Q4 2022 Bancolombia SA Earnings Call
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And allows the bank to adjust to our clients' needs and preferences floor on encase.
Experience.
On Colombia currently per se, so around 71% of the markets digital transaction and around 43% of online transactions on the growth.
Customers volume and Stunk Sox ship constructions on activate the better you'll say it has been exponential.
As an example, Nike today has more than one 4 million active users per day.
Those 210 million active you'll see us better month on 1.3 million well Scott users. These.
To being a driver for growth and efficiency is also a tool for financial inclusion.
Number of Nicky usage represents 29% up the top of the Colombian population and out of these 1.7 million Nicky exclusive mint.
Meaning they do not use other entities.
Slide eight you can see how digital channels.
This reshaped the transactional space in terms of volume.
And exceeded an upward trend in terms of digital adoption, reaching more than 77%.
This in turn has increased digital sales certainly boosted by the pandemic.
It is important to highlight as well that in Colombia crashes still important close to 37% of transactions on a value basis still persist through physical channels for which the bank has an important advantage given its network and complementary with other close to fishing Chinese banking agencies.
These interoperability has been certainly one of the drivers are supposed to make it on section on success as you've said can easily cost out through the physical channels.
Going forward, we will keep investing in digital.
Dutch formation for our customers' convenience for their efficiency.
Okay.
And last one.
Slide number nine I want to refer to brokers on our ESG strategy in which we continued delivering on our goal of reaching.
Mm three trillion pesos of sustainable loans originated in the last three years really related to Agri business Smes housing climate change I'm financial inclusion inclusion amongst others.
We also launched the first sustainable dairy about keeping local market, providing great coverage to companies that comply with sustainable indicators.
And last I want to highlight the most recent Belgian sustainability index assessment, and we'd spend Columbia West shrank as part of the best 5% banks in the world.
I'd take global ESG score the only Colombian bank within the top 5% is standing out in dementia, such as sustainability finance labor practices and climate change strategy. We celebrate these achievement.
Turning to our commitment to deliver on our purpose.
After these general business update I want to turn now the presentation to <unk>, who will further elaborate on our fourth quarter and 22 year end results Jose.
Thank you Juan Carlos.
Again, you can see an overview of Colombia, and Central America operations.
In 2022, St Joe America for Christine.
29% of the total loan portfolio, increasing due to FX.
These crops reflects how all the banks have had.
<unk> seen me like twins in the last years contributing to the overall group performance in terms of <unk> growth and pick up in margins post Colby with Columbia stand outs due to a higher growth rate markedly.
The asset sensitive condition.
Second asset quality one.
Hum 90 days coverage under progress in efficiency.
Falling close to equal ratios.
It's worth to highlight that equalize and Bangkok will make antigen positive performance a source of growth and profitability I'm bodies more with potential path to efficiency.
Pardon me this is the operator and due to some technical difficulties, we are actually going to restart Citi presentation.
Thanks, so much for your patience.
Good morning, ladies and gentlemen, welcome to Bancolombia as fourth quarter 2022 earnings Conference call. My name is <unk> and I will be your operator for today's call. At this time all participants are in listen only mode.
Following the prepared remarks, there will be a question and answer session. During this question and answer session. If you have a question. Please press Star then one on your touched on Fountain. Please note that this conference is being recorded please.
Please 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 made in this conference call and future filings and press releases or verbally address matters that involve risks and uncertainties. Consequently there.
There are factors that could cause actual results to differ materially 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 our targeted clients.
Changes in business strategy and various other factors that we describe in our reports filed with the SEC.
With us today is Mr. Juan Carlos Mora, Chief Executive Officer.
Mr. Mauricio <unk>, Chief Corporate Officer, Mr. Jose Humberto Acosta, Chief Financial Officer, Mrs. Catalina, Escobar Investor Relations and capital markets Director and Mr. Juan Pablo Espinosa 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 Bancolombia S fourth quarter results conference call.
We are very pleased to share with you our results for 2022.
A year in which we delivered strong performance and move forward in our pursuit for sustainable development in the countries, where we operate.
Net income was six point.
Eight trillion pesos for the year.
Attributable to the combined effect of a positive economic <unk>.
Round this.
The spike in interest rates.
A contractionary policy stance on it and the good operational performance of the bank.
Due to inflationary pressures the central Bank rose the reference rate 900 basis points during the year.
Despite the sharp increase the.
The loan book grew three 8%.
For over a quarter on 22.
5%.
For the year.
And if he can expansion, albeit slow slowdown in demand in the fourth quarter.
Loan growth during the year.
Even amongst segments aligned with the overall improvement in the coming economic activity.
Meanwhile, deposits grew five 6% during the quarter.
19, 3% year over year.
Reaching an 85% share of total funding mix as a reflection of the bank's capacity to a truck competitive low cost resources to fulfill its growing funding needs.
Even on the more challenging market conditions.
As a result, the NIM expanded to six 8% for the year and as interest income generation outpaced interest expenses driven by loan growth higher interest rates on our asset sensitive condition.
This without any doubt is one of the key competitive advantages of the bank on one of the drivers for our OE expansion last year.
On the other hand.
Provisions for credit losses for the last 12 months were $3 seven trillion pesos.
Labour lent to a cost of risk of one 6%.
An increase of 56%.
And is basically explained by our loan growth.
On the low base of comparison versus 2021.
Furthermore.
<unk> for credit losses for the quarter were one seven trillion pesos equivalent to a cost of risk of two 6%.
This represents an increase of 49% quarter over quarter, driven by a combination of loan deterioration during the period, mainly in consumer segment.
Expected credit losses, as the economy is slow stones and rates remained elevated and consumer related parameters and less favorable macro inputs.
As per year end allowance represents five 5% of total loans.
<unk> of 254 for 90 day days past due was.
<unk> three core equity tier one ratio stood at 10% and the total capital at 12.5%.
Well above the minimum regulatory capital.
Higher income generation and our efforts in cost control initiatives contributed to offset the overall increase in expenses boasting an IRR of 19, 8% year end.
However, less less favorable macroeconomic conditions globally and locally coupled with political uncertainty in the countries, where we operate make us make us more cautious with regards to this year performance.
Factors, such as persistent inflation interest rates and unemployment.
So as the potential economic and social impacts of racing from government's ambitious reform agenda may impair economic activity.
For further detail on the macro outlook I will turn the presentation to Pablo Espinosa, our chief Economist Juan Pablo.
Thank you Juan Carlos now please go to slide number three in the presentation.
Ladies that indicate that the moderation in economic activity that we anticipated a few months ago has already begun GDP for the last quarter of 2020 to surprise on the downside we did year on year growth rate of 2.8% so that full year 2020 to print.
Was 7% lower than our seven 8% estimation.
Performance was mainly driven by a slowdown in consumption, which has expanded at double digits by six consecutive quarters and grew just two 2% year on year in the fourth quarter of 2022.
The other hand investment was the most dynamic component of demand with a growth greater than three.
3%, but in absolute terms it is still below pre COVID-19 levels for 2023, we keep our view that the Colombian economy will lend to a growth rate close to 1% as internally managed schools in a context of high inflation and interest rates the stringent financial conditions in <unk>.
The uncertainty.
Actors that recover sharply after the pandemic, including retail manufacturing construction and services will decelerate more than the rest of the economy.
Scenario will lead to a deterioration in the labor market in reach Alberta unemployment rate will increase from 11, 4% in 2022 to 12, 1% in 2023.
With respect to interest rates and prices, we anticipate that the central bank will finish as soon the carton hiking cycle, we determine a rate of 13 or in a quarter.
It is consistent with an inflation that were we to speak this quarter at 14, 3% and then we have more of a very gradual lead to close the year at nine 3%.
Given that this number would be well above barn reps target, we foresee that the monetary policy stance would've remained contractionary full of long time, therefore, we forecast that the reference rate by the end of this year, we'll be at 12%.
Regarding the exchange rate, we forecast an average cap rate of 49 30 for 2023 up from 48 eight in 2022. This means that factor supporting Colombian peso weakness, including tight financial conditions are large corn tech.
Deficit and the uncertainty regarding the reform agenda will remain a relevant Moreover, depreciation would extend a significant pressure on core inflation.
Finally on the physical side, we expect central government deficit to reduce from five 6% of GDP in 2022 to four 2% of GDP in 2023, a number that incorporates the additional collection from the latest tax reform as well.
Higher revenues biodiesel sector actually this will allow the government to meet with the fiscal rule targets and then at the same time increased spending as is contemplated by the management of the public budget that was submitted to Congress a few days ago.
After these economic overview, let me turn the presentation back to Juan Carlos one.
Thank you Juan Pablo.
Moving to slide four I would like to highlight three key elements.
Have contributed significantly to our positive.
Performance.
In the first place an extraordinary growth in clients, we have seen a consistent uptrend in the last few years in all segments and in 2022, we reached more than 29 million clients.
We deem these progress as a result of a well articulated strategy in channels products and investments in technology.
That has become a competitive advantage leverage on the banks networks footprint and product offering.
Nike Bancolombia, a la Mano and banking agents are just a few good examples of these broad strategy.
As you may see in fly into slight in the case of Colombia, we have compounded at an annual growth rate for the last four years of around 9% in retail and SME and around 5% incorporates.
Nowadays.
We are adding around 300000, new clients per month.
This significant growth in terms of new clients has been a catalyst for four <unk>.
Growth in deposits.
Asset origination as we will discuss in the following slides.
Moving to slide number five you see the strong growth in terms of loans and deposits on a group level posting a 22, 5%.
Loans on line.
<unk>, 3% for deposits for the year.
Peso denominated loans grew 18%, whilst the U S dollar denominated loans grew 8%.
Nominal growth net of FX was 15% for loans and 11% for deposits.
Such difference is explained by the sharp pain.
Peso depreciation amounting to 28.
8% during the year.
There was uneven.
Growth among segments during the year.
In the case of commercial loans, we must highlight the growth in corporate loans, which benefits the overall portfolio quality us it entails lower credit risk.
In the case of consumer loans annual growth was driven by personal loans. However in the fourth quarter. This segment grew less than previous quarters, consistent with higher interest rates.
The current 24% share of consumer loans as the total loan portfolio is the result of a deliberate strategy implemented in the.
<unk> 14 to capture higher risk adjusted returns that contribute to broader income generation as we will discuss later.
Regarding deposits.
And time deposits stands out with 46.
Six.
5% increase for the year with a two for dry bulks large funding needs to meet loan growth coupled with clients' preferences for these type of instruments, given the higher rate environment.
Savings accounts also grew.
<unk> more modestly up 11 three.
<unk>, 3% and reflecting the bank's strength to attract low cost funding as we.
For two previously.
On slide six I will elaborate on the second key element consisting on the pre approve an automated loan strategy that has been another of the catalyst of growth in loans Sundries. Adjusted return returns. While it also provides management flexibility to adjust originations according to <unk>.
Four months on risk appetite.
Your study started in Colombia in 2014.
And on.
On the consumer segment leverage.
On the richness of stern, so I've seen a lot of information on investments on data analytics and automation.
Reach interesting effectiveness ratios in terms of disbursements on clients.
More recently U S extended to Smes corporates and subsidiaries in Central America as it certainly provides value us to preserving asset quality wheat and reached and more precise free small little based on transactional flows data.
Moving on to slide number seven I will touch upon the third unless key element to highlight for this period, which is the evolution and leadership in terms of digitalization.
This result is leverage as well.
On the channel product and technology strategy that we already referred.
<unk> allows the bank to adjust to our clients' needs and preferences for an increased experience.
On Colombia currently precise around 71% of the market's digital transaction on around 43% of online transactions and the growth.
Customers volume and stocks auction transactions on activity per user has been exponential.
As an example, Nike today has more than one 4 million active users per day close to 10 million active users per month, and one 3 million of card users. These.
Addition to being a driver for growth and efficiency is also a tool for financial inclusion.
Total number of Nicky user represents 29% of the total for the Colombian population and out of these one 7 million or Nicky exclusive.
<unk>.
Do not use other.
So.
Slide eight you can see how digital channels Chinas reshaped the transactional space in terms of volume and amount and exceeded an upward trend in terms of digital adoption, reaching more than 77%.
This in turn has increased digital sales certainly boosted by the pandemic.
It is important to highlight as well that in Colombia, Kashi is still important and close to 37% of transactions on a value basis, how does still persist through physical channels for which the bank has an important advantage given its network and complementary with other cost efficient Chinese banking agents.
This interoperability has been certainly.
One of the drivers make it transactional success as you said can easily cash out through the physical channels.
Going forward, we will keep investing in digital.
Formation for our customers' convenience for their efficiency.
Okay.
And last slide.
Slide number nine I want to refer to brokers on our ESG strategy in which we continued delivering on our goal of reaching.
101, three trillion pesos of sustainable loans originated in the last three years really related to agribusiness Smes housing climate change I'm financial inclusion inclusion amongst others.
We also launched the first sustainable derivative in the local market, providing great coverage to companies that comply with sustainable indicators.
And last I want to highlight the most recent Belgian sustainability index assessment in which spun Colombia was Frank as part of the best 5% banks in the world.
The global ESG score the only Colombian bank within the top 5% standing out in dementia, such as sustainability finance labor practices and climate change strategy. We celebrate these achievement and stand to our commitment to deliver on our purpose.
After these general business update I want to turn now the presentation to who will see of course, the who will further elaborate on our fourth quarter and 22 year end results.
Thank you Juan Carlos.
And you can see an overview of Colombia, and Central America operations.
In 2022 same term recover Christine <unk>.
29% of the total loan portfolio, increasing due to FX.
These graphs reflect how all the banks have had.
Similar trends in the last years contributing to the overall group performance in terms of cooling.
Road and pick up in margins, but it's Bobby for Colombia announced due to a higher growth rate markedly.
Asset sensitive condition.
Second asset quality, one posting 90 days coverage on <unk> progress and efficiency with falling close to equal wages.
It's worth highlighting that equalize Bangkok American peers positive performance as source of growth and profitability.
With potential for their path to efficiency.
Now moving to slide 11, you can see how liquidity uncompressed loan growth during the year closing at a loan to deposit ratio above 101%.
During the fourth quarter time deposits through the most reaching 30% in the deposit mix killed a bulb breakup at Jacobs.
Growth was mainly driven by the net stable funding ratio requirement and a lack of demand as clients seek for higher returns.
Despite savings accounts time.
Time deposits you've seen techniques.
Share is significantly higher compared to pre COVID-19 levels, reflecting the bank's strength.
<unk> flows and keep the proceeds all of which accounted for 85% for the year in 2022.
It's worth highlighting as well the capacity that bancolombia, but we'll have to access credit.
Loans to pay for the respective bonds maturity for a total amount of one 5 billion in a moment, which capital markets were closed.
Explains why it is achieved between long term debt and loans with banks, we need that funding mix, which by the way contributed to reduced interest expenses.
Also important was the issuance of the first sustainable bond for any financial institution.
Fully subscribed by the IDB and green and they're a private banking with a competitive terms and conditions.
Moving into slide 12 will talk you through NII and NIM performance.
In the upper part you would find Columbia NIM evolution coordinated to the market rates.
2022, the reference rate increased 900 basis points closing it at a level of two 8%.
ZIP is displayed.
Displayed by the mean change the third quarter of 2021 reflects the bank's capability to capture high give margin even as an interesting interest expenses goes up.
This is explained by the asset sensitive condition will give you that 66%.
The loan portfolio is floating whereas 88% of deposits activity.
Also it's worth highlighting that 55% up time deposits mature in less than one year, providing some margin protection like rates are going down.
The infrastructure certainly represents a competitive advantage.
How's the bank to capture higher margins when rates are going up while adjusting relatively fast.
In interest rates.
In the lower part of the slide you can see the significant increase in NII at the group level growing at that pace of seven 4% quarter over quarter and 55% year over here.
Due to a higher market rates and loan growth and there is valuation income from investment securities and overnight funds held on the portfolio.
As a result mean increased 6.8 firsthand expanding more than 170 basis points from that recorded in 2021, it's worth mentioning <unk>.
<unk> investment portfolio as well, but we came in at four 1% for the period well level if past performance.
In the short term, we expect NIM to remain stable as the average rate of the central bank that determines revenues great idea.
<unk> will be higher versus 2022.
The long term NIM should be at around five 5% area.
Moving to slide 13, we provide a snapshot of peace.
Please grew 10% during the year exhibiting increases of around 20% in almost all categories Columba.
Columbia provided the largest contribution to the fee income given the increasing volume of transactions to have higher retail activity as well as an important growth in the number of clients.
The incremental demand in consumer loans and credit cards outstanding also added to the positive performance in fees related to these products.
Bancassurance performance wasn't a peak level during the year growing 27% explained by a continued grow on distributed products.
Largely associated with as far as me a weekend norms.
Banking service.
As a result of the growth you can sanction projects and use of digital channels.
Equal ratio Leidy chops.
The positive net income growth relative to net income growth.
Moving into slide 14, we present, the evolution of provisions and asset quality.
Provision for credit losses for the quarter were one seven trillion Colombian pesos equivalent to a cost of risk of two 6%.
These represent an increase of 49% quarter over quarter out of which 450 billion Colombian pesos due to update on consumer related parameters and macro inputs, while the remaining balance is due to loan origination in deterioration.
As <unk>.
Third quarter, there were no overt liabilities during the fourth quarter.
Furthermore, provisions for credit losses.
The last 12 months were $3 seven Colombian Chilean pesos equivalent to a cost of risk of one 6% an increase of 56% year over year.
If you can explain like the loan growth and below base of comparison versus 2021.
The 90 day past due loan ratio for the year in 2022 was two 2% down from 3% in 2021.
Collecting a healthier balance and driven by a better payment behavior and improvement in the collection process.
Charge offs increased six 5% year over year associated mainly with relief granted during the COVID-19 crisis.
We continue committed to responsible growth our allowances are potential St personal loans remains strong and representing <unk> 90 day past due loans of 254%.
Going forward, we forecast the cost of risk off at around one eight.
The 8% for the 2023.
Good morning.
On slide 15, we present, our operating expenses and efficiency ratio.
Operating expenses.
<unk> 8023.
Driven by a combination of FX, depreciation and inflation as well of higher taxes and investment in technology.
As a result of the positive operating income performance delivered during the year and coupled with several of our cost control initiatives.
The ratio of Bancolombia for 'twenty, two with 44, 6%.
Notwithstanding this good result, going forward, we expect a more sustainable ratio at a level of 45%.
We've been normalized income generation.
Moving into slide 16 represent the profitability metrics.
As mentioned before there was a strong income generation during 2022 that drove margin expansion and diluted coast. As a result net income for the year was $6 eight trillion Colombian pesos and deliberate that return on equity of 19, 8%.
However, going forward as global and local economic conditions deteriorate, we forecast a sharp moderation in loan growth fee income.
Expenses related to provisions and operations.
The effective tax rate for the year in 2022 with 28%.
And as a result of the recent tax reform, we forecast a tax rate of 32% area for 'twenty to 'twenty three.
And finally on slide 17, with precision snapshot of the bank's capital.
The bank's capital adequacy ratio on a consolidated basis stood at a level of 12, 79% by Geely under full Basel III.
Strong profitability, both the core equity tier one generation in 284 peaks during the year.
<unk>.
A total of 439 bps reduction mainly associated with the strong organic growth coupled with a significant cup depreciation that increase the value of Colombian pesos.
Hey, guys good loans.
Yep.
Going forward, we expect loan growth of 5% and core equity tier one of around 11% at the end of 2023.
Now I will hand over the presentation back to Juan Carlos for some final remarks.
Glenn.
Thank you pushing back too.
Yeah.
2023 will be a challenging year.
We acknowledge that the world has changed in many ways.
And it's having an impact in the countries in where we operate.
So chas economic slowdown persistent high inflation high interest rates higher unemployment among commodities.
However, we are confident that our strategy on our competitive advantages will allow us to better handle the tougher conditions, whilst we continue to pursue when our long term strategy.
We will continue supporting our clients with a special focus in asset quality.
Proactively assisting them to find solutions to our Bali loan deterioration and leveraging more on data analytics to monitor the impairment payment capacity to preserve our balance sheet.
Meanwhile.
Based on our estimations, our loan growth will be around 5%.
Cost of risk around one 8% area.
NIM around six 5%.
We forecast our core equity tier one ratio for the year in 2023 will be around 11%.
Thus yesterday, we announced the dividend proposal to be discussed in the annual shareholders meeting in March.
<unk> of <unk>.
50.
Percent dividend payout equivalent to 3.34.
Four trillion pesos payable in four quarterly installments of 884 pesos per share during the year.
And finally, our long term or we should stand at around 15% area.
With this I will invite you to ask any questions you may have.
Okay.
We will now begin the question and answer session. We ask that you. Please limit yourselves to one question each.
Do you have a question. Please press Star then one on your Touchtone phone, if you wish to be removed from the queue. Please press star two.
If youre using a speakerphone you may need to pick up your handset before pressing the numbers.
Once again, if you have a question. Please press Star then one on your Touchtone phone.
The first question is from <unk> <unk> from Bank of America. Please go ahead.
Hi, Good morning, one Carlo.
A couple of Rina and good morning to all your team.
Thank you for your question <unk>.
For the opportunity.
My first question for me.
I'm wondering.
Wondering what are you assuming for the year.
Great.
It's common.
Exactly.
Hum.
Glen According accruing so just wondering how do you have any more.
Revenue for Goodyear.
And then my second question for Mark with Qualcomm.
During the quarter.
Higher per <unk> from right at all.
<unk> weaker macro Rosling Columbia.
The reality is though.
Clark on Mcarthur River.
Thank you.
Thank you Ernesto.
Regarding NIM.
Yeah.
As you know inflation remained high in Colombia.
Still there will be inflation pressures.
With that we foresee that the central bank.
Central Bank.
It's probably going to increase the reference rate right.
In the next session could.
It could be 50 basis points could be even 75.
Doug.
Interest rates will continue.
Increasing.
You know that has an effect on our on our knee. So what we see is.
That the NIM will remain broadly.
A little.
This year.
We mentioned that the NIM should be around.
Exploring $76 five between $6 six.
Got it.
Because of interest rates will remain high we don't expect that.
At the international ratio.
We'll see soon.
Because of that probably the.
Yeah.
The Central Bank will remain interest rates high for the remaining of the year will start.
Kris and interest rates by the end of the so what we expect as I said already is that with that condition, our NIM should.
It should be around.
The ones that we have today, even a little bit higher regarding.
Quality.
For me that.
The buyer will to watch doing this year, it's going to be key how the loan book is going to perform particularly.
Consumer book.
What we see.
That.
The good news is going to normalize and we will have some additional operations.
What we have seen now is that the cost of risk should return during this year to 1.8 area could be a little bit more.
Depending on the on the pressure as I mentioned on particularly on the retail side.
But definitely that's the variable.
We need to do what what we are doing is what we are.
Anticipating.
That situation and we are working with our customers.
For our clients.
Understanding the coring of cash flow.
Situational.
Working with them.
Waiting for it.
To have to have issues with.
The loans so we are.
Anticipating.
All of the things that we are doing is this year, we are not going to push for growth.
We concentrated on asset quality.
Okay Carlos Thank you very much.
Thank you.
The next question is from Gary Hernandez from Jpmorgan. Please go ahead.
Hi, guys. Thank you.
Asking questions one regarding G&A outlook, hopefully see in Illinois and interest expenses are growing this year. It was in a high growth growing closer to 20% year over year, but I think effects explained part of it but even Colombia.
That's been a more normalized like had a higher G&A year I know you'll have a lot of.
That's mat placements.
So any guidance for 2023 welcome here and I have a second question regarding our equity evolution. This was a very good quarter for your your capital rights of our shareholders that decrease almost two times your net income generation.
I'd like to understand the moving parts here looking at your balance sheet, it seems to be more OCI even like.
I'd like to understand is like what is driving and all that.
Should move up.
So we can expect like volatility here. So is this effect, we even at these rates like what would drive good behavior.
For capital for you. Thank you.
Thank you Huey I am going to give you some.
Some comments around two points.
Pass your question to host Humberto too.
And if he will give you more details.
Yeah.
<unk>.
Yeah.
That.
As you mentioned that there are pressure from FX.
Also from inflation.
On an investment.
Wei.
We'll see where we are forecasting that.
The expenses.
Grow.
A little bit I'm all in.
<unk>.
Colombian Colombian inflation we.
As I said investing on technology.
The investments we plan to continue but we need to.
Work on other on our expenses.
Finding space for those.
Investments in technology so.
That's that's the focal.
We what we are.
And how are we handling this is we are targeting 45% efficiency ratio.
With that we will be managing expenses, we think that with.
45.
The efficiency ratio target, we can when we can deliver the ROE that we that we are expecting so.
With that.
I thought you said expenses will grow at all.
Above inflation.
And with this I will pass I will pass your question to come back.
Thank you Juan yes.
Yes, Judy remember the bulk of our expenses are highly co related with the level of transaction analysis that the bank has.
On a different channels. So that also explains this is before element that explains why we are expecting.
And capex and Opex, increasing a little bit above inflation for the 2023.
Regarding your second question the equity evolution, yes. There is one element that will impact. This RBC ratio at the end of the year that would be FX, but our forecast for ethics 2023 will be landfill attack that the FX that we had in 2022. So we are.
You mean to reaching the level of 11% of Q1 based on relatively 5% cost of risk of one point.
8% and.
And it takes an average of 4900 pages.
It explains why our rationale to maintain our NASDAQ during the year at $10 five at the end of that 11%.
Thank you guys.
Thank you. Thank you.
Yeah.
The next question is from Andres Soto from Santander. Please go ahead.
Good morning to all of you on thank you for the presentation.
A few questions the first one related to margins.
I'm curious to see that you are forecasting a stable margins article goes on I'm sorry.
We even as you expect.
It was very strong at Central Bank and you have had such a great performance in terms of the funding structure.
What will be the risk for margins getting up.
We continue to move in tandem to retire Columbia rates about that would be my first question.
Yeah. Thank you. Thank you Andreas.
Yes.
Right.
With margins I think we will.
Keep moving as he said in tandem with that.
With the reference rates.
As you know we have.
They are very diversified.
The cost of funds.
And we.
We will have some additional pressure from the cost side or cost of funds, but we are able to manage I think the pricing the way that we maintain maintaining the Martin you would notice that we are not forecasting a big increase additional increases.
A market that allow us to manage.
But it's coming.
So we are we are confident that the.
Forecast.
The guidance that we had even though I'm alone in nims.
It's accurate I don't know if its impacting you'd want to add something yes. Thank you.
And there is two elements on the loan portfolio, we are not expected to growth in consumer loans that you know that this is a source of net income of NII. So we are potentially maintained the same volume so consumer loans during the whole year for the group. This is the first element.
The asset side on the funding side.
We are having.
Very big portion of our deposits.
Savings accounts that.
Because of the interest rate is quite high people, we shift from savings accounts and checking accounts to time.
Time deposits so.
The product for the Colombian banking industry. During 2023 will be timed deposits. So you are going to see an increase in our funding cost because of that because when the interest rates are high there is not that.
In difference in between having the money on savings or tangible so time deposits will be the main driver for the equity.
Those are the two elements that.
That give us the explanation why we are able to sustain the NIM during the year.
Thank you Michael.
Second question is regarding the cost of risk you will say that you expect that to be at one 8%.
To me that sounds a little bit optimistic I remember in the past you've mentioned that the structural cost of rates for bancolombia for be rub, 119%. So one eight in the year, which.
So many answered there may be some.
You know all of the banks were growing at such a fast pace in 2019 through particularly in consumer Lumpiness.
Loans come due we may we may see some pressures there right. So what will be sort of a range.
You may expect in a more.
Challenging environment.
What level, you would see cost of risk going not 42, 6%.
You posted this quarter is to be the reference of what will be the stress scenario. We can we can see in our predictions.
Okay.
You mentioned cost of risk is the viable tool to watch during this year.
We are.
Today, we are we are.
One eight area.
But you are right that that could be a little bit higher it depends how the economic conditions in Colombia evolve.
Yeah.
How how high could could go.
It could be.
Around one nine.
The deterioration is higher than where we are expecting.
So.
Thank you.
One king from sensibility.
It could be one eight.
Yes.
Scenario.
Go up to one nine.
It depends.
It depends on.
How things are evolving in Colombia.
Yeah.
The viola again to watch on that variable will be the driver of Bancolombia results during 2023.
Thank you Juan Carlos.
The next question is from Carlos Gomez from HSBC. Please go ahead.
Yeah.
Hello, Good morning, congratulations on the results.
Going back to questions that have already been asked but I was wondering do you have a very conservative view of 2023, you expect less than 1% growth.
And you don't want to lend too much.
No.
I contrast that with the fact that at the same time, we are increasingly taking a joke on for a 50% payout when traditionally the company has got around 30 or 35%.
Why is that Wouldnt dispute the right moment to accumulate capital casting.
Since.
At that point, so it may not be able to club that luxury.
And would you consider I mean would you want to you want to stay with at 11%, although the one perhaps to go a bit further in terms of keeping I think capital again at this time when you have high profitability. Thank you so much.
Thank you Carlos.
As we said the payout.
The board is proposing to do.
Shareholder.
It's 50% our our upper edge.
It has been around 47%.
Yeah.
With some.
By ability.
For the year.
We feel comfortable that with 50% payout.
We can manage.
Healthy level.
Equity.
That we forecast to be at the end of the year around 11% <unk> growth is not going to be present during this year.
But there.
There is not going to be pressure from from a long long road.
We will be.
I say it that long at 11%.
We feel that thats a level in which.
It's comfortable it's enough.
Accumulated too much capital I think.
Yes.
We need to find the right level and the right level for us. It's it's got 11, 11%.
Got it.
Okay, if I could if I can push back a little I mean.
Historically.
This capital has not been a problem for them for Bancolombia and again since you are conservative at this point in time.
<unk> had a high profitability.
I Wonder why it would not be the right time to accumulate.
But of course it is a reflection of the management and then Youll have to talk what you're thinking spaces.
Thank you.
Yeah.
Yeah.
The next question is from Nicholas <unk> from Goldman Sachs. Please go ahead.
Hi, Juan Carlos and everyone. Thank you for the time and for taking my question first on the political environment in Colombia.
How are you monitoring that situation.
Maybe what are you.
Watching there.
Maybe specifically more on the tax rate or any other ways in terms of political environment in Colombia, and second just on the expectations for fee and for fee growth next year in 2023. Thank you.
Thank you Nikolas.
The political environment.
Okay.
On.
Three big reforms that the government is submitted.
Submitting to Congress.
The health system reform that was already.
<unk>.
It started to be discussed.
And they announced that we will.
<unk> be presenting.
Soon the label.
Yeah.
Reform.
And also the pension system default.
Yeah.
Lastly, as you know the tax reform.
Increase the statutory rates for financial institutions.
For Syn <unk>.
That's now it's incorporated in the on our on our forecast and our guidance.
And on us.
Today, we don't see.
Any.
Particular regulation regarding financial financial institution.
Yeah.
They will.
Okay.
They would be.
The discussions in Congress will be around these three big reforms.
And that's what we are we are expecting now so we need to be watching the evolution of.
Any other viable Florida.
Issues that the government.
As racing, but with our conversations with the government.
We are not.
Look into it.
Interviews.
The big reforms, what is it going to happen and they are they are.
Working on that is they are going.
To.
Welcome having more strong.
Public banks government box.
Which they are saying.
Going to complement what.
Private banks or <unk>.
Commercial banks.
Are doing that's something that they are announced.
Announced.
They are working they are working on that.
Regarding.
We think that the.
He led the fee growth should be also around 8%.
Year.
Yeah.
The introduction of new services.
<unk>, it's important for us since we are growing in the number of clients on a very healthy way.
Help us to maintain and grow.
On fees and Nicola.
Great. Thank you.
Thank you.
The next question is from Daniel Mora from Credit Corp Capital. Please go ahead.
Hi, Good morning, everyone and thank you for the presentation I have just one question regarding the NIM.
You already mentioned that the guidance for this year, it's between <unk> five and six 7%.
I would like to understand what is sort of a base case scenario.
Part of the NIM during the year, because we see the last couple of quarters, we show our NIM.
Above 7% so it mean.
That you believe that these could be maintained at least in the first half of the year as we are now expecting a decrease in interest rates.
And then I.
I would like to understand what would be the meaning the second half of the year.
Considering the scenario.
You are maintaining an interest rate above.
12%.
I think that it will help also to understand what would be the outlook or the cost of deposits to better know all to better incorporate the guidance of the six five to six months have been Rachel. Thank you so much.
Thank you Danielle.
I am going to give you some summary gen.
General comments on unlocking better we'll give you some more details.
It is important to take into account that.
They did it.
Interest income.
It will continue.
Can we see because of the volume that we built.
During 2020 to.
Because rates are going to continue to be.
Hi.
But there is volatility on the on the treasury business and margin.
The treasury business during last quarter particular needed during December .
<unk> had a very very good.
Four months.
But that's not going to be the case, we think during the year.
So but that margin cause more volatility so.
Have to take into account what is what.
It's related to loans and where they need to.
B.
The treasury business.
Yeah.
Yeah as I said.
TSA income will continue being in a label.
Okay.
Current level or even an increasing that regarding the cost of the phone. Let me pass that to have him back and he will give you more details on that.
Thank you Wang yes, again, the structure of funding cost for the bank, which shift during this year from checking and savings accounts to time deposits that explains why.
You are going to see an increase in our funding cost commodities were only growing 5% its foundation and is not growing in consumer so that would be the key element.
Supports our thesis of that NIM will be stable and going back to the Treasury business also you have to take in consideration that day.
Our portfolio.
Less than 8% of the total asset so.
If you if you compare both elements, we are talking about 79% of our.
Our asset types, our loan portfolio and 8% securities portfolio. So if you do the math of buying both ethics.
Youre going to see at a stable NIM for the whole year.
Perfect. Thank you so much.
Thank you.
The next question is from Julianna <unk> from <unk> <unk>. Please go ahead.
Hi, everyone and thank you for my question.
I'd like to ask about the net stable funding ratio as you mentioned you are expecting that.
We will have to change your funding.
Sources from saving that comes through.
Deposits, so I would like to know.
If you are now.
Having the requirement that the regulation is.
For the net stable funding ratio or you are having some pressure on that and what are your expectation for Q.
For this year, although these radio thank you.
Thank you for again, Fortunately, our our net stable funding ratio.
It's under control currently we are talking about that around the handful of 5% percent. There is one reason why we have a very strong funding structure.
Consolidated level of infection equals of the time deposits and because of the savings account that we received from our clients. So for the whole year. This year we are.
In office space enough room to move into the into the corporate deposits on institutional deposits. So we don't feel particularly operation and the other parties, we have not having pressure because we have not seen a loan growth that we saw last year.
Okay and my second question I would like to ask you about the loan portfolio. You mentioned that you are expecting a 5% of loan.
Growth.
Can you give us more color about which segments are you expecting the best growth for the 2023 and if you can remind me the expectation of our ROA for the for the year. Thank you.
Okay regarding your first question on the low side of the loan growth will be consumer as we mentioned previously zero to 2% loan growth consumer on the upper side would be commercial correlated with the GDP growth.
Youre going to see the mortgage business. So the combined combination would be the 5% that we mentioned our return on equity for 2023, we are expecting a return on equity clearly at around 16% to 17% and the main driver will be date NII generation because interest.
So we remain high assuming as one nation the cost of risk of one.
Thank you.
Mhm.
The next question.
Next question.
<unk> <unk> from Scotiabank. Please go ahead.
Hi, Good morning, and thank you for taking my question.
So my question.
In this context of high rates and slowing economic growth.
We have seen some peers in the region make material changes to the digital initiatives.
And you have delivered so far strong growth use in user.
Engagement in your digital platforms.
So in.
In this context.
You talk about how the higher rates and slower economic growth impact Bancolombia digital initiatives, particularly gnathion bancolombia a la mano.
Good.
Thank you Juan.
Yes.
That's that's very important.
Continued seen at very very healthy growth on our digital platforms.
Mickey continue spot.
We're growing at around 300000, new clients a month, we are at this point.
Reaching $15 5 million.
<unk> the usage continue to be very.
Very good.
<unk> said that 67%, so that's more than or close to 10 million active users among.
Yeah.
And that.
And also we see that same trend for similar trends on Bancolombia Bancolombia a la Mano.
Particularly colombians now.
Using the digital tools.
National digital tools.
All day everyday life.
But it is creating a base.
Ah.
An important base of clients that is.
Giving us a lot of information of how they behave how they use money and that information will allow us to increase our presentation with different brokers not just financial products, but all the products.
Oh.
And it's given also information for loans or how to originate loans to this group.
We currently are.
Yeah.
Doing.
I look forward or moving.
On the direction of leveraging that information for loan growth that will take some time.
It's something that is not going to materially affect positively the results of bancolombia, but for the future would be very very important.
Although base of clients of Bancolombia, its more its a $128 million, including all countries.
Similarly in Colombia.
We reached close to half of the population of Columbia on radio.
Half of the population with Columbia.
Hi.
We are proud of our relationship with Bancolombia and Thats very important in terms of how we can engage them with different strategies between platform from that.
Our fan base.
For our growth.
Thank you for the comment.
This concludes the question and answer session I would now like to turn the call back over to Mr. Juan Carlos Mora for closing comments.
Okay.
Thank you everybody for participating in this conference call I want to apologize for the taking.
Technical difficulties that we had at the beginning.
Of this call.
We know that 2023 will be a challenging year its a different year.
The conditions are going to be.
More challenging as I said.
Yeah.
Great risk would be key in on.
But we are confident that with the tools that we have the origination, but we are our order.
Is that we have in place will help us to manage that.
The situation or what we are going to face.
Additionally, we are.
Moving in a direction to be more proactive to be proactive.
With our clients trying to anticipate.
The big.
Any any situations they may hopping on and be able or willing to restructure or two.
Within the way that we can handle.
Yeah.
J D.
Any issue they make up on that.
It's why do you say.
Allowing us to.
B K optimistic about how we can handle that growth.
Great rates could go higher than.
And we expect.
But also.
Good day and with the information that we have that will be that will be very important. So with this again I would like to thank you.
Yeah.
Expect to hear.
Be with you again.
When we report the first quarter of 2023 thank you very much and have a good day.
This concludes today's conference. Thank you for participating you may now disconnect.
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