of the quarter consumer confidence.
Has reached its highest level since the beginning of the pandemic as consumer spending made very strong comeback.
As a result on a seasonally adjusted basis.
During the third quarter of this year the economy grew approximately 13% versus the same quarter a year earlier and GDP grew 10, 3% in the nine months ending in September.
More detail from the supply side.
During the quarter all sectors of the economy expanded while the most dynamic sectors, where commercial activities that grew 34% manufacturing that grew 18, 7% and government services that grew seven 9%.
From the demand side total consumption increased almost 17% and investment grew three 6% consumption growth was driven by a 19, 9% increase in household household consumption and a 19, 2% increase in government spending.
Analysts have continued to raise their forecasts of GDP growth for 2021.
In its latest meeting the central bank revised upwards its growth forecast to nine 8% the ministry of finance to eight 5% and be IMF to seven 6%.
We expect growth to continue in the last quarter, given the large inflow of remittances of workers from abroad.
Prices of oil coal and coffee and the progress of the vaccination campaign. Therefore, we don't anticipate GDP growth of approximately 9% in 2021.
For 2022 analysts anticipated GDP growth rate close to 4% given our market sentiment that remains optimistic despite the uncertainty associated to an electoral year.
The Central Bank is now forecasting a GDP growth of four 7% in 2022 and the IMF of three 8%, we expect GDP growth in the 4% area in 2022.
The labor market has also continued to improve.
As of September unemployment has recovered to 12, 1% the lowest since the beginning of the pandemic.
After the loss of approximately 6 million jobs due to the pandemic.
More than $5 2 million jobs have been recovered led by commerce construction and entertainment activities.
Informality levels have fallen to 46, 4% from a maximum of 48, 2% registered in January 2021.
We expect additional gains in the payroll numbers and expect unemployment to fall below 12% by the end of the year, reaching an average close to 14% for 2021.
Regarding consumer prices 12 months inflation reached $4, 58% in October.
Most 300 basis points above 12 month inflation as of October 2020.
Value added tax holidays have proven to be deflationary as evidenced in October when inflation was 0.01%, we expect that future that holidays could further help to ease inflationary pressures from higher transportation costs and surges in producer prices.
We also expect as does the central Bank that 12 month inflation will reach four 8% by the end of the year.
Medium term inflation expectations remain anchored at around 3%, but given the pressure on producer prices and a weaker peso. It is likely that inflation will converge in 2022 towards three 4%.
In this context, the central Bank will probably continued tightening monetary policy in 2022.
The repo rate is currently at two 5% after two consecutive hike of 25, and 50 basis points, given inflation expectations and GDP growth, we sure analysts estimations, which anticipated a repo rate increased two 4% at the end of the first half of 2000.
22, and 245% by year end.
Regarding the exchange rate in the last few weeks. The peso has weakened to almost 3900 pesos per dollar largely explained by a strengthening of the dollar in international markets principally associated to the announcement that the fed will start tapering its purchases in the next few months.
The peso has however remained stronger than currencies of other countries in the region due to the inflow of dollars from the sale of visa to Ecopetrol.
Purchase of foreign currency reserves from the Central Bank and the most recent issuance of global bonds by the Ministry of Finance.
It is foreseeable that these inflows of dollars will return the exchange rate to 3700 3800 basis per dollar range at the end of this year.
On the physical front Congress recently approved a new tax law that extends social programs such as the transfers to the poorest households until 2022.
And racist fiscal revenues by 15 trillion basis by increasing the corporate tax rate to 35% permanently in the financial sector tax rate to 38% until 2025.
Other components of the tax reform include reducing tax deductible expenses strengthening legal measures to fight tax evasion and freezing government spending.
The additional revenues from this bill should be enough to stabilize the path of public debt in the medium term, but most probably will require yet another reform sometime in the next four years.
The government continues to expect the fiscal deficit to reach eight 6% of GDP in 2021, and 7% of GDP in 2022.
Finally, the current account deficit is expected to widen to five 3% of GDP in 2021 up from three 3% in 2020, mostly due to imports, which have proven more resilient and better priced coffee oil and coal exports.
In 2022, we expect a modest correction of the current account deficit to four 5% of GDP in a scenario in which commodity prices continued to be high that negative shocks to oil and coal production would be partially diluted and net tourism receipts gradually recover.
With respect to Central America year on year reported growth as of September 2021 was 13% when compared to the same nine month period the year before.
During 2020, the economy had contracted 10% versus 2019 as.
As such the IMF adjusted its GDP growth forecast and now expect approximately 8% growth of the region's economy in 2021 and a four 6% in 2022 as Central America continues to benefit from the economic recovery of the United States and the positive.
<unk> trade and remittances.
And it excites current oil prices may prove burdensome for a net oil importer such as Central America.
We generally inflation for the last 12 months was three 3% that's up September 2021, more than double 2000, twenty's inflation during the same period.
Furthermore, countries with Dollarized economy choices, such as Panama and El Salvador.
Have seen an acceleration in inflation in recent months when compared to the other countries in the region.
'twenty, the central Bank of Costa Rica, and Guatemala completed 16 months without changes in the interest rates at zero point, 75% and 175% respectively. While <unk> remained almost a year with its reference rate at 3%.
We will continue to provide information on the status of the loan reliefs granted by our banks. During 2020 until these are negligible as a percentage of our total loan portfolio.
It does.
Those currently past due 90 days or more represent approximately 1% of our total consolidated loan portfolio. While those currently past due 30 days or more represent one 8% of our total consolidated loan portfolio.
Still strategy continues to yield results.
As of September 2021 clients actively transected with our banks through our digital channels totaled 5.5 million almost 40% more than 12 months ago.
Our bank sold 1.7 million digital products during the first nine months of 2021.
Columbia, 60% of old sales rebuild.
Rebuild products for which are Digitalised solution has been developed are currently conducted through the digital application while in Central America, approximately 25% of total retail sales are sales of digitalize products.
In addition, your debate of the total value of all monetary transactions through all of our channels close to 61% was transected through our digital channels. Our branch network now represents only 36% of total amongst transacted.
Last June 20, we launched our mobility ecosystem through got our yet Boondoggle Korea is currently yielding two and a half million visits per month with 1 million subscribers. We're also starting to see a sizable amount of credit needs for our banks as a result.
We're in the process of developing strategies to convert those users two digit declines of our banks or a darling.
We continue working on developing other ecosystems through metro <unk>, and and and <unk> Dot Com and expect to launch these in 2022.
Yeah, Metraplate al Andalus, <unk> combined kearney yield more than 80 million visits per year and serve over 10 million subscribers.
In the meantime, we continued to add potential partners to the three ecosystems.
As a result of our recently proved mobile banking apps and banking web pages, we have increased digital adoption from our retail clients to 65%.
Augusta are centralized data analytics platform continues to improve ourselves effectiveness.
<unk> using Augusta have been able to increase purchasing dented by 40% and effective disbursements in specific campaigns have increased by 15%.
Our churn rate has also decreased by 15%.
Matilda or programmatic AD platform as allowed us to reduce by 41% are CPM or the cost per thousand impressions, while increasing by 3.8 times the number of impressions.
In Central America as of September we have 1.9 million active digital customers of which 84% are active users of our banking App in fact, the number of transactions through the banking App. This year is higher than transactions through our online banking plot platform.
Digital sales as of September approximated 500000, which is already higher than total digital sales during 2020.
We recently launched a personal finance solutions App for our customers, which is more than 500000 subscribers with a high customer satisfaction rating.
Regarding customer service digital clients interaction represents approximately 60% of total interactions.
And to finish center of America are transaction lab cash continues to be in the top three downloaded financial apps in Guatemala under us and Custer Rick.
Moving on as you may recall on September 15th we announced bankable with us invention to spin off to its shareholders, including the Dubois, 75% of its equity injures interest in backs holding company.
Back holding international Corp, or BHI, which was previously named at least symbol with up on <unk>.
<unk> group Polo's intention to follow suit and spin up to its own shareholders. The shares a BHI it received from uncle, but with that.
We believe that these transactions will ultimately generate value for our shareholders. As a result of simplifying bankable with thousand Grupo out corporate structures, while allowing for more efficient capital fiscal and regulatory structures.
We also believed that the proposed spinoff would allow group board bump global with that and Buck to strengthen their respective strategic decisions to capture future growth.
And two more quickly adapt to the local market dynamics.
These transactions required and we are willing to the process of obtaining approvals from regulators in Columbia Central America, the Caribbean and the United States from certain creditors and from shareholders and any others required under contractual arrangements we.
We expect to close this transaction before the end of the first quarter of 2022.
Finally, giggle referred next thing details to our financial performance during the third quarter of 2021 and will also provide guidance for 2021, and 2022 of <unk> and BHI on a combined basis, but before that I would highlight the following.
This third quarter was characterized by growth in the economy and strong loan demand in excess of what I believe any of US players in the financial sector had foreseen I also think that we have been very pleasantly surprised by our debtors commitment to serve their loans.
This has been in any case excellent news as the most immediate result is that as I said before we recorded the company's best quarter ever on a pretax basis and that we have exceeded our budget for 2021.
We have to keep in mind, however that this growth, albeit strong as only taken our economy's too roughly what they were back at the end of 2019.
We're still dealing with adapting to a new normality in aspects such as physical versus virtual presence of our employees and with learning how to behave in open and closed public spaces.
This has posed a challenge to our estimation of next year's macroeconomic drivers somewhat compounded with uncertainty surrounded surrounding future fiscal reforms that have consistently targeted the financial sector and also the current electoral environment.
In any case, we believed that we're presenting today have somewhat conservative guidance for next year as is our custom and.
And we are presenting are getting guidance on a combined basis BHI plus oven as in theory, our current investors will hold shares of both companies after the spinoffs.
So with that I. Thank you for your attention and I pass on the presentation to dig.
Think it is Carlos I will know move to a consolidated results of Cooper Island ARIA Forest.
It's highlighted in a report Cooper registered it's best pretax income results ever for a quarter was driven by a control cost of risk.
Throw retail growth and steadying him unknowns in spite of some emergent pressures on funding rates in Columbia.
Now starting on page 10, consolidated assets with 2.2% over the quarter and 5.3% year on year.
But I'm an asset growth recorded a 2.0% increase during the quarter and 6.1% year on year, while central American assets recorded 0.8% poverty and 5.5% year on year growth in dollar terms.
Accordingly, depreciation of one from 7% in a 12 month appreciation of 1.4% take quarterly and annual growth in pairs of Central America, two 2.5% and 4% is thick.
The Sheriff Central America in our book really made at 36%.
Moving to page 11.
Our total loans grew 2.4% over the quarter and four 3% year on year Lone Grove continued to show a positive trend in both regions.
Columbia gross loan portfolio increased 1.5% during the quarter faster than a quarter earlier, while 12 months growth was 3.8%.
Demand for consumer loans was from Columbia, resulting in a 3% increase from the water at 12.7% year on year competition remains high and low risk products, such as pay with loans. However, as pointed out in her last coordinate call unsecured products containing continued to gain traction which.
Reflects an increase in the risk appetite of beds.
Better lending that accounts for 61% of our career consumer portfolio group at three 7% for the quarter and 26% year on year.
Credit cards grew 2.5% on person and personal loans, 2.7% over the quarter. The first positive figures in the year. This products account for 12% and 20% of our Colamine consumer portfolio respected.
At 10 in August acute retail products in Colombia mortgages remain dynamic spending 3.9% over the quarter and 13% year on year as experiencing Columbia with the recent quarters. The strong growth of retail lending products was partially dumping by a still sluggish performance of commercial loans are Columbian commercial.
Nonportfolio continued it's milk recovery growing at a steel shy, 2% or growth in this segment versus that of our peers continues to be affected by our pricing discipline, where we've privilege.
Profitable customer relationships over market share cumulative 12 month commercial growth was negative at minus 1.8% with are still highly comprises base a year ago. This portfolio has grown one 6% year to date.
Even percent preliminary raker R. A gross loan portfolio short the best part of the performance since fourth quarter of 2019, with a 2.2% partly increase and that's 6.5% increase year on year conductors.
Quarterly performance in Central America was brilliant by a 2.4% growth of consumer loans. This performance resulted from a three 4% growth in credit cards, and 1.1% in federal loans quarterly growth and credit cards took the year on year growth of this product to nine 9%.
Commercial loans and mortgages grew 2.5% and 1% respectively during the quarter in Central America.
Looking forward fundamentals port loan growth continues to be strong and bolts geography's.
On the commercial no front, we expect competition to remain vibe supported by further improvements in economic activity in business confidence in the retail lending front, we expect our bags to continue to attend the risk appetite for long for further growth in high risk products that has been emphasized within the last year.
And pages 12, and 13 were present several loan portfolio quality ratios.
As discussed under last call. The COVID-19 credit juncture continued unwinding failure leave for our banks during the third quarter proven by the continued and stronger than initially forecast of recovery in both economies. This has translated into a better evolution of relieves and a better performance of the rest of our portfolio, resulting in a signal.
You can see lower cost of risk than initially forecast it.
Low relieves continued to expire and return to active payments shows, particularly impediment as expected.
<unk> have higher delinquency ratios than average however, the remainder of her loan portfolio, 92% of it has benefited by a stronger economy offsetting the burden of.
Jones.
As of September we had one 3% of our total gross loans under payment policies and 8.5% under structural a payment programs together accounting for 98% of our loan portfolio.
In Columbia, 6% of our loans have some type of relief only 1% of our Colombian gross loans are still under payment holidays. The majority of them are under structural payment problems.
In Central America, $16, 2% of our loans, you'll have some type of release, four 7% percentage points lower than last quarter.
Is broken down and 12.7% of gross loans under structural payment programs and 3.5% on the payment followings.
Although payments holidays persist the outstanding balance in the region contracted by 53% over the quality down to $750 million with Panama accounting for 88.5% of those.
At the end of period for 4% of our total loans that in the past that benefited either from pavement holidays or restructured and that had returned to active payment shed walls were passed to more than 90 days. These past two loans continued representing 1% of our pollute gross loans.
This numbers were 7.5% and 1.8% for loans past two more than 30 days.
In Columbia, 6.2% of loans previously relieved that happens shield active payments shed rules, where 90 days past few representing 1.1% of gross loans for 30 days Pdl's. These numbers were $9 and 1.6%.
Central America, 2.9% of loans previously relief that had returned to active payments shareholders, where 90 days past two representing 1% of gross loans for 30 days Pdl's. These numbers were 6.1% and 2.1% as.
As mentioned before the duration in relief nose was upset by the improvement of the risks of the loan portfolio. This resulted in the improvement of overall metrics for 30 days and 90 <unk> during the quarter are announced coverage for 30 days and 90% APR improved over the water.
PL formation was particularly low during the quarter due to a positive performance of our vintages and Cologne is added to the return of 583 billion pesos of our young Qatar group loans to current almost the entire PDL formation or the remaining PDL formation was explained by retail products.
Yeah.
The quality of our loan portfolio improved relative to a quarter and two a year ago, 244% of the 30 days basis and 3.1% on a 90 day PDL pace.
The breakdown of our local poliovirus stages continues to improve with stage one those gaming 88 basis points in the mix compensated by 70 basis points in 80 basis points decreasing stages, two and three.
The improvement was mainly driven by our consumer loan portfolio in both Geography's, which reported 216 basis points increase in the share upstage, one loans to 81, 6% 201 basis points decrease in stages tool in stage two loans to 13, 8%.
Cost of risk net of recoveries was 1.5% 47 basis points lower than the 2% for the previous quarter and 140 basis points lower than the 2.9% a year earlier.
This quarter incorporates 37 basis points, and 14 basis points improvement in commercial and retail no one's perspective.
Quarterly costs, such as built 79 basis points in Colombia, and increased five basis points in Central America.
In Columbia cost of risk fell 89 basis points for commercial loans and six six basis points for retail loans and said put America the cost of risk for commercial loans fell 51 basis points, while that for retail loans increased to keep the five basis points.
Finally, the ratio of charge off to average 90 radio was 169 times. This figure was 17 percentage points lower than that a year ago. When we charged off every time slot.
On page 14, we present funding and deposit evolution are funding structure shifted slightly over the quarter. This reflects our bank's efforts to control a rising pressure on cost of funds by deleveraging part of the excess liquidity built up during the pandemic.
Deposits account for 70.
6.2% of total funding down from 77, 9% a quarter. Edgar is was upset by an increase in the share of interbank borrowings deposits contracted 3% during the quarter in group three 7% year on year Colombian deposits decreased 1.9% during the quarter, while central them.
Erica Blue 0.5% in dollar terms.
Over a 12 month period Colombian deposits, 2.6% in Central America $10, 1% in dollar terms.
Ordered 107% in deposits to net loans and 15.9% in cash deposits at the end of quarter.
On page 15, we present evolution of our total capitalization are attributable shareholders' equity in the capital adequacy ratio upper banks.
Our total equity Ooh, three 9% over the quarter and 8.4% year on year, while renewable equity increased 4.1% over the quarter and seven 3% year on year growth was mainly driven by earnings.
As mentioned on our last call effective on July 31st changes in the control structure for venue where competed bipolar over time no longer consolidates Portland need us with Burrell will go onto consolidated directly.
This changing explains most of the changes in correctly to one of my quota and of bankruptcy then.
And page 16, we present, our yield on loans cost of funds spread and net interest margin.
Noon performance during the quarter was driven by a stable named both on loans and investments Malone's remained at 5.8% bring up water as the spread between the spread if any other loans and cost of funds remained materially flat at 6%.
As previously mentioned the anticipated increase in reference rates began to be priced into our floating loans are banks successfully contained the pressure of cost of funds, resulting from floating in short term funds incorporating it expected changes in the central bank rate.
Net interest margin in investments wasn't the theories table at 1.4% of string of water.
And page, 17% net fees and other income.
Rusty income increased 13.1% year on year, and nine 4% quarter on quarter large contributors to this performance where the recovery of our merchant acquiring business in Central America, and the strong performance based pension management fees in Cologne in.
In Central America.
Advanced that vaccination programs has enabled a strong consumer activity that translated in an increase in merchant sales to pass across the region is this in which bought holds a privilege sure.
The increase in income from the non-financial sector, primarily reflects on oil performance of the infrastructure sector, mainly due to a deceleration in the construction progress of October groups. The.
The bottom of the page the quarterly increase in other income is obtained by an extraordinary dividend from who pointed here where water that was partially compensated by lower contribution from FX and derivatives.
On page 18, we present some efficiency ratios cost me income increased to 47, 1% on cost to us it's 233% increases in both metrics reflects costs associated with higher commercial and operational levels given the recovery in dynamics in both regions in fact.
Two eight opus compared to 2019, a prepandemic year, 1.8% in Colombia, and 1.6% in Central America in dollar terms, excluding the effect of the mfg operation with ish.
Given the low 2020 comparison base due to the pandemic year, two eight other expenses increased or 2% year on year, resulting from growth of 2.2% in Colombia, and 3% in dollar terms instead preliminary excluding the effect of energy.
Partly expenses grew seven 9% year on year with Columbia growing five 6%.
<unk>.
Central America growing sales, 0.5% in dollar terms.
Compared to last quarter hour expenses increased three 4% with Columbia decreasing one 3% in Central America grown five 3% in dollar terms.
Extensors during the quarter in Central America were affected by an uptick in the merchant acquired business is reflected in groceries.
Finally on page 19, we present, our net income and profitability ratios a total net income for the third quarter of 2021 was 780 billion pesos or 35 pesos per share. This water intuitive the negative effect of a tax bill passed in Colombia, which impacted our three rubbo net.
Income by 201 billion tests. Despite this effect quarterly net income was 12.9% higher than a year earlier Ah returned an average assets for the quarter was 1.4% and 1.7% year to date, a return on average activity for the quarter was 14.2% empty.
Eight 9% year to date.
I will now summarize our guidance for 2021 and 2022 for comparison purposes. This guidance. We first or business is is that include 75% of a back holding international operation that we intend to spin up early next year.
We expect.
10, 22 known growth to be in the 9% diarrhea, slightly lower than that 10% 14 or 2021.
We expect Neiman loans and total name for 2022 is stable compared to 2021 at 5.8% and poor 8% respected.
Cost of risk will continue to be lower than previously 14, and went down closing 2021, and 1.9% area and falling to 1.7% in 2020 team and.
Net P growth is expected to close in the 12.5% in 2021 and two in the 6% area in 2000 2018.
2021, non financial sector is expected to close at a similar level to that of 2020.
Contribution of a non financial sector in 2022 is expected to be 75% of that observed in 2021.
Expenses are expected to grow 3.5% in 2021 and to grow in the 675% to 7% range in 2022.
As discussed earlier return on average equity is affected by the recent tax reform that implied a one time impact on 2021 at three two attributable net income of 201 billion pesos or around one percentage point of return on average average.
That this effect 22 21 return on average equity would be in the 15, 5% when including dissent impact returned an average equity is expected to close in the 14 and 5% in 2021.
Starting when people between we estimate a permanent effect of close to half of a percent of return on average equity per annum from these tax report. Therefore, we expect return on average equity to meet in the 14.5% to 15% range in 2022.
We are now open to address your questions.
Thank you.
Will now begin the question and answer session.
If you have a question. Please press star and then one using your Touchtone phone.
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Once again, if you have a question. Please press star and then one using your touch Tom Tom.
We have a question from Jason Molina from Scotiabank. Please go ahead.
Hello, everyone.
I have two questions.
The first is on the previously announced clan to raise capital if you could provide any details or how that would work if that's gonna be it.
While level or at the back of the volatile level or or.
What we should expect on that front.
And a second question is on the spin off related to the Central American operations. If you can speak to the stock expectations for stock trading liquidity Rbn's, you that will be spun off and if you think this will impact the training for them all thank you.
I'll take the first one into Okay, Hi, Jason Wood.
With regards to your first question as to the capital raised.
What we're thinking is well first we have to gauge well the capital needs a bunk global with I might might be after it a spin up what we know right now is that the regulatory capital ratios of bankable that will will look even stronger than they look today after the spinoff however, uhm.
Well, we've decided is we'll put a big push for growth Inbond global with them.
So I think with probably mentioned in the past, we've always been very satisfied with the level of of Ah P&L at <unk> net income at the bank level, but not not as much with with growth. So so that's what the what the push is gonna be for meaning then then that would still have to.
<unk>, what the capital need at bunk global without would be and to a dresser questions. Specifically, so one yeah. If we raise capital it it will be at the bunk global with a level, but because I won is obviously a uncle with the largest shareholder then we would probably.
We would raise capital level at B O L.
Level first and then use that to in turn capitalize a bunk liveable with that.
So that's that's with regard to your first question and regarding the liquidity. After this pin up a bear in mind that what we are planning to do is basically give to the shareholders of a banquet without first and then have them all exactly the same sure that they had before in the spinoff company.
Therefore.
You're breaking down banquo with 9222 different buckets. However, when the new vehicle goes up to our level it will pick up both the minorities of.
Bancorp tie.
As well as our therefore, the let's call it the float off the resulting company will be the some of the floats of both levels.
The shares will trade initially in a in a bar in the <unk>.
The Colombian stock exchange and the Panamanian stock exchange for so that shareholders will be able to trade them.
Thank you.
The next question comes from Judy Fernandez from J P. Morgan.
Hi, all thank you and congrats on the Carter I have no question regarding the guidance on means I get information for the next tier stable <unk>, but I was thinking that given the stage it through loans I need to <unk> higher rates in Colombia, and like these higher appetite for longer off like why should.
That means move up next year. So that's the first.
Question and I have just a follow up regarding that kept on increased so basically the perceived the potential proceeds from this kept going craziest Grove right. It's girlfriend bunk with the Bogota or do you see other needs like you say well I wouldn't invest more technology is there any other needs on the capital on the potential use of proceeds of this kept on Queens.
Thank you.
Let me start with the second question first yes. The the main purpose is growth. The main purpose is to give banker with that.
The instruments it might need to be able to claim a higher position.
A larger share in the Colombian.
Market.
There's other uses of funds, but those are used as a punch that had been planned in advance.
Particularly you mentioned some of those in which we're working quite hard at this point and it is a modernizing bank boil water and all the process around digital where we are actively working.
Then a moving it to your question on our name is is a very good question because what we have found over the past few cycles in Colombia, as you actually need to be able to read a NIM less cost of risk to get a sense of how the market is behaving indeed, when you take those in to conceal.
Narration the margin that you would get that would be NIM. After subtracting costs of risks will increase in that's implied in our guidance. However, what we expect to scheme is even though some of our business.
All expanded its name, particularly corporate business will have a larger a portion of NIM. We're also having competition on prices and then on the consumer side, most of our loans or or or some of our loans, particularly the payroll loans are fixed rate. Therefore, those do not.
A reactor as well to to increasing rates you get some contraction there. So when you add those to the what happens on the corporate side consumers side and combine it with this is an increase in rates that is tied to a better economy. What you expect to see is all those add up to something that is quite flat to compared to what we have however, we.
Getting the benefit of a lower cost of risk.
Thank you. Our next question comes from <unk> I'll see can't from that medium diet Coke.
Hi, everyone and thank you for having us I have to question in these regarding some follow ups have O T.
And you got the listing off a balcony holding international I just heard that you mentioned that you released T.
Company and the Panama in in the color Minister could change I, just want to confirm done that and and my second question is regarding the denim.
And also if you have any sensitivity allowed if there's an effective interest rate increase.
What will be the theme fucking denim regarding that I would like to know if you have like for example, if the central.
Central Bank decided to increase the interest rate really really high and eat it.
Have some impact on D M loan growth.
Thank you.
I really don't think you yeah regarding your first question. The answer is yes, Bolton, Panama and in and in the B B C in Colombia and prove I didn't second Deborah.
Regarding your second question I think that.
When you look at scenarios you need to be consistent in how the scenarios look like and do you have two different forks of interest rates going up but one can be a bear market increase in interest rates and the other can be a bull market increase in interest rates. The one we're facing is a bull market increase in interest rates.
That sense, it will come and.
At the same time, where you should expect to see a stronger growth in loans and in that sense.
This is consistent with a kind of scenario for interest rates that I think the market is looking into the market is looking into a scenario, where we could go up to around 4% to 45%. We're also building in competition into that process combined with a lower cost of risk.
You would take all those into consideration the way, we build our pricing and we assume that most of our competitors do is the same if we build it out of how our yield curve. It looks like plus our opex that is tied to the volume that we are dealing with and <unk> also the expected cost of risk that we have.
So you have to take all those pieces together and that's why even though in the past we had guided in this is years ago, how the Colombian market behavior, we had guided into something that 10 to 15 basis points area as the kind of elasticity that we had it too.
To the Central bank rate, what we altered over time as as the Colombian market has become much more intelligent.
Four and four pricing and as I. Just described you have the positives of.
What I mentioned before when you take the overall portfolio, but you also have the negative coming from competition and lower cost coverage that is why that nspcc that used to hold doesn't seem to hold a any longer and then to your question what happens if the central Bank goes crazy into a strange number it we're not looking into that kind of.
Scenario, we're looking into a scenario, where we've got could have around 100 basis points increase in in in central bank rate and in that kind of magnitude all of those things that I just described still hold.
Thank you. Our next question comes from Carlos Gomez from HSBC in New York.
Kind of with Martin and thank you for taking my question.
Could eat.
<unk> sure questions. The first one is regarding the or at least enough back.
Uhm, we understand you are until you sit in Bogota on in Panama Uhm could you just think why not go for it on a b R. Since that will be the logical step for most of the shareholders of Oh five hours to be able to take advantage of these new listening. The second one is the relationship between back Uhm.
<unk> in the future you will maintain the 25% mistake, but should we understand the Buck will continue to be controlled by of all I need just hoping you could tell me by the group or will it kept me out on independent fluffy. So for instance, if there's an appreciation that same the menu hunter public is that something that <unk>, you will talk to them.
To ask and finally, we have always been waiting for a simplification of the structure of the group is this a step towards some more.
Sympathetic structure or we will it could have Oh. This is for people to the permanent structure that you would have in the future. Thank you.
Hi, Carlos back for the questions on the first one why not in a D. R. We under some time constraints and there was no time for an a D. R. Secondly, we didn't see.
An immediate need to do so so so we we ruled it out haven't ruled it out for the future but for now we ruled it out so we feel that with those two stock exchanges would be those two would be enough for our purposes and shareholders.
The second questions about the relationship going forward with doing an hour and Buck.
We want consolidator in our in our statements back any more so and neither will bunker, but with obviously so control we won't control. It we will be a very active shareholder with our 25% and there are some synergies that we will still.
Take advantage of and so that would be the relationship we will participate up to our percentage of shareholding in back.
But obviously, it's a really important subsidiary so so we will make sure to to keep an eye on it further going forward with acquisitions actually we'll do it as we've always done it which is to decide who is the best suited to to acquire a.
A new band and and in that respect it's on a case by case basis and will will keep on.
We'll keep the.
Looking at those acquisitions in the same way.
And regarding the simplification of of the structure.
For now that's what we've decided we will simplify it to that point.
And then we'll see if towards the future further simplification or different the structures are needed to to better run the company and more importantly to give more value to our shareholders.
You have to bear in mind again, but the controlling the ultimate controlling shareholder remains the same so so that's an important.
Attribute up there told transaction.
Which is at the top the the control remains exactly the same.
Thank you.
Our next question comes from the Sofa from something there.
Good morning. Thank you for the presentation my questions over hyped, it will be infrastructure business I want to confirm if I heard correctly.
You expect revenue from these lines to decline 5% in 2022.
And what will be the drivers of these performance. The second question was related to this is if you are expecting to have any kind of expecting to receive any cash dividends from coffee Columbia or coffee Columbia and I will continue to.
To use the current position financial position to expand into infrastructure in Colombia. Thank you.
Thank you Andrea.
You are right. What we said is there is some change in the.
Have been discussed in the past and the maturity process of the current projects that we have however, we're working on a pipeline of initiatives to replenish some of the things that are in the process of.
Ah reducing their contribution.
That ties to your second question and.
It's basically a result of of those two forces together one as the toll roads reach operation.
That's the point in time, where they start to pay back in cash and allow us to payback or allows protocol to pay dividends and cash to its shareholders.
So the.
The dividend policy of courtesy call will be dependent of those two options one is a.
In the poll roads, starting to provide actual cash not only earnings.
And the new projects that we start.
Thank you at this moment, we show no further questions. Thank you I would like to turn the call over to Mister side of me until the P. M. S for final remarks.
Thank you very much well uhm. So this concludes one quarter called from.
Hopefully the next call will still be we'll still have all of the exactly the same way. It is right now but on the on the one after that.
Will be a bit different that'd be a bit strange in a way for us but.
We'll keep on bringing the numbers so that it's on so that anybody who is a shareholder of both BHI an hour. We will have a very good understanding of what's going on in.
In the meantime, we expect to keep yielding results and expect to keep adding value to shareholders and with that though like to conclude the presentation and thank you all for for assisting and will be we'll see you next time.
Thank you, ladies and gentlemen, discomfort today's conference. We thank you for participating you may now disconnect.