Q2 2024 Grupo Aval Acciones y Valores SA Earnings Call
Speaker Change: Luis Gutierrez, Diego Saravia, Luis Gutierrez Luis Gutierrez, Diego Saravia, Luis Gutierrez
Regina: Welcome to Grupo Aval's Second Quarter 2024 Consolidated Results Conference Call. My name is Regina, and I will be your operator for today's call.
Speaker Change: Grupo Aval Acciones y Valores S.A.A., Grupo Aval, is an issuer of securities in Colombia and in the United States SEC.
Speaker Change: As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation.
Speaker Change: Grupo Aval is also subject to the inspection and supervision of the Superintendency of Finance as holding company of the Aval Financial Conglomerate.
Speaker Change: The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the IASB.
Speaker Change: Unconsolidated financial information of our subsidiaries and the Colombian banking system are presented in accordance with the Colombian IFRS as reported the Superintendency of Finance.
Speaker Change: Details of the calculations of non-IFRS measures, such as ROAA and ROAE, among others, are explained when required in this report.
Speaker Change: This report includes forward-looking statements. In some cases, you can identify these forward-looking statements by words such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue, or the negative of these and other comparable words.
Speaker Change: Actual results and events may differ materially from those anticipated herein as a consequence of changes in general economic and business conditions, changes in interest and currency rates, and other risks ascribed from time to time in our filings with the Registro Nacional de Valores y Emisores and the SEC.
Speaker Change: Recipients of this document are responsible for the assessment and use of the information provided herein.
Speaker Change: Matters described in this presentation, and our knowledge of them, may change extensively and materially over time. But we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any updates for such material development prior to our next earnings report.
Speaker Change: The content of this document and the figures included herein are intended to provide a summary of the subjects discussed, rather than a comprehensive description. When applicable in this document, we refer to billions as thousands of millions. At this time, all participants are in a listen-only mode.
Speaker Change: Later, we will conduct a question and answer session.
Speaker Change: With us today are Ms. Maria Lorena Gutierrez-Guterrez, Chief Executive Officer, Mr. Diego Solano, Chief Financial Officer, Mrs. Paula Duran, Corporate VP of Sustainability and Strategic Projects, and Mr. Camilo Perez, Banco de Bogotá's Chief Economist.
Speaker Change: I will now turn the call over to Ms. Madreya Lorena Gutierrez-Latero, Chief Executive Officer. Ms. Madreya Lorena Gutierrez-Latero, you may begin.
Speaker Change: Alonso Arambur, Alonso Arambur,
Speaker Change: Good morning, everyone, and thank you for joining us for our second quarter 2020 Tool Conference Call.
Speaker Change: I am here with Diego Solano, our CFO from the Located People's Economy of Banco de Bogotá, Pabla Urán, our co-founder and CEO of Premieres y Empresas y Servicios, and other people of the company. Let me start with some news in my life.
Speaker Change: Today, for the execution of our strategy, we are taking actions to renew and strengthen our 19 teams.
Speaker Change: at the first and second waves, both at our main businesses and our hosting companies.
Speaker Change: Juan Camilo Andrés is China's CEO of Pantera Religion after 30 years of business. He was appointed as Amsterdam's president.
Speaker Change: Gerardo is the former Chief Legal Officer of San Carlos, Argentina. He serves as part of the Board of Directors of Columbia Central Bank and a Superintendent of Finance.
Speaker Change: We are calling to see you in an open. We thank you for your participation.
Speaker Change: Can this be an opportunity of understanding?
Speaker Change: Also, we would like to present our structure at the holding room with the creation of a new corporate vice-president.
Speaker Change: The VP of Sustainability and Socialist Projects, Lezette Paula Ugan, and the Corporate VP of Financial Services and Efficiency, Lezette Antonio Cartani. Paula is the Corporate VP of Strategy and Sustainability of Puerto Colomianos, and works in the Department of Humanities and Environment.
Speaker Change: They both have more than 20 years of experience in the police and paramedics.
Speaker Change: I am confident that the personal and professional qualities of our team will continue to extend our market potential and help us achieve our goal of our long-term expectations.
Speaker Change: Now, I would like to call up the Board of Regional DOC of Chippewa Community Schools.
Speaker Change: Thank you, Madame Reina, and good morning to you all. First of all, I would like to congratulate Banco de la Huerta on its issuance of 500 billion pesos in sustainable senior bonds.
Speaker Change: Also, our banks presented their principles of responsible banking reports as part of their Agreeance to Unite the Funds. This implies that all our banks will have plans to move forward both in terms of climate change, gender equality, financial inclusion, and sustainable finance among others.
Speaker Change: During this quarter, we received several recognitions for our advances in terms of diversity and inclusion.
Speaker Change: Rizuala ranked 6th in Latin America for its commitment in this area, and Franco Rosa ranked 3rd. Puerto Colombiana was also recognized for its work towards closing the generational gap, and Puerto Rico successfully launched a drug fight for the employability of senior citizens.
Speaker Change: As for recent advances in environmental impact, Banco Atlántico celebrated 30 years of the Planeta Azul Prize that recognizes initiatives aimed at water preservation and protection.
Speaker Change: Also, our road construction successfully implemented several biodiversity projects in more than 700 hectares, as well as solar energy projects generating significant efficiencies in energy consumption.
Speaker Change: In terms of our social impact, in addition to our programs implemented by our subsidiaries, we continue advancing in the Nacional Guajira Program. Up to now, we have benefited more than 340 families, that is 3,500 people, with clean drinking water solutions as well as food security.
Speaker Change: Finally, I would just like to highlight that for us, sustainability is not just a commitment. It's a core principle that drives our every decision.
Speaker Change: We're dedicated to building a future where financial strength and social and environmental services go hand-in-hand, ensuring our positive impact for generations to come. We continue advancing the determination towards our sustainability interests and goals.
Speaker Change: Thanks, Paula. Now, on the macro side, let me mention some relevant issues that we discussed.
Speaker Change: Inflation continues to trend down in the U.S. Third, supporting our view of an award-canceling program that could raise could, could
Speaker Change: Economic growth has continued to be a low, and it definitely remains world-goal-year-old to social levels.
Speaker Change: The country's fiscal accounts remain undisclosed, many of them spending cross-border.
Speaker Change: The government is working on a second wave of pending cuts and considering a tax reform.
Speaker Change: for financial loans, including for charges to additional sectors while lowering the general corporate tax rate.
Speaker Change: [inaudible]
Speaker Change: Thank you, Madam President. Good morning to all attendees. Economic activity has turned out better than expected at the beginning of 2024, with an annual growth of 2% so far this year from May, compared with projections between 1.5% and 1.8% for the year.
Speaker Change: The improvement has been inferred by the recovery of the global economy, which has been reflected in a better performance of foreign trade.
Speaker Change: The improvements have been made, secondly, in local context, very dynamic in sectors such as public administration, agriculture, recreation and utilities, especially electricity, have also explained the positive surprise in economic performance.
Speaker Change: In contrast, more traditional sectors of the economy, such as construction, commerce, and manufacturing, maintain contraction rates at the beginning of the year. This is evident at the current dispersion in sector performance.
Speaker Change: Close in 2024 is likely to exceed the 0.6% of 2023. However, it will remain below that of the long-term.
Speaker Change: Although we're covering investments affected by low levels of companies for both businesses and households, couples with still high interest rates have had a negative impact on the present but has also reduced the outlook for future growth.
Speaker Change: The total aggregate investment rate as of March 2024 approached its lowest level since the beginning of the series in 2005, that is, 13% of GDP. This would have a negative impact on economy growth in the coming years.
Speaker Change: The potential growth is now estimated at between 2.5 and 3%, lower than the pre-pandemic estimate of between 2 and 3.5%.
Speaker Change: Nevertheless, some modest signs from the consumers suggest that the worst is behind us. The National Employment Rate shows an annual increase of just 0.2% response in the first half of 2024 to 11.1%. Benefiting from higher public and services hiring, which has compensated to some extent for job losses in sectors that were traditionally the engine of the labor market.
Speaker Change: In addition, we expect low-rate household firefighters in power, as wages increase more than inflation and the exchange rate has revalued, and a reduction in the financial burden will allow for a change in the consumption cycle. This has been evident in the positive readings of impetus of consumer goods in the first half of the year.
Speaker Change: We have upgraded our estimate of growth for 2024 to around 1.75%. I gave the consensus just below that level. We will get the official numbers for growth in the second quarter later on today.
Speaker Change: In July, immigration was in its downward trend, falling below 7% after being stuck just above this level during the second quarter.
Speaker Change: Also, the existing stationary tax rate continues the indexation of services, especially rents, the potential depreciation of the economy and deficits, and the increase in digital prices will only allow inflation to reach the same percentage price between 2 and 4% under the new 2010 tax law.
Speaker Change: For the year, our forecast for intensity trend forward is 5.6%.
Speaker Change: The aforementioned macroeconomic balance has explained Banco de la República's caution in its process of increasing monetary policy, where in July it completed four meetings with 50 basis points rate cuts.
Speaker Change: However, given the increasing inflation and the convergence of expansion to their targets, the pace of rate cuts is set to accelerate to 75 basis points soon.
Speaker Change: Furthermore, the forecast of lower rates at a global level reinforces the above. For the year-end, we expect the central bank rate to reach 8.75%. In terms of the external accounts, the country has seen a significant adjustment, with a reduction in the current account deficit to levels close to 2% of GDP.
Speaker Change: This can be explained by a combination of lower demand for goods traded abroad, especially imports and capital goods, while the country has seen greater inflow of dollars from the resources and tourism. In net terms, this situation has resulted in a lower need for dollars, which have provided some support to the exchange rate.
Speaker Change: The other factors that play into the currency behavior are potential interest rate cuts by the Federal Reserve, the United States collection, specific creation, and local uncertainty.
Speaker Change: His latest talks are delayed. The Republican National Assembly is the presidency. If the situation deteriorates further and local political amounts return, the exchange rates will tend to go down.
Speaker Change: For the time being, the aforementioned forces have found a fragile balance that has favored a flat exchange rate with an upward balance, in the midst of a recession period in the United States.
Speaker Change: On fiscal month, even though the government has straightened out these scams because of a significant spending tax, the ISPs are still present and compliant with the fiscal rules we have stated, as indicated by the Autonomous Committee of the Fiscal Year.
Speaker Change: For the remainder of the year, please use priority tax for tax collection to meet the established targets, and for the government to restrain the spending in order to raise concerns about the sustainability of public finances.
Speaker Change: In this case, trading agencies are alert to any new developments, while the markets are already pricing a lower level for the following trading.
Speaker Change: Fiscal risks remain for 2025 due to potential budget financing issues. There is a need for the approval in Congress of a financing law and an earlier end to the transition period for the fiscal risks. As of today, details regarding the financing law are still unknown.
Speaker Change: That's how tough our economy is. Thank you.
Speaker Change: Thank you, Camilo. We strongly believe that a country's recovery needs to be driven by government policies that lead to a stronger investment, effective execution, and confidence of the legal environment and physical security.
Speaker Change: However, we believe that in addition to decoding records, private sector initiatives will act to decode them.
Speaker Change: [inaudible]
Speaker Change: SMEs, Housing, Energy Transition, Agriculture, and the Population Reality Economy.
Speaker Change: This has had immediate effects on economic activity and employment.
Speaker Change: We have committed to provide funds at preferential rates to the key growth sectors, ensuring a strong risk management process.
Speaker Change: We also continue our industry plan.
Speaker Change: of more than $1.9 trillion in private sectors, such as infrastructure, gas, agribusiness, and tourism.
Speaker Change: Before Diego gives his take of what we've heard, let me go over the highlights of what we've heard.
Speaker Change: The second quarter showed a stronger loan and deposit growth that allowed us to continue increasing our market share.
Speaker Change: Over the quarter, our banks combined gross loans to 1.8%, reaching a 25% market share by March of this year.
Diego Saravia: Quantity and access quality is close relative to the previous quarters, and operating expenses remain under control.
Diego Saravia: Regarding medical quality, it seems we have finally reached the peak we thought of this and the reason people continue on.
Diego Saravia: On commercial lawns, the increases and decreases have been milder than what could be expected in this cycle.
Diego Saravia: We remain vigilant for potential climate changes or recurrent earthquakes.
Speaker Change: We are currently designing an ambitious, cost-effective, and efficiency plan, which we will launch over the coming months. I expect to provide you updates on our following goals.
Speaker Change: Finally, the center line continues to be re-installed to speed up interest rate reductions.
Speaker Change: We maintain our view that the sense of time can cut great slashes.
Speaker Change: They've used these resources on how you read our users' groups. We've tried resources in our peer-reviewed users' marketing dialogues and in our tooltips.
Speaker Change: Medicared's margin on retainers has benefitted for their service of wage.
Speaker Change: However, that can be made by the superintendent of finance.
Speaker Change: to the formula used to determine if the tax has caused a super-declined credit card, personal loan, and other types of consumer lending products.
Speaker Change: On the other hand, net interest margin for financial loans has been affected by competition, which puts personal risk mainly in the high credit quality corporate segments.
Speaker Change: As a result, net income to our shareholders was $204 billion, and return on average equity was 4.9%.
Speaker Change: This report was obtained in the Colombian context of ten banks out of a total of twenty-eight, incurring cumulative losses of...
Speaker Change: have made the world bigger since 2009.
Speaker Change: We expect the end of this great cycle in consumer loans and the recovery of net interest margins will enable the financing sector to return to its current stability over the next month.
Speaker Change: People, if you know what that for a common vote on 2%?
Speaker Change: In two of our events, which we perform on Tuesdays in this cycle, we strengthen the capital structure of Banco de Occidente, Banco Cofinan, and Banco Adelida.
Speaker Change: Now, I would like to pass the call to Diego, who will give the details on our report.
Diego Saravia: Thank you, Maria Lorena. All parties, pages 8 and 9, will receive charts regarding the growth rate and quality of our new portfolio relative to the rest of the Colombian banking system.
Speaker Change: For comparability reasons, these two details are unconsolidated under Colombian IFRS as published by the Superintendent of Finance.
Speaker Change: And in the same case, we continue to outgrow our competitors in all loan categories. This means that by end of May, we only need market share gains of 53 basis points in total loans, 108 basis points in commercial loans, 125 basis points in consumer loans, and 57 basis points in mortgages.
Speaker Change: And page 9, the quality of consumer loans application has begun to improve in the Colombian banking system, but commercial loans and mortgages will likely deteriorate.
Speaker Change: As mentioned in the past, Howard's portfolio composition is key towards low-risk consumer products resulting in a better credit quality than the system average.
Speaker Change: Any one news to advertisements in the United States of the distribution allies underlying French?
Speaker Change: starting on page 10.
Speaker Change: Assets grew 3.2% over the quarter to $317 billion pesos accumulated at 6.2% increase year-on-year. Great loans are recurring assets, which are $192 billion pesos growing 2.4% year-on-year and 4.8% year-on-year.
Luis Gutirrez: And an 8% depreciation of the Colombian peso during the quarter had a positive effect on quarter-on-quarter metrics, reducing the 1.2% exchange reported growth. Earlier, the peso depreciated 10.7%, having a negative impact on growth metrics.
Speaker Change: Commercial lanes and roadways with continuous lighting are non-obvious, while consumer lanes receive light following 2.5 feet of borders of protection.
Speaker Change: Commercial mills expanded 2.9% in the quarter and 5.9% year-on-year, with special appreciation for 2.1.8% experience with quarterly mills.
Speaker Change: [inaudible]
Speaker Change: Finally, United States grew 4.3% over the quarter and 10.8% year-on-year. We ask you to take long-term steps to rise the U.S. economy to 2025 through an amalgamation of monetary policy, stronger GDP growth, and improved implementation of human rights policies.
Speaker Change: We expect a 24-month hold to continue, also through the vaccine system.
Speaker Change: And thank you all for your support of Funding and Deposit Revolution.
Speaker Change: Total funding increased 3.4% during the quarter, accumulating 6.8% year-on-year.
Speaker Change: The project accounts for 3.4% of our funding, $3.4 billion of water and $10.1% ERU.
Speaker Change: [inaudible]
Speaker Change: On page 12, we present the evaluation of our total capitalization, our total for all those entities, and the capital and equity ratio of our banks.
Speaker Change: [inaudible]
Speaker Change: Banco de Chile's second quarter ratios reported $135 million dollars in an important 1-4-5-2-3-0 issue-dominated setting that added $135 million dollars to its solvency.
Speaker Change: In addition, the U.S. Embassy announced insurances of $100 billion in equity and $100 billion in social security bonds. These will be made in bonds at the Council of Quebec, which represents the U.S. Capitol position.
Speaker Change: Banko compromised unconsolidated solvency ratios were 12.3% for paid solvency and 10.6% for COLA-PPT-1. These insurances will add approximately 1 percentage point to unconsolidated solvency. Finally, we are also considering as a regulated bond insurance for Banko IRB.
Speaker Change: On page 15 we present our Yellow Loans Cost of Funds Spread Amendment.
Speaker Change: and you will increase 5 tablespoons of hot water to 3.4%.
Speaker Change: Okay, so the rate of new money loans was still at 0.3%. New money sale loans, the RMAP price at 6.8%, expanded community basis points to 5.1%, and new commercial loans, the RMAP floated over IDR, fell at 18 basis points to 3.7%.
Speaker Change: The expansion of human loans continues to be slow due to high coming costs in line with shy central bank interventions in Election Day.
Speaker Change: In addition, low rates have been suppressed by a concentration of low-to-high-quality low-rate assets and by changes made by the strengthening of finance in the formula used to determine interest rate caps affecting some credit cards and personal loans.
Speaker Change: We expect that the Central Bank will have room to accelerate its pace in rate cuts as the year progresses given the positive evolution of inflation, the current high forward moving real estate rate level, and the recent reduction in the output per year rate levels.
Speaker Change: This is a virtual view of the expansion of the following floors.
Speaker Change: Finally, continuing with the COVID-19 expansion, I remind you that this includes the constitution during the quarter.
Speaker Change: [inaudible]
Speaker Change: You are below historic levels.
Speaker Change: These incorporate the union retail loans that expanded 14 basis points to 5.7% and union commission loans that decreased 39 basis points to 4.4%.
Speaker Change: The total need of our banking segment expanded 3.2% to 4.3%, driven by the same trend impacting our consortium's needs.
Speaker Change: And pages 14-16 represent term loan portfolio qualifications. Following page 14, the original asset quality forms the end of the credit cycle for those human loans, with pre-obligations and pre-affirmations seeking to enforce quarter 2024 across all products.
Speaker Change: [inaudible]
Speaker Change: 28% of the world's decreased to 5.8%, while 98% of the world's increased to 4.2%. Consumer loans were also mentioned. Therefore, on a 30 and a 98 basis, was reduced.
Speaker Change: Commercial loans and mortgages show maldecumulation over a quarter. The affirmation is expected to increase with every age horizon, and I look forward to making aid for the portion of commercial loans that became delinquent since last quarter.
Speaker Change: Finally, the annualization of child jobs to average 98.38 plus 0.64 times.
Speaker Change: On page 15, the share of unknown performers classified as H1 performers is slightly overquartered, and is being driven by a better performance in consumer goods.
Speaker Change: Coverage measured at the annual for Stage 2 and 3 loans and the percentage of Stage 3 and 3 loans. Thank you for viewing the product with a 77.4% yield coverage for consumer and promotion loans at $35.9 and $35.4 respectively.
Speaker Change: On page 15, as anticipated, the cost of this is within the quarter. We expect a positive trend over the following quarters, even in a more favorable local market scenario.
Speaker Change: [inaudible] very very very very very
Speaker Change: [inaudible]
Speaker Change: The lower cost of risk in commercial loans is also an improvement in price trading of previously traded corporate clients that have had over time a consistent risk-free loan behavior, which explains improvements of the six basis points in the lower cost of risk and the 61 basis points for commercial loans rated for.
Speaker Change: On page 17, you present your Q and R income. Your Q income is 2.3% quarter-on-quarter and 4% year-on-year. Your Q income is 2.7% and 1.9% year-on-year.
Speaker Change: Net pension and savings fees, 50.7% quarter-to-quarter and 3.7% and 7.3% year-on-year. This is higher than the total pension fund's management fees.
Speaker Change: [inaudible]
Speaker Change: Income from the non-financial sector contracted to a local party sheltered for the period by sample such as the reconstitutionary construction phase of the operation.
Speaker Change: I'm going to be on the bottom of the page.
Speaker Change: Accordingly, in our operation, income is expained by 1, derivatives and FX losses, where derivatives correlated with the high returns from the non-financial sector.
Speaker Change: to net losses and sell-off investments in OCI realizations associated with systems and portfolio management, and to comparison with our recently heightened ACQs via our security-related third blocker.
H.H. King: and H.H. King represent San Joaquin City Nations. Relying on the cost and forbearance, total expenses is between 8% quarter on quarter and 150% year on year.
Speaker Change: General and Administrative expenses exceed 2.25% and complete 1% year-on-year. GMA expenses continue to be created by operating taxes and deposit insurance that accounts for 38% of total GAMA expenses.
Speaker Change: Toxic Waste Water is less than 0.7% compared to the infill basis points water and water, and 9 basis points UNU. According to Tox2Info, it is 2.4% compared to a lower-quality operating income described in the previous chart.
Speaker Change: Finally, I'm preaching to represent a middle-income and poverty-stricken region. Activity for a middle-income third quarter was 200 per billion pesos, or $8.6 per share. Returning average assets and returning average earnings for the quarter were 86.4.9% respectively.
Speaker Change: Before passing this back to Maria Moreno, I will now summarize our general guidance for QMT painful.
Speaker Change: We expect low growth between 7.5% and 8%, with commercial growth between 9% and 9.5%, and terminal growth between 5% and 6%.
Speaker Change: These are three important areas with minimum wage under 4.5% tariff.
Speaker Change: You now have three seconds to report, and you have the same time as you were named in the Department of Foreign Affairs.
Speaker Change: Cost of use, the end of use coverage in the 50-50 percentile. Cost to assets in the 50-50 percentile.
Speaker Change: Income from the non-financial sector of 80% of that for 2023.
Speaker Change: At the information is 28.5% and finally we expect our pension for the terminology equity to be 26.6.5% I apologize for my level of English.
Speaker Change: Thank you, Diego. Finally, let me mention that we are focused on sustainable growth and effects that are better in the macroeconomic scenario in the second half of the year, and we support better policies that will be going into 2025.
Speaker Change: Thank you.
Cote: Where do you live, Cote?
Speaker Change: Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone phone. If you wish to be removed from the queue, please press star 1 again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then 1 on your touchtone phone.
Speaker Change: Our first question comes from the line of Julianoske Javavienda Cortores. Please go ahead.
Speaker Change: Hi everyone and thank you for having my question. First of all, I would like to confirm the guidance... Mr. Chavez, I think that we understand what you are saying. Could you speak a little higher, please?
Mr. Chavez: Okay, can you hear me now?
Mr. Chavez: Is it better?
Speaker Change: I don't know.
Speaker Change: Go ahead, but it's difficult to understand.
Speaker Change: Okay, so first of all, I would like to confirm the guidance in terms of NIMA and ROE.
Speaker Change: And my second question is regarding the impact of Banco Popular due to the equity...
Speaker Change: issues that was announced yesterday.
Speaker Change #100: and what will be the participation that the group all would have to...
Speaker Change #100: Diego Saravia, Luis Gutierrez, Diego Saravia, Luis Gutierrez, Luis Gutierrez, Luis Gutierrez,
Speaker Change #101: Should we keep it to our first question?
Speaker Change #102: Thank you.
Speaker Change #103: Why did you remove November 13? I remove November 13 because – Yes. They asked you what did you remove? Well, I just removed the month –
Speaker Change #104: And, as you might remember, we give out two different sorts of guidance for the banking sector and then for our foreign members. You may be able to consult me at the bottom of the chat. Mainly, it is expense and that will be interviewed in the interview engine.
Speaker Change #105: So, a need of a banking segment in the 4.5% area with minimum loans of a banking segment in the 4.25% area. That implies a ceiling of 3.75% area with minimum loans in the 4.5% area. That's your question.
Speaker Change #106: Then, regarding Banco Popular, the issuance are supported by Grupo Al-Ain, as we've done it in the past, so that's what we expect to see. We will be anchoring those, of course, starting them soon.
Speaker Change #107: And finally, Elvira Felipe Rizal, who can only be directional, as Maria Lorena mentioned and Raul De Coli emphasized in his speech.
Speaker Change #108: and I'm referring to the normal numbers from the central bank somewhere at the middle of next year. We see that as positive study results, we have given out quantitative guidance.
Speaker Change #109: Okay, thank you.
Speaker Change #110: Again if you'd like to ask a question press star then the number one on your telephone keypad and our next question comes from the line of Nick Dimitrov with Morgan Stanley. Please go ahead.
Nick Dimitrov: Hi there, good morning. I have a couple of questions and apologies, the connection seems to be pretty bad, so I don't know, you might have already answered this.
Speaker Change #112: I have a question about your capital allocation decisions.
Speaker Change #113: So it became clear that...
Speaker Change #114: Banco Popular shareholders have agreed to raise 100 billion pesos yesterday. Can you walk me through the rationale for that? Because I know that the entity has been struggling for a year and a half, but when I look at capital, it's 18 percent, 18.2 to be exact.
Speaker Change #115: At the same time, this is the strongest or the best capitalized subsidiary within the group. At the same time, there's banks such as Banco de Occidente, whose capital is significantly lower. So I was just kind of wondering about the rationale to raise.
Speaker Change #115: Equity for Banco Popular when it's the strongest capitalized entity within the group and why not Banco de Occidente? So that is the first question.
Speaker Change #116: And the second one is on, I understand that there is also a decision to raise 100 billion pesos of Tier 2 capital again for Banco Popular, so I was looking to get an update in terms of where you are in the process of raising the Tier 2 money. Thank you.
Speaker Change #117: Could you go over the text box to make sure I got it right?
Speaker Change #118: I'm sorry, say that again?
Speaker Change #119: Could you repeat your first question to make sure I got it right? Yes, so the first question is the rationale for Banco Popular to raise money when optically it looks that it's well capitalized.
Speaker Change #120: Sorry, number 2. Let me answer question 2 and then you can answer question 3.
Speaker Change #120: last year's presidential debate,
Speaker Change #121: It's decided, number one, we look not only at the consolidated numbers, but also at the unconsolidated numbers. And in regards to the difference between those numbers in Danza Popular and that's the reason when I get two numbers, I vote those out for Danza Popular.
Speaker Change #121: Then Banco Popular has a combination of two things happening in its cycle. Number one, it's been using money, therefore it's been destroying capital over several periods.
Speaker Change #121: and then we see a very strong potential for growth moving forward.
Speaker Change #121: So, we're also capitalizing it because we're replenishing part of what was lost in the process and also we expect management of the funds to be able to execute a much more aggressive growth strategy that will be requiring that sort of capitalization.
Speaker Change #122: Then we went into one colosseum, to one colosseum, to somehow get them to become so popular because they've been quite popular throughout their childhood.
Speaker Change #123: We will continue strengthening the bank, if further required, if demanded by growth. At this point, the use of capital seems to be the right amount.
Speaker Change #124: But, as we've done in the past, we see our banks being able to outgrow our expectations and control that and review that plan. And then, could you repeat the question? Yeah, the second question is regarding $100 billion...
Speaker Change #125: Colombian investors of tier 2 capital for Banco Popular, where are you in the process of raising the money?
Speaker Change #126: Okay, I think that was the previous question, and we are ready to support it, but we do not see a market execution risk in that instance.
Speaker Change #127: There are no further questions at this time. Ms. Madaria Loren Gutierrez Botero, I turn the call back over to you.
Speaker Change #128: and I'm going to be talking about the the the the the the the the the the the the the the
Speaker Change #129: Thank you. Thank you to you all to be involved in this call. And as you know, if you have questions, comments in the coming months, you can call us, wire us.
Speaker Change #129: And until the next call, have a good day.
Speaker Change #130: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.