Q4 2021 Bancolombia SA Earnings Call
Good morning, ladies and gentlemen, and welcome to Bancolombia as fourth quarter 2021 earnings conference call.
My name is Maria and I will be your operator for today's call.
At this time all participants are in a listen only mode.
Following the prepared remarks.
It will be a question and answer session.
And during the question and answer session. If you have a question. Please press Star then one on your phone.
Please note that this conference is being reported.
Note that this conference call will include forward looking statements, including statements related to our future performance capital position credit related expenses and credit losses.
All forward looking statements, whether they're made in this conference call in future filings in press releases or verbally address matters that involve risks and uncertainties.
Ladies and gentlemen, please hold the line.
Thank you.
Please note that this conference call, we didn't see that the forward looking statements include statements related to our future performance capital position credit related expenses and credit losses.
Forward looking statements.
Whether made in this conference call in future filings in press releases or verbally address matters that involve risks and uncertainties.
Consequently, there are factors that could cause actual results to differ materially.
It only from those indicated in such statements, including changes in general economic and business conditions changes in currency exchange rates and interest rates introduction of competing products by other companies lack of acceptance of new products or services by by our talk.
Clients changes in business strategy and various other factors that we describe in our reports filed with the sick.
With us today is Mr. Juan Carlos Mora, Chief Executive Officer, Mr. Mauricio Rosie Lutz Chief Corporate Officer. Mr. Holds that went back to of course, the Chief Financial Officer, Mr. Rodrigo Prieto, Chief Risk officer, Mr. Carlos that investor.
So back then we said one Bob Lewis Chief Economist I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer, Mr. Juan Carlos you may begin.
Good morning, and.
Welcome to our conference call for the fourth quarter of 2021 .
I would like to begin this call with a brief overview of the pro four months of the Colombian economy.
Colombia is coming out of the COVID-19, pandemic I said, one of the best performing economies into each week.
We've done a lot of GDP growth of 10.6%.
Mainly driven by the exposure to commodity prices baidu strong pace of recovery of domestic demand.
The positive performance of the second half of the year set tops economy for a good 2022.
We.
Expect growth to be around 5% of all DIY much of the reach.
The main risks to our view of the uncertainty surrounding the electoral cycle on inflation higher than the range of the central Bank.
Let me give you an overview of the results of 2021 .
The loan book grew 15% over the year.
Net fees grew 13%.
Core equity tier one closed.
Seven nine and the net income for 2021 was 4.1 trillion.
Basis.
Yeah.
Provision charges for the year were $2 four trillion pesos.
All historical low cost of risk of one 2%.
Explained by better macroeconomic forecasts improvements in the expected loss models on the economic recovery in the countries, where we operate.
Our ecosystem strategy closed 2021 as one of the most relevant market places in Colombia with 11.5 million visits 87 billion peso seen disbursements.
And with our coverage of our QR code.
100% of the municipalities of Columbia, with one point million engaged merchants.
Can you just started you not only has great potential in terms of flows on disbursements through that digital challenge, but he has also allow us to deepen the relationship with all our clients generating more data.
Before getting into the details of the results.
I want to highlight two relevant topics.
On December 21, we announced the legal separation of Nike from Bancolombia.
The structure approved by the board of directors is intended to create the necessary vehicles for Nike to have greater flexibility.
To capture the value of financial and nonfinancial businesses at a regional level.
These will be implemented during 2022, and this new entity will be hundreds of percent owned by Bancolombia.
Also yesterday, we announced the dividend proposal to be disclosed in the annual shareholders meeting next March.
This proposal comes with a structural change in the dividend policy since we have defined and up to my level of core equity tier one to support the growth we expect.
We believe the bank has the capacity to generate capital and that's it.
Stained bases in the upcoming years.
At this point I want to turn the presentation to Juan Pablo Espinosa, who will further elaborate on the performance of the Colombian economy Juan Pablo.
During 2021, the Colombian economy surpassed expectations and grew 10, 6% one of the highest rates in Latin America.
Half of this figure is explained by the low base of 2020, when GDP contracted Idaho revised rate of 7%.
The remaining portion represents and genuine process help recovery, which has been led by Brad that consumption. This component of aggregate demand has responded to several factors, including the spending opex savings accumulated that the start of the pandemic as well as ample access to.
Credit and higher mobility within the country. Moreover, experts accelerating during the second half of 2021, thanks to higher commodity prices and an increase in oil and mining production on the contrary investment, especially machinery I think we've been fell behind.
The rest of demand components.
Our leading indicators suggest that at the start of 2022 debates those economic activity. Despite some established nation has kept momentum.
As we move through the year, we expect that economic activity will gradually moderate as global conditions become less of a purpose, but do you see a stimulus is remote and household consumption established itis incorporating all these factors. We're currently estimating that in 'twenty.
22, GDP will grow around 5%.
I know there are significant recent development is the increase in inflation, which moved from one 6% at the end of 2020, 256% by December 2021.
This trend has consolidated recently, because so both extending a lot of local forces, we expect year on year prints to bake in the short term by around 8% and then to accelerate then closed the year around 6%.
In this context, we anticipate that the central bank will bands for theater in its presence as well we see normalization, we have adjusted upwards not only been umbrella right tags, but also determined at a level, where you're operating in this cycle to six 5% after D C.
Pandemic overview, let me turn the presentation back to one catalyst one.
Thank you Juan Pablo.
Moving to slide four I wanted to continue these presentation with the summary of how we face the pandemic.
During this challenging time, our main goal was to support our different stakeholders.
For those clients that needed support with the obligations, we have plate D that tourists support program.
Not all clients recover at the same rate.
Right.
In Colombia, we continue to offer alternatives for that to even after the programming costs and it.
We've reduced payment terms to 30 days or less for our suppliers, giving priority to those that due to their size and possibility of financial leverage needed more liquidity.
Through our channels, we continue helping the government in the delivery of subsidies for vulnerable households in all corners of the country as well as companies, whose operations were affected by the pandemic.
We also support the vaccination plan.
Accompanying the government with resources for the purchase of vaccines.
22000 doses.
We are also implemented a hybrid work model to keep supporting our employees.
On slide five we present, our ESG framework.
Oh, our ESG strategy focuses in three main topics.
Redfin thing the productive network.
Promoting sustainable cities and communities.
Fostering financial inclusion.
In each of these aspects, we observed considerable progress comparing 'twenty to 'twenty and 2021 .
In 2021, we mobilized almost 37 trillion pesos towards our ESG strategy.
Our 33 U.
Really uncle.
This amount represents more than 20% of the Bancolombia S disbursements.
We have a commitment to promote sectors that drive the transition to a low carbon economy, where we disbursed in 2021 close to 4.6 trillion.
Maybe to switch us sustainable construction.
Electric and hybrid mobility.
She had cooler economy sustainable agricultural among.
Others.
Moving to slide six I want to continue this presentation by explaining the loans and deposits for four months.
The recovery of the economy has resulted in significant progress in our business.
I have experience in important growth in the number of clients, reaching more than 25 million.
We broke our offer of products and services and extend our digital strategy.
All these is gilead really reflected in the performance of the loans and deposits.
The loan book continue showing a steady growth across the three main segments.
These trends confirms that the bank overcame the economic shock of the pandemic without relevant implication of its financial stability.
The retail and mortgage segments showed a positive trend throughout the year.
Whereas the commercial segment started to improve since the second half.
And this last segment, we are seeing a good opportunity of growth.
It's a nice.
During the first three quarters of the year, we increased the balance in savings and checking accounts.
And this was compensated with a decrease in time deposits.
However, as the Central Bank started the rate hiking cycle and the loan book grew at a better pace in the last quarter the balance in time deposits increased to support this growth.
Moving to slide seven I'm going to elaborate in the evolution of digital.
Sales.
During the year digital sales represented 43% of total sales.
Digital sales have maintained a steady evolution, despite the reactivation of traditional channels.
During 2021, the customers accelerated the adoption of digital channels.
Slide eight I'm going to elaborate in the evolution.
Yeah.
Of our payments services.
One of the main strengths of the bank is the level of processed transactions.
As you can observe.
Just a slight credit and debit card transaction volume returned to pre COVID-19 levels, while the net fees have already exceed recovery figures.
I would like to highlight that in both debit and credit cards, our share of transaction is far higher than our share of outstanding cars showing the power of our.
Channels.
A fact worth nothing is the composition of debit card fees.
This generated by American transactions has remarkably increased during the last few years.
Indeed, the acquiring business has expanded share within the total revenue leverage on the growth of boys adoption as well as electronic payments evolution.
As a result monthly maintenance fees for individual accounts have a lower participation.
Boeing progression towards diversifying sources of income.
Moving to slide nine.
I'm going to elaborate about Nicky.
Nike continues showing positive trends weekly.
We closed 2021 with 10 million clients.
1.3 trillion peso seen deposits.
Levels of M P S and low acquisition cost.
During December Nick you reached 1 million daily active users of which about almost 30% use the marketplace.
Nike cards are growing fast.
Well have more than doubled the number reported 12 months ago.
Bear in mind that we are not only issuing more plastics.
The number of transactions and the volume of payments are increasing at a very solid base.
As a result of the information that we have gathered from our clients during the last quarter of the year Nicky's loan book started showing a very positive trend.
Moving from a neighbor that's balance of $1 3 billion pesos in the third quarter to 39 billion in the fourth quarter.
No I want to turn the presentation to wholesale Costar to give you additional details on our performance during 2021 .
Burton.
Thank you Juan Carlos now turning to slide 10, I want to walk you through the evolution of the relief program.
Rate reliefs are almost done with only one 9% of the consolidated loan book entrepreneur Heath.
In 2022, it will be key to follow the evolution of deterioration restructured loans and charge offs.
The train into geographies, where the bank operates.
Yes, their patients I'm better loan quality indicators when compared with 2020.
Can you just Nike Levi, we proceeded to breakdown of provisions during the quarter.
Our recent charges for the year were two point for Twilio basis, mainly explained by the provision reversal due to a better macroeconomic forecast unless provisions related to COVID-19.
The slide you can observe in different points of time, if forecast of GDP, we had for 2021 in.
In each of the four countries, where we have places for example, we just had it anytime you want with an estimated 5.7% GDP growth in Colombia I'm finished the year with.
One of 10.2 per se.
Moving to slide 12, we keep you on your snapshot of provisions and asset quality.
Cost of risk for the year was one 2% lower than the normalized cost of risk the Spanish who have under normal circumstances.
As we explained in the previous guidance. The main drivers were economic recovery your loss provisions related to significantly their clients and improvements in the expected loss models.
During this year charge offs have increased 6% when compared with 2020 driven by the retail segment.
He has two important impacts first it reduces the balance of the loan portfolio and second it helps reduce get past emails.
I want to highlight the 90 day coverage level of 231%.
We closed the 2021.
Dcp's bone, partially to the fact that after the end of their beliefs the amount of restructured loans increase anyway, though do you feel in south provisioning they are performing or in that grace periods.
It shows a solid enough coverage to face 2022.
On slide 15, we present, the liquidity position of the bank.
In a consolidated basis, we continue operated with sufficient levels of liquidity.
At the end of 2021 saving in checking accounts represent 61% up funding structure.
This growth is mainly explained by the growth in the number of customers. Thanks to the bank's digital strategy.
And this increase has been compensated with that decrease in time deposits and credit suite all their financial institutions.
As we have mentioned during the call the economic activity in the loan book are showing better trends quarter by quarter.
For this reason the violence in tanker policies savings or checking accounts would increase at a similar pace during 2022.
Fourth these clos.
Only 14 with pristine and an overview of <unk>.
Yeah right.
And so Americans gang, gaining relevance in the group has been kept being able to improve the standalone operation. Despite the challenges at the end of 2021 as we do the loan book reach $15 billion and $2 6 million times.
'twenty, one results were better than expected and the training to all of the different geographies was similar.
Reactivation of the loan portfolio increase in savings and checking accounts stable margins strong capital position increase of expenses and decrease in provision charges.
We are replicating the experience we had.
Pat in Colombia Central America from the digital strategy, we see the opportunity to grow deposits Bryan's on peace.
I want to highlight some key aspects.
From the Standalone operations.
After the end of the relief program in Panama.
At four months of clients of Chinese Mills, who I call me now after every needs is better than expected.
During the year the weaker clients reactivated mortgage had a positive dynamic and incorporating sportsman's show a positive trend.
It's temporary.
Facing a challenging situation, but non core can you cannot keeps maintaining exclude operational metrics with a return on equity of 19% for 2020 one.
And in Guatemala, we have velocity perspective, with the economic activity of the country.
That is reflected in the growth of the loan book, that's why we are being more aggressive in the retail segment.
One is that could we see the evolution of margins net interest income.
Net interest margin close 20 to 20, 151% with an expansion of 20 basis points. Despite the low interest rates explained by three main drivers first more efficient funding structure.
In cost of deposits.
A good performance over the year of the weekend and mortgage segments.
And third the beginning back in September of the rate hike might be Colombia, it seems like that.
Net interest income grew eight 9% up anything here because of the 26% reduction in interest expenses.
For 2022, even though we foresee an increase in the funding cost.
The good performance of the NII due to the loan book would an increase in the interest generated by the loan book.
Denny we are expecting.
Punch them of a piece of 100 basis.
Due to the rate hikes, we expect definitely to close 20 to 26, 5%.
Remember that we have an asset sensitive condition, where approximately 70% of all our assets are floating why only 34% of our liabilities.
Is that 16 shows the evolution of expenses and efficiency.
Operating expenses increased 14, 6% during 2021.
In this slide you can observe that generics from salaried employees are under control.
Dry pickup desalination, where first goodbye rehab and compensation are in place.
Remember, we can sell during 2020 and because of the good results of 2021 these pain with Don.
Eitan explains almost 50% of the 14% increase.
Second.
Renting expenses due.
Due to the assets depreciation.
Despite even with Easter as an operating expense just for accounting reasons.
Element is directly associated to the operating leasing, which outspend has one of the business lines with the highest growth we have the balance sheet and explains two 4% over the hour a 14% increase of expenses for the bank.
And third investments related to digital transformation formation that shows an expansion of 38% during the year.
VK pool, so we're collecting how gamone sections and the new planes engage the tap the immediate as well the loans configuration.
In each company.
<unk>, one 5% of the bank's total 14% expenses growth.
With that in mind. These three items together illustrate at 11, 4% out of the total 14, 6% increase in expenses.
Slide 17 shows the evolution of fees.
Fees continue to be one of the most risky lines on the P&L.
13% of their thinking.
They need some connection as well as banking services have added to the strong performance, although fees from David Paterson commercial establishment.
The line with the largest contribution thanks to the increase in the volume of transactions and the use of the Chinese.
2022 we expect net leased to grow between 10 and 11%.
Slide number 18 shows the profitability metrics during all the quarters of this year, we delivered positive results maintained the pace of investments in digital transformation.
Income for the year was four one treatment pesos I forgot on equity stood at a level of 14%.
Even though the decrease in provision charges were the main driver of this result, I want to highlight the good performance of the other lines of the P&L.
Cable margins, thanks to the airports maker on the funding cost.
Data growth of NII and the fast recovery all fee income.
For 2022 we expect we think the limitation of last year taxing from Colombia, and effective tax rate in the 35% area.
I think like 19, we present, the consolidated Standalone capital I think question.
Consolidated that uncertainty ratio as Stan said I live in a 15, 5% Y T T. One I live and up 11, 9% on your food basket three for the year.
These ratios are well above the minimum regulatory requirements not only in a consolidated basis.
But in the Standalone operations.
As Ron mentioned in his opening remarks yesterday, we announced our dividend proposal from 'twenty to 'twenty one.
We want to be clear that we have been preparing for each proposal in previous years.
Because of the pandemic, we had to postpone.
Equity is the line of the balance sheet that has grown the most in recent years.
Implementation of Basel III was positive for all the capital ratios I mean, we are expecting a moderate organic growth of the balance sheet in the next three years.
The structural change in our dividend policy and the banks have the capacity to generate capital in a sustained basis in the upcoming years.
The new dividend policy defined as an optimal core equity tier one range from 11% to operate the bank in the next few years.
Some of the current macroeconomic conditions and in our profitability and the growth expectations.
Therefore in the next few years, maybe begin payment will be based on basically.
Now I want to turn the presentation to catalyst one to close things with mics.
Contactless.
Thank you Barton.
After one of the most challenging situations. The war has faced in the recent history.
2021 was a transition year.
We're very proud of the results. We just presented and we are quite aware of the challenges alright.
We are ready to support our more than 25 million clients and all our stakeholders in the pure emerging after the pandemic with a strong balance sheet liquidity products and services.
I want to close this call, giving our 2022 guidance.
We're going to return to our normal cost of risk levels of around one 8%.
We are expecting the loan book to grow between seven and 9%.
The cost to income ratio between 47 and 49%.
Finally, with the R O E at the end of the year between 14 and 15%.
Which we believe is our medium term profitability lip.
After elaborating on these key topics I want to open the line for questions.
Thank you we will now begin the question and answer session.
If you have a question. Please press Star then one on your touch them phone.
So we used to.
From the queue. Please press the pound sign.
Yeah.
Be careful you may need to pick up the handset before pressing the numbers once again.
So please press Star then one on your phone.
The first question is atmosphere that belonged up of Bank of America. Please go ahead.
Hi, Good morning, one catalog so some radical cosmos.
Good morning, Jim.
Congratulations on your results.
I have three questions on my side.
The first one need someday you mean keep group.
Wondering if you can help us understand.
How many boards have.
You need to keep group obtained so far.
And when do you expect to have the full picture of the board's compensation that sooner.
I'm also related to this puppy would you be evaluating.
With each of their journey.
And then my second question, it's a Mickey.
You're kind of setting your price.
Before Bancolombia has got supported Nicky.
General operations.
So it would be object.
By providing.
Some key performance indicators are and I don't know.
P&L with Nike.
You got it correct.
Back to start.
Writing those metrics.
How do you see today is the most profitable product Nicky.
And also it will be interesting to know.
Nicky Ito very profitable.
Or whether it gets better.
So.
And then my last question is Oh.
Some patients are I know you got it.
You just said.
However, what we're putting altogether guidance.
On the dividend payout ratio it.
It seems this year.
Well around a 15%.
So you've got a double check.
So that's another item six thank you.
Thank you Ernesto.
Let me address the you're better.
<unk>.
The first one related to the tender offer for a group of Sudan.
As you know, what's the first tender offer in which the <unk>.
This group now has two parts.
Dissipation of their 25% on glucose Cuda, that's that's the fact.
Now there is another tender offer.
We don't know that we saw yet.
Hum.
And there also.
We closed.
On February 28, and at that point, we will know.
Oh.
What it's going to be different displayed Sean.
When you're in you're in Grupo SURA.
So far what we know is that the hub they already have a participation.
The shareholders' meeting of Grupo SURA.
Scheduled to be at the end of March.
Moment, we will know.
How many seats they are going to follow up on the Grupo suite.
Born that's what the information that we have already and we need to wait and see how things develop in the future related to <unk>.
Second part of the question and merger.
The tender offer.
The document.
<unk> Express.
Gigabit spreads.
Uh huh.
<unk> presented.
Presenters impossibility to move.
B to consider.
Possible.
Marriage.
Between D C.
Rob on Colombia.
The conglomerate on Grupo <unk>.
I congratulate now that's the only information that we.
We again have to wait and see.
How old are developed they only.
The information that we have that's the one that I mentioned that is going to be on the documents of the of the tender and the tender offer.
The second question regarding making.
As we announced last.
And as of year end.
We are in it.
The process of separating the making.
Okay.
We think that they call year. So we are separating.
Yes.
Independent entity and we are in the press.
So all right.
Creating the legal entities.
<unk>.
Asking for the regulatory or.
Going to the superintendency of finance to Eh.
Well I can say about it.
So during this year, we will continue reporting making performance and we will increase our disclosure in.
It seems we are moving to us to be a separate entity one sees a separate entity.
Fully report.
The performance on the metrics of all for me.
Yeah.
Well, we are we are very well.
Happy with the performance like we mentioned not making as we mentioned.
We ended last year with.
More than $10 million.
Claims.
The pace of new customers.
Very very high and also we are yes.
The increase in.
Or is that the number of loans on.
It is also increasing at a very good pace and we are also very happy and that's all.
And then Nicky is not profitable yet.
Hum.
The potential to be very profitable since we already have that.
A number of clients in which it is.
Our.
Gross selling them.
And additional closings, including in Green.
Great with cheese.
Yeah.
With me in the past.
High potential so we'll be disclosing as I said more information.
Yeah.
But.
That will probably be.
Ones Nicky.
Nicky Ito.
Regarding <unk>.
As you mentioned our guidance for 2020.
Two weeks between 14 and 15%.
Okay.
We think that is.
We've done that we've done.
Mid <unk>.
You said.
Models are more around 15% you could be right there are some.
Certain things around around the army.
One is probably the most.
What is going to be the key element I think during this year.
Yeah.
Interest rates in Colombia on coal.
I was going to just need the interest rate hikes to due to the market. So we could defend.
Certainly we've achieved 14%, but we think that in some of that.
Upside that we can reach.
And that's why Oh.
Our guidance of between 14 and 15%.
Super helpful. Thank you very much.
Youre very welcome.
[laughter].
The next question is from.
Of course the bank. Please go ahead.
Hello, everyone. Thanks for the opportunity to ask questions.
I have some follow up questions related to what you've been talking about first I believe at the beginning of the presentation. You mentioned one risk one potential risks to the outlook is on the political side.
If you can give us.
Perhaps some of the positive risk and negative risks that would.
She could could come about in Colombia.
My second question is a follow up.
On what you talked about the structural change in the dividend policy.
If you can explain the main rationale for these structural changes.
<unk>.
You did just comment that.
But you had been considering this kind of change in the past.
Covid gotten away if you can talk about maybe that that process.
Of making this change I think it's very constructive personally.
And lastly.
Lastly on the ROE guidance.
I believe you said ROE at the end of the year 14 to 15. So does that mean like just in the fourth quarter youre going to be getting to that this is a gradual projects prop.
Process to get there.
Or you know is and is this just the number that you expect in the fourth quarter rather than for the whole year and maybe if.
If you can provide another line item on the tax front since that that can be a large factor in.
And hitting the bottom line. So maybe you can give us your views on taxes.
Thank you.
Thank you Jason.
Yeah, let me start.
Your first point about the risks on the political aspect.
As you all know in Colombia.
He is facing during these first semester.
On election process.
Congress.
It will be a new Congress would be elected.
13th of March.
It would be.
Residential elections made on them.
In June .
Yeah.
Better.
Or sometimes even related to any political.
Yeah.
I think in any in any country. So at this point, what we know is Dod on <unk>.
Residential loans that are.
Many candidate.
Yeah.
And we.
Still don't know how that is going to be but we will have information on merit.
As per March 30, which.
We know what kind of going too long for PMT for sure and at that moment, we will have.
Clear.
Sure.
Of this situation.
But.
But let me not that Columbia has a very.
Strong tradition of very strong institutions.
And democracy, we think it's unethical plenty countries. So.
Yeah.
There are a centerpiece of course, we don't think they are going to affect materially the results of the economy.
The bank during 2022 but the results from the positive or negative side with hot.
Hum.
I'm thinking more for 2023 done for 2022 .
Your second question regarding the change.
Change.
Dividend policy.
As you May remember we are.
Announce.
And last November change on our dividend policy the board of directors discuss the matter on.
But nonetheless the point.
Our dividend policies Dod.
Rachel we'd be related leave our core tier one levels.
So what we are setting.
The optimal level of core tier one that at this point.
Between 11 and 12%.
And net income.
In general during the year there.
We set that target.
The portion of the net income that.
It is not.
Or is it below that level of core tier one will be.
Our dividend for that.
That's a structural change and you mentioned that you were.
We've seen these before the pandemic as you also may remember we.
They have an extraordinary dividend during 19 during 2000 1919 that it was the road to a change in that structure change on our dividend policy. So what you.
We would expect in the future or do you start.
We set the target of core tier. One then we have the net income and also what we expect the loan book growth that is going to be another aspect that we need to incorporate into this equation.
You define.
Dividends for the next year, so we thought the exercises or how we do it.
Yeah.
I'm going to present to the Chevron This meeting in mid March.
And then a 3 billion pesos.
Yeah.
We expect in the future.
Well, what we expect in the future.
Keep in mind is these formula that I that I mentioned.
On an I O U I think.
What we see.
14 two.
15% ROE for the full year 2022 is not just the last quarter.
As you saw we achieved.
14% ROA for 'twenty.
2021 .
What we expect for 2022, it's again and I believe for the full year between 14, and 15% and Jason.
Thanks.
The next one is that since I am sorry.
As you know.
There was a tax reform in Colombia that increase in statutory rates for banks to 38%.
So that's great we'll apply for Oh.
Revenues of 22.
Yeah.
All the ducks.
Deduction on the different aspects of the pisco.
Yeah.
The.
The lowest in Colombia, we expect our rate.
To be between 35 and 36%, but it's.
I do not think that we incorporate that.
Right.
Hey, guys.
And so that 14, 15% takes into consideration the Dod.
But eh.
That's linked to Jason.
Okay.
Thank you very much.
Do you have anyone.
Okay.
The next question is from J P. Morgan. Please go ahead.
Thank you everybody and congrats on the quarter I have a follow up on the margin I guess, you mentioned 100 bps particular expansion on these so I guess, it's on the annual need for the 5.1, you an indirect going through to fix that is above the 2018 19 levels and I would like to understand a word.
100 bps margin basically coming through.
I remember in previous calls.
You may see your asset sensitivity to rates was around eight to 90 Beeps every 100 bps. So my first question is are you seeing a higher sensitivity now on better funding or or something like that so my first question is how much of that is 100 bps increase in margin is coming potentially from.
Good.
Right and I have a second regarding costs right. You put out you went off the slides some data showing decreases of their digital channels for sales for transactions and we see branches and other and all their physical channels not recovering as much principles in 'twenty that I think was a very easy.
The pumps. So so my question is why not a more aggressive cost optimization plan are poor for bancolombia right. Because we sold branches to be closed in the past, but I don't remember see I'm very major drop in the number of employees. So why not even like digital channels are growing.
<unk> you are investing on didn't go so why not a more aggressive I dunno G&A structure for the company are driving this cost to income not from 47 to 49, but you've been going through this low point.
In the coming years, Thank you very much.
Thank you Judy.
Let me let me.
Address your questions.
I will start with me.
With the margin as you know and it's happening all over the central banks are increasing the rates that cities in Colombia, and we are expecting rates to move.
Greece is too.
Despite inflation and thats going to be one of the aspect that is going.
To improve.
Improve.
Our our margin and we are coming from a very low <unk>.
Interest rates are.
And Dod.
The increase in interest rates in the market that are going to expand our our margin.
It's good to notice also that Oh are you.
The completion of consumer loans in our total loan book is now.
2%.
Are we.
I think that that.
Now us to transfer faster the increases in interest rates, but also.
We have had higher margins on that.
Great. So that's why I'm not I'm going to pass that question to give you more color on that but what we believe the increase.
The increase in interest rates on our loan book compensation are going to help.
So on the margin and Thats why we are expecting an increase would be on the on the margin.
And let me address your second question and then like bus, especially working better to complement my answer.
Yes, we are improving our digital some of the places we are very happy with how that is developing.
How are our clients are adopting the new challenge channels new products, but this is this is a.
It's not that we cannot stop is not that we are again.
These journey.
And so we need to keep investing and we are going to.
Incorporate them.
Those are what we are gaining on ordinary incorporate the new digital channels, our digital transformation.
Will be incorporated in the next years, so it's going to be incorporated I am sure, it's not going to be during 2022, yet because we need to keep investing in that test for mentioned we stopped that.
They have the ability to compete of the bank is going to be affected. So our view is we need to manage.
Maintain and it can even between the short term and the short term results.
We felt the bank and that digital transformation. So we started that journey.
Some years ago, but still we need to continue that journey for maybe two three more years on the other thing that.
I think he's going to bring these new technologies, new behavior of the consumers new competitors are going to.
B. They are gone we need to keep investing is not something that you plan on using that plan and that's all done you keep you need to keep working for.
For me the key point is that we have.
In.
Returning.
The profitability that the investors are requiring on 19 that 14% to 15% that we are announcing 222.
And that is in line with our mid term.
<unk> is a.
The key point in the spring.
Judy let.
Let me now pass the line to <unk> to give you more information on margins. Thank.
Thank you Juan Carlos Good morning, Gary.
I think that.
The best way to explain why it's happening we can even expansion in the bank to treat different parts. The first one on FX being one the composition of the loan portfolio right now the consumer weight. He said, 22%, but also we have to highlight what is going on in the commercial loan portfolio week SME, we haven't.
Moving on we are increasing our loan portfolio and that in that semi.
Sammy section it is happening as well.
On the on the asset side.
The second part is the way we are getting funding now we have different.
Different ways to fund the pieces, because remember Dan checking accounts and savings accounts.
At around 70% of the total funding that we are having from that what customers. So D. C very low interest rates and we have only 35% of these liability in terms of some floating Meanwhile, on the asset side, we have 70% of our loan portfolio is floating.
So there were pricing would be faster because again, they start kind of funding these deeper and get their way all the way.
And why they need expansion will happen. These days because you can see interest rates coming from 3% at the beginning of pickier and W. M to six 5% almost double so that explains the different speed the pace of play with pricing all of the assets.
No that's strictly true numbers.
Well, thank you thinking about much Hong Carlos for the explanation is though and congrats again for the question.
Thank you Jody Thank you Gary.
The next question is from.
Please go ahead.
I'm wondering if I got it from better call. Thank you for the presentation and congratulations on the results.
My question is related to your strategy in this year.
Yeah. So that's one point to one you show significant progress in terms of the rollout of our several services, including Nicky card cyanide cure payments.
For Bancolombia I would like to dig a little bit deeper on the cure aside which which our clients are you targeting in this approach.
How how many clients you already have I believe you mentioned 1 million I will like to confirm that and then more generally speaking my question is how you guys plan a plan to manage this transition in wage as you showed in this presentation Bancolombia has a significant share in debit and credit card transactions.
I know you are rolling out which are a very important source of bancolombia its profitability in terms of our fees and and these all turned out they say assume that our exempt of a piece of it all I would like to understand how you guys are managing this transition from highly profitable products that I probably.
Expiring.
While you are rolling out the new roundup products that at the beginning probably are going to cost a little bit in terms of our profitability.
Thank you Andreas.
Very interesting question.
Yeah.
Let me, let me describe a little bit how are.
The Colombian markets.
The only market.
It's on payments.
Affect them.
Oh great.
Credit cards.
And debit card fees.
With it.
Yeah.
Just to give you a figure.
There are around 500.
Sounds fun.
In Colombia.
Yeah, but the potential is.
Very hot.
And our strategy is to cover those.
Businesses, mainly small and medium businesses that do not accept.
Yeah.
Today through the QR.
Starting with pure <unk> started we sold what we are targeting is that.
More on medium.
Enterprises that do not accept digital payments or Cogs today. So what we are covering it's one part of the market that is no.
Address today.
You are right we have one two.
2 million QR codes in the market now.
So what we are doing that.
We are enabling those small businesses do affect digital payments.
And they do not accept that in the future and in the past I'm sorry. So at the end what we are doing is funding the market. So that's not hurting our.
Yeah.
Smith.
Got it.
Then the efficiency to the payment of.
The network to be acquiring or to be acquisition business.
But we also know that the debit and credit card business is going from a bulb.
So what we are doing is preparing.
For that evolution complementing.
Wrestling.
Part of the market that was not so.
And we have been we are very happy with that we've got the right and let me add that those payments are giving us very good information.
We keep on our models to also address those customers' weed although some.
Gross selling them.
As I mentioned.
We are very happy with the volume that we have.
And we keep a ballgame on young through the numbers on the figures are going to continue growing that is also.
Allowing our digital platforms to become a payment method, so nicky in Bancolombia, a la Mano and also the Bancolombia.
No payment are tools that are.
The usage of our four platforms are increasing.
So very virtue of virtual Memphis cynical that is has been not allowed in our strategy in place.
That's very clear thinking what color do you have anything maybe I'll say a potential size of the market of QR payments consider into yes. I mean, there are a little taking crave a debit card. So at this point.
The hallmark of the addressable market would be around $4 5 million.
We think that we can address half of that market.
In our Australia, New Zealand, so I'd say its a big market.
As I mentioned, it's it's it's.
Very.
Yeah.
Those are small businesses move into digital and accepting payments.
Physical.
Stores, but also on E Commerce, I think are a great potential in that.
Where our <unk> is heading.
Absolutely. Thank you for the I'll start and congratulations again.
Thank you.
The next question is from Matt.
<unk> of Goldman Sachs. Please go ahead.
Hi, Good morning, everyone and thank you for the call. My question. My question is on your cost of risk guidance. You mentioned that you expect it to normalize back to the one 8% this year.
Just curious do you expect to get there immediately Q1 and stay at those levels for the fourth.
A year will it be more of a gradual increase to get back to those levels and what kind of underlying asset quality.
And do you have for the year.
Asset quality is holding up fairly well do you expect to see some deterioration from here.
Any color in terms of where mpls can be by year end as well.
Yeah.
Yeah. Thank you Peter.
And what we expect is that during 2022 as we mentioned there would be a normalization of the cost of risk of around one 8% is going to be.
A gradual.
The.
They were.
Affected by what happened in 2021, and 2000 22020 in 2021. So we are we saw a big.
Big swing.
Between those two years. So now we are moving is gradually returning to one point.
At 8%.
Yeah, as you mentioned, our long term guidance.
For close to a free so we expect that during this first semester.
Of course, we will normalize and then we will end the year with that cost of around 118.
Percent.
It is.
Let me pause.
<unk> has many potential for complement.
Thank you finally, just in terms of N. P. S. We had foreseen that kind of stuff and extension of that neighborhood.
Probably in the second half of the year, you are going to see that but not in my life Costa Rica can normalize and be a native speaker.
Yeah.
Okay. Thank you and just any color in terms of the different segments and how the I'm guessing involved.
You can consumers and commercial and SME.
I think commercial was one of the main segments that shows a gradual.
Improving in terms of M. P. S. I mean, the last problem will be the consumer can understand we are foreseeing.
Manifestation again, beginning in the second half of next year.
Yeah.
Okay, great. Thanks, so much.
Thank you thank you Peter.
Yeah.
The next question is from catalyst.
HSBC. Please go ahead.
Good morning, and congratulations on the results.
A couple of questions. <expletive> I was wondering first of all your expense level.
It was higher this year, we understand because.
You were able to normalize.
Hum.
Statements to get them. Please.
That's correct. It's just the level of expense that we should expect for a normal basis or would you say was higher or lower than that rich.
The second refers to your restructure.
We have seen some of your peers.
Peers in Colombia.
Segregating, the Latin America Central American assets to facilitate our capital management.
So would you consider at some point a separate listing for what you do not have in Colombia.
Make it easier to do it just kept the kind of structure.
Hum.
And finally booked under any circumstances, you are getting involved in them.
The offerings I mean could you possibly justify.
Perhaps that they say if I a case for bancolombia to what Don.
To make an offer for for this yourself offshoot out or any other company in the cocoa, Mike. Thank you very much.
Thank you Carlos let me, let me address you.
Second and third points and then the Hudson there can you elaborate on the on the expenses level.
We are not considering any changes from our structure to facilitate the capital management I think we are comfortable with how we are doing the structure that we have so at this point, we are not considering any evolution on our structure.
In the sense that you mentioned.
Regarding your third question.
The answer is no.
We are not.
The regulation.
We're not allowed to do that so it's a big category.
And then the first point.
Okay.
Yes Fabulous.
You should not be extreme in general terms, the 14% that youre seeing on the presentation. It explained ctrip has seen out of <unk> 14 per se because of the labor cost.
You mentioned this.
Mostly because of the bonus plan going back to your question. We are not foreseeing a peak increase in terms of labor cost for these 22. The sequel is now comparable with the 'twenty to 'twenty. One. So you are not going to see a big change on that line.
Okay, that's pretty clear and by the way. Thank you very much for the answer on.
On Sudan, and that's that's a question we have to put anybody could have on your side.
When you mentioned regulation a booth regulation.
Allow a merger.
Between you and another financial institution in Colombia, Colombia that Youre already there the large one.
I imagine you have approached them before I mean, you know that.
The possible takeover target that there has been in the market do you think it is reasonable to expect that a merger between bancolombia somebody else could be consider or do you think it is more likely to be rejected.
Yeah Carlos.
Yeah, Hey, do you see this allowed under the regulation, we can merge with another financial institution.
And there are two sides of your question. It is at our disposal that really happened in the past. It's it's part of our regular business in the in the industry as you know in Colombia. It same thing now.
Now the other side of that is that.
Any any well see more merger or all in the form of all for <unk>.
Oh I'm sorry.
Allowing different institutions to work together.
It.
Goes through the financial.
Regulator, but also the competition regulator. So we as you mentioned we.
Harper around 26%.
The market doesn't call.
Yeah.
The competition authority.
We will have to do it.
Half of a war on a new potential but in any case not dose. The one that we have been talking about.
In any of their other form of acquisition or merger.
Yeah.
Yeah. Thank you so much.
You're very welcome.
The next question is from Alonso Garcia of Credit Suisse. Please go ahead.
Hi, Good morning, everyone and thank you for taking my question actually I just have a follow up on the taxes.
Our guidance for a range of 35% to 36%.
The effective tax rate was easier.
So I just wanted to check if this is the same level do you foresee for the mid to long term or is there any particular reason why.
This year it might be a bit higher I don't know if maybe in the coming years.
We will see a.
More balanced mix in terms of earnings contribution from the different geographies, which have a lower tax rate compared to Colombia, and maybe the fluctuating the features it could be a bit lower.
So I don't know if you could provide some color on that thank you very much.
Thank you Alonso.
As we mentioned the tax reform in Colombia.
Yeah.
Now on the statutory rate of 38% for financial institutions.
The what we have.
Now on a new well.
Uh huh.
Forecasting our performance based on that statutory rate for Colombia. So we don't expect any changes unless there are changes from D. A.
Let me add something that temporary increase on on on that for a pretty even so after three years it come back.
35%.
It's the two downgrades so it's simple right.
So a mix of three years, we will have that.
Downgrade in Colombia.
As you mention that there are different.
Rates in the different countries in which we operate and of course the performance of those operations in Central America will affect the <unk>.
The tax rate by that but it's good to notice that in Colombia. It's US you know 70, 72%.
All of the whole group so the effect will be marginal on the statutory effective.
Effective tax rate.
Understood. Thank you very much.
You're very welcome.
The next question is from Jose <unk> of Citigroup. Please go ahead.
Hi, everyone. Thank you for taking my question just a couple of follow ups Hum.
In terms of loan growth.
And loan performance in general just wanted to get a sense from you.
What you're currently seeing in terms of competition.
Do you see like for instance, let's say the move to two perhaps over more competitive rates in order to foster a loan growth and any comment on that would be.
Really helpful.
And the next question just I'm just trying to I think you already commented, but but in terms of npls if I'm understanding.
<unk> correctly.
We it would be reasonable to expect like a like a normalization or an uptick for <unk>.
It's the cycle how of 2022 given your growth.
The consumer and SME books.
I just wanted to get your opinion on what colorectal level.
Are you would you be feeling comfortable with.
Thank you.
Yeah. Thank you Hussein, let me let me address your first question.
The second one.
The loan growth, we are foreseeing a loan growth between seven and 9%.
We think that's reasonable.
We are.
Updated our.
GDP growth for Colombia for 2022 to five 5%.
So that level of growth I think is reasonable to expect a loan growth.
Between seven and 9% on any other geographies. We are also seeing a good.
Bye.
On.
On the economy.
And expecting competition.
Competition is there.
I think he is strong competition in Colombia, new players are coming back.
I firmly believe that Bancolombia is.
Very well positioned to compete we have a cover.
A very good network on the on Colombia, our digital strategy at speeds.
I think very clear and it's producing the results. So I've done this effect.
But we have two effect.
Our net.
Net income.
Net interest margin.
Because of competition and that's going to affect the volume.
It could be an upside on our loan growth.
And then on how strong and how.
Economies developed during during 2022.
Regarding your second question, let me pass that to question, but thank you Juan Jose, Yes at the 7% that we are expecting.
Long road seven to nine.
In fact, it will be consumer desktop with 10% on the lower bucket will be commercial 6% to 7%. So and that's one of the reason we believe that they're not my intention again would be on the second half because there is no. One specific main driver of the loan growth that would be.
Three segments at the same pace and yes, we are expecting to maintain the same level of coverage, meaning that for 30 days, we will be all day every alpha hands around 20% and for 90 days, we will expect our 180 to 200 basis points.
200 per cent person touch of coverage.
Great. Thank you.
Thank you. Thank you.
Yeah.
The last question is from Alonso.
B T T. Please go ahead.
Yes, hi, good morning, and thank you for the call.
I wanted to ask a little bit about Panama. It seems that that's the only geography, where profitability really hasn't picked up in 2020 one can.
Can you comment what you expect in 2022 in Panama, and if you can get potentially to double digit roe's.
In that country, which hasn't been the case definitely for a few years out.
Thank you.
Yeah. Thank you Alan.
<unk>.
The question the answer to your last part of the question, Yes, we expect to go back to two or to go to double digits Oh.
It's good to notice that.
Panama and B the reliefs in Panama.
In the September 2021, so still we are seeing a lack one on their own how D. A.
Customers are performing so well.
It's going to take six months to really know what is the situation of <unk>.
Those consumers.
How they are going to perform but we have seen very positive results.
Better than expected results. So far so we are positive on the performance for 2022 and also.
To us that.
It's small it's growing faster than the market in both deposits and loans.
Yeah.
So we.
I agree with you about it.
The <unk> operation.
It's behind deals on a per insurance and with food costs.
Braces.
But we are plus 20.
2022.
If all of it.
But need small well.
Uh huh.
So it's in line with our expectation which is.
Be.
Close to that double digit or.
Are we that view that you mentioned.
Great. Thank you very much.
You're very welcome.
Okay.
Okay.
So tomorrow I'll turn the conference back to you.
Okay Mark.
Yeah. Thank you. Thank you all of you for attending these conferences. So we are the heartbeat of the 'twenty to 'twenty one results in early of 14%.
It's in line with our.
Mid term target for return on equity.
And.
I am well, we are positive that 2022, we will continue that line too.
Yeah.
Two given those returns to our investors between 14 and 15%.
We are confident that we are very well positioned to take advantage of the digital transformation.
We are on the thinking on that.
Yeah.
Results of Bancolombia during 2022.
It will be it would be awesome.
And again, thank you very much for attending this reduced scope and we hope to see you on the.
Conference call for the first quarter 2022 thank you very much.
Uh huh.
This concludes today's conference. Thank you for participating you may now disconnect. Thank you.
Yeah.
Hum.
Okay.
Uh huh.
Yeah.
Uh huh.
Hum.
Yeah.
Uh huh.
[music].
Yeah.
[music].