Q3 2024 Grupo Aval Acciones y Valores SA Earnings Call
Welcome to Grupo <unk> third quarter 'twenty 'twenty four of consolidated results Conference call. My name is Regina and I will be your operator for today's call Grupo of all axion it'd be by large ICI group of all its an issue of securities in Colombia, and in the United States S. E C. As such it is subject to compliance with securities.
Regulation in Colombia, and applicable U S Securities regulation Grupo about it's also subject to the inspection and supervision of the superintendency of finance as holding company that'd be about financial conglomerate.
Consolidated financial information included in this document is presented in accordance with I F. R. S. As currently issued by the I E. S. P.
I'm consolidated financial information of our subsidiaries in the Colombian banking system are presented in accordance with Colombian I F. R. S. As reported the superintendency of finance details of the calculations of non I F. R. S measures such as R. O a a and R. O a E. Among others are explained when required in this report.
This report includes forward looking statements in some cases you can identify these forward looking statements by words, such as May will should expects plans anticipates believes estimates predicts potential or continue or the negative of these and other comparable words actual results and events may differ materially.
From those anticipated herein as a consequence of changes in general economic and business conditions changes in interest and currency rates and other risks described from time to time in our filings with Euro Heathrow Nasional day by Louis E. M. A source in the S E C.
Recipients of this document are responsible for the assessment and use of the information provided herein.
Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review update or correct. The information provided in this report, including any forward looking statements and do not intend to provide any update for such material development. Prior to our next earnings report.
The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description when applicable in this document we refer to billions as thousands of millions at this time all participants are in a listen only mode. Later, we will conduct a question and answer session with us.
Today, our Ms Maria Lorena, good theaters with Taro, Chief Executive Officer, Mr. Diego, Solano, Chief Financial Officer, Ms powder in corporate V. P of sustainability and strategic projects, Mr. Jorge cause Daniel corporate V. P of financial assets inefficiency and Mr. Can be operate Banco de Bogota, Chief economist I will now.
Turn the call over to MS. Maria Lorena Gutierrez Botero, Chief Executive Officer, Ms. Maria Lorena, good theaters with Daryl you may begin.
Yeah.
Speaker Change: Thank you good morning, everyone and thank you for joining us for our third word toward me 24 golf Orange co.
Speaker Change: I am here, we'd be able to launch our CFO I mean, no brainer chief economist.
Speaker Change: Oh, no no no more corporate deal something strategic for us.
Speaker Change: I will start by highlighting these acquired Regal.
Speaker Change: Frank I was just afraid of that.
Speaker Change: Cool.
Speaker Change: Cause confusion, Oh I'm sorry.
Speaker Change: To impose excuse me phone shown in some key business metrics.
We barn or not.
It was 9.7% back to levels comparable to the third quarter 'twenty to 'twenty two.
Speaker Change: Our banking secondly, he's back to net income there was close to the continued new ankle third and fourth quarters of 2022 driven body.
Speaker Change: So great.
Speaker Change: Stronger me wrong investment I'm close.
We continue to gain market share while growing.
Speaker Change: Great.
Speaker Change: Bored with me has the highest net income or acquired.
Speaker Change: Sure.
Speaker Change: Well it would be recovered through them with out of court.
Speaker Change: <unk> contribution to net income.
Speaker Change: Well, we don't know what topics as part of the timing of our corporate synergies suddenly fishy program, we're having fun.
Speaker Change: Right.
Speaker Change: Terrific.
Speaker Change: Coke attaches name change cool all right.
Speaker Change: What do you or obviously.
Speaker Change: I always say, we lacked a coupon.
Speaker Change: Since our lives thus far for our some CRE business support processes looking to unlock value for our shareholders.
Speaker Change: Catch you capturing synergies and efficiency in this practice.
Speaker Change: We aim to leverage knowledge and things going there.
Speaker Change: To improve our agility and time to market.
Speaker Change: Total board these Monday, we have strengthened our risk.
Speaker Change: Management team our raise the bar.
Speaker Change: We are calling since you started to see Oh, my goodness of C O or do you I hope not.
Speaker Change: Four of synergies.
Speaker Change: No.
Speaker Change: Findings from this study.
Speaker Change: You saw in new.
Speaker Change: Yeah, that's what I'm going to go down.
Speaker Change: Uh huh.
Speaker Change: Trajectory in banking I T telecoms with a strong track record of execution and abuses.
Nikki: Or do you run more recent yeah, that's Nikki youll have ample experience I T operation I am eastern areas in banking institution in Colombia.
Yeah. He has various management roles. He instructed you I'm fine.
Nikki: But globally.
Nikki: And more recently acted as puja CFO.
Speaker Change: To support execution of this strategy, you'll probably see we have a new board over there.
Speaker Change: I am now the chair of the board.
Speaker Change: These include four totally independent board members with extensive senior level experience you know random in areas, including I D innovation share services might ask me a nice T constructing I E N G.
Speaker Change: On the payments front, we are parked in the central Bank's initiative to create a real time payment account by account system.
Speaker Change: Good evening.
Speaker Change: It really does is thus far we've been happy to retain customers and increase by nationally.
Speaker Change: By increasing.
Speaker Change: Providing infusion you something.
Speaker Change: So stepping deceleration.
Speaker Change: We launched talk a lot.
Speaker Change: As a future study neighborhoods they may need.
Speaker Change: And you have seen this every so far by our banks.
Speaker Change: Or where it's terrie here, there's a lot of offerings that we know we're back now that got you set them apart Macquarie G assigned to each savings from that would tie up you know what banks undeniably that enables instant payments between now while it comes without the.
Speaker Change: Sharon.
Speaker Change: Yeah.
Speaker Change: You know in March we continue and not worried enforced to participate in public and private I mean, they park their activation of these countries.
Speaker Change: These costs allow us to play a fundamental.
Speaker Change: Well in our sector and we continue convinced that align with our purpose of creating a sustainable condition or broker.
Speaker Change: Must continue what ought to be for Moreno, where you're forced to reach maximum aims.
Speaker Change: Okay.
Paul: Now I will invite Paul to below where it is do you have to have most of the recent newsletter.
Paul: Thank you might have your dania to begin with I would like to bring your attention to some of the most recent achievements that show them. The way we haven't moved forward without E G.
Paul: In the days this corporate sustainability has said evaluation Houston, if I did that with Jones sustainability index competition, we've reached our highest score so far increasing 18 points, our previous court I'm, placing us in the 90% that we improved in all of the three dimension environmental social and governance measures by the SEC.
Paul: Our sustainable gold Forethoughtful, you'll have become stronger reaching 17, one three trillion financing sustainable construction sustainable mobility and semi.
Paul: Sustainable agriculture renewable energy among other engine.
Paul: In terms of governance with the most recent appointing female participation in the tough management oriented used has increased considerably.
Paul: I grew up like Crazy, 35% of top management positions are held by women and 43% of the largest company are adapting.
Do you start to see more presence and voice, which is most of our companies is higher than 30%. This is a strong signal of our commitment to attracting the best talent and promoting diversity gender experience and abilities.
This quarter, we had an active participation and the United Nations Biodiversity conference called <unk>.
Paul: That took place in California.
Paul: 16, so hoopla about playing a leading role you know before you bet and high level.
Paul: Most of our entities you always participating actively as well as Grupo <unk> yogurt in the Dania with the only representative of the Colombian financial sector. Indeed, you saw during the global finance stake organized by unit.
Paul: In addition, during the coffee steam we signed imagine house acceleration of United for Wildlife with the British Embassy combing fight against illegal trafficking of wildlife species.
Paul: We also made strong presence in different venues smoked gouda divisions or diversity achievements as well as supposed to probation unreported station.
But I'm glad to see that they celebrated 30 years I'm thinking of it as will award that recognizes projects that we serve and closer of the country's water source.
But with that expanded the reach of their muscle and your debit card concerning mangrove in the Colombian Caribbean when you bought them and put them you got subsidiaries of course were some young launching innovative energy projects based on biogas captured from crude palm oil that powers more than 1400 homes.
Paul: That's been our social impact.
Paul: That's a number that got Neal stage of that project did you bring digital solutions implausible water sustainable energy and security to more than 4500, <unk> I would like to highlight the relevance of these projects that he's net unfunded work directly by our CEO went into Daniel as what is the chairman of board of directors and he said he's got them.
I'm being told you our readiness to benefit by mid 2025 more than 25000 people in any one comes.
With this project we have also used by staying on their efforts from the private sector to work together with the government and community in other regions of the country.
Paul: Our entities continued social programs that will make sense and there is social financial education much thank capability for small businesses and entrepreneurs proactive project in indigenous communities unemployment programs for senior citizens.
Paul: During the quarter. We also received several recognitions on PD as useful while I always included Indonesia literally by leading companies interested in ability by four we were also ranked as the steak with Walmart with the best reputation in Columbia, and improved 18 positions into general reputation survey of the Crunch.
Paul: The medical need and is it tracking 100 M D.
Paul: Natural Beach also talk policy.
Paul: Great place to work recognized bankruptcy has been the first company condos I really can.
Speaker Change: Yeah, Dina Columbia gas also ranked in stock positions into same branch.
Speaker Change: And the global cockpit contract awards of course, you're going to be wanting to get their greatest fight against corruption initiatives building society through corporate transact.
Speaker Change: Bankruptcy ancient or the one is the best business practices category for its U S credit card, which contributes to call me anything away or they need received also recognition and of course its video expose people awards for its contribution to the productive inclusion of senior citizen.
Speaker Change: Finally, as we move forward, we remain steadfast in integrating ESG principles and grows and grows every aspect of our operation.
Speaker Change: We recognized sustainability, not just as another indication or commitments, but as a value driver in fact, I just read innovation road and sure. Thanks. This is the legacy we strike.
Pablo: Thank you Pablo now on the macro side as he mentioned also relevant issues looking in this part.
Speaker Change: I stopped Boston Pizza evolution inflation continues to trend down towards two five.
Five points.
Speaker Change: Were you, 1% some Chinese factory outside of New York time pressure due to climate events.
Boehner.
Speaker Change: Most likely but.
Speaker Change: You can envision a breakthrough in the remainder of this year.
Speaker Change: However, we believe that the positive evolution of lesions and manage them more decisive action from the Central Bank for foster great cost to reduce the effect of the high we are in terms of repayments.
Speaker Change: When those two little economic growth continues to pick up supporting a healthy environment for our business.
Employment metrics remain under contract, which will support internal demand diagnostics.
Speaker Change: So obstacles for for a strong recovery of Colombia remain or big changes in fiscal policy.
Speaker Change: From government execution.
Speaker Change: Embarrassment remains below historical levels.
Speaker Change: Right.
Speaker Change: And as you progress have no make progress over the past couple of years.
Speaker Change: The country's fiscal accounts remain under pressure even after our first the spending cut program under recency and no second wave or spending.
Speaker Change: Sorry, three trading pits.
Speaker Change: Come you know we've already commented on these and we shared our view on the economy.
Thank you Matt.
Joel: Morning, Joel opinions.
Joel: The Colombia economy rates or annual growth of one 9% in that year to date to August.
Joel: Recovery household consumption, a resilient export sector and some signs of improvement and investment.
Joel: For Columbia purchasing power has benefited from lower interest rates real wage gains due to falling inflation, the riskiness of the labor market and higher income from government.
Joel: Government monetary transfers and financial returns.
Joel: The improvement in domestic demand has supported us.
Joel: Entertainment services Commerce lodging with services and transportation.
Yes right.
Joel: Tourism has also helpful.
Got drunk production due to improved weather conditions from the workwear kolesar prices not only fulfill domestic consumption. But has also held sales abroad, where government has positioned itself as one of the most dynamic sectors.
Joel: And construction housing sales bottom up on progress is evident in some infrastructure projects other than boats.
Joel: However, the recovery of the sector is still good.
Joel: With this scenario, we maintained the growth projection for 2020 for around 175% with the consensus of analysts to slightly up.
For US, yes, gentlemen, public spending 200 to fiscal rules the main downside risks.
Joel: It should be remembered that economic growth in the first half of the year was one 5%, but excluding public administration would have been just to your 0.8%.
Joel: Unemployment has.
Joel: Better than most for our sector activity had reshuffle hiring door services and the government contributed to the equation at least in the first half of this year.
More recently expenditure cuts have taken a toll on all of the card.
Joel: National employment fell to nine 8% in September its lowest level in two years.
Joel: So you see inflation process deepen at the beginning of the fourth quarter, yes, not increasing prices went from seven 2% in June to five 4% in October.
Joel: The other being the lowest level since the end of 2021.
Joel: Yes.
Joel: While inflation in goods reached a new low services remained elevated due to heightened excision.
Joel: For the remainder of 2024 and muscle 2025, we anticipate an extension of the downward trend in inflation, albeit at a lesser base does that seem reasonable and in 2020 for around 5%.
On the external front the country recent second quarter and second quarter. The lowest current account deficit in the last 15 years standing at one 6% of GDP.
Joel: However for the second half of 2000 and to report the recovery of domestic demand, especially private consumption will increase impersonal deteriorate the external debt.
Joel: The positive numbers of inputs, mainly in consumer goods raw material already confirmed the situation.
Joel: However, the arrival of dollars from remittances coffee and operational expertise as well as from tourism with partially offset the outflow from English with this bug that would have its second year with low financing needs in dollars are.
Joel: But would be reversed by 2025 with a more dynamic economy.
Joel: Passing onto a disc ops tense situation has become more challenging on the one hand escalation will against your price. The government estimates on the downside, making a deeper cut in spending necessary to 100 <unk>.
Joel: 24 <unk>.
Joel: Local media has been reporting on unexpected or cut off our own 33 Chilean peso.
Joel: Which together with others.
Joel: On the execution of the budget could help comply with fiscal rule.
Joel: On the other hand Congress did not approve the gardens budgets for the following year.
Joel: If approved by degree as it stands.
Joel: There is a high probability of underfunding of the tax reform going through Congress has a low probability of vessels.
Joel: Finally, there are foreign trade Europe artificial system compromise the sustainability of public financing in the medium term.
Speaker Change: Correct, Yeah Autonomous Autonomous committee of the fiscal rule highlighted that the proposal is not consistent with the compliance of the group in the coming years.
Speaker Change: The higher cost of risk premiums partly explains the recent devaluation of the exchange rate, which has surpassed the prior year of 4500 barrels per day.
Speaker Change: From the international from a good result for the United States economy, and the Victoria, but not strong generates expectations of higher inflation on the shallower reduction in interest rates supporting a stronger dollar.
Speaker Change: There is also a risk of diplomatic backlash at Columbus governmental blessed with that of the United States on topics such as gross unsecured put.
Speaker Change: Put it together explained the cautionary approach upon quite out of poorly guidance process offerings interest rate cuts.
Speaker Change: September October despite some expectations of deeper cuts the rate adjustments continuously multiple up 50 basis points to 975%.
Speaker Change: For 2020, we predict a recurrence rate of nine point.
Speaker Change: 25%.
Speaker Change: To sum it up growth unemployment and inflation have fared better than expected while the fiscal situations have become the biggest challenge for the country and within the space for a more up on monetary policy.
Speaker Change: For 2025, we expect grocery improved to two 6% while inflation will keep on trending downward from three 6% and the central Bank reserves its policy rate further to around 6%.
Speaker Change: Certainly on the blade to upfront and inspired relations hindered the economic recovery.
Speaker Change: That sums up our economy. Thank.
Speaker Change: Thank you.
Speaker Change: As you might understand.
Speaker Change: Thanks Camilo.
Speaker Change: Our financial system has remained solid.
Speaker Change: Facing the challenging headwinds coming from the currency.
Speaker Change: We believe that it caused some consumer credit cycle has already entered that recovery phase.
Speaker Change: Loan growth is still negative to grow into in real terms, our margins are still under pressure due to the shy action from the Central Bank.
Speaker Change: Sorry ratios such as changes into a big task.
Speaker Change: Higher liquidity and solvency requirements.
Speaker Change: Nonetheless, Colombian financial system has delivered on its commitment to our country's economy.
<unk> <unk> coverage.
Speaker Change: As part of this effort must commandments.
Speaker Change: Banks community in August to the appropriate today.
Speaker Change: This aims to a direct team.
Speaker Change: These five vessels the company rates to clients in seeks buried.
Speaker Change: Ty sectors.
Speaker Change: As of September <unk> has already these firms pinpoint seeks premium passes as part of this program.
Frank: In addition to promote housing construction bonds lower mortgages Frank did.
Speaker Change: <unk>.
Speaker Change: The spread between new great centers.
Speaker Change: Bank rate is now.
Speaker Change: <unk> living history around 2%.
Speaker Change: These hasbro ranked with salt and a rebound in Ukraine.
Speaker Change: Finally banks have efficiencies prosper the central bank rate cuts.
Corporate and consumer clients.
Speaker Change: Let me go over the highlights of our financial results.
Speaker Change: Loan disbursements increase in the system doing deep work, even though loan and deposit growth continued to be soft.
Speaker Change: In this context, we continue to outgrow our peers and increase our market share.
Or the court our banks combined gross loans grew following two upon 7% reaching 25.
2% market share by September of this year.
Speaker Change: Yes.
Speaker Change: Cause the phrase kind of asset quality improved relative to the previous quarter and operating expenses remain under control.
Speaker Change: Regarding asset quality cost of risk and delinquency for consumer loans and mortgages continue improving.
Speaker Change: A strong result in knee boating business, resulting from positive market conditions.
Speaker Change: Perfect.
Speaker Change: Sure.
Speaker Change: Finally, Nemo loans continue to be very conservative monetary policy interest rate caps affecting consumer loans and our concentration in highest quality second win some growth.
Speaker Change: As a result net income to our shareholders was 415 billion pesos a return on average equity was nine 7%.
Speaker Change: Their best we still require a third quarter in three years.
Speaker Change: Now I would like to pass the call to Diego, who will use eight tenths for Atwood.
Speaker Change: Yes.
Diego: Thank you Marty Hello, Dana I'll start on pages, eight and nine with a few charges regarding the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system.
Compatibility reasons.
Diego: On a consolidated figures under Colombian IRS as published by the strengthened the superintendency of finance.
Diego: On page eight we continue to outgrow our competitors in all loan categories.
Diego: By the end of August year on year market share gains of 65 basis points in total loans 65 basis points in commercial or 138 basis points and consumer loans and 100 basis points in mortgages.
Diego: What does the exit from the microcredit slightly shifted our market share in total loans.
We're starting to see an increasing disbursements across all categories in the banking system as rates have gone down and credit risk has decreased as mentioned by coming no leverage or households has continued rishi.
Diego: Hardly total loans disbursements for the period ended August increased 18% over three months and 23% over the year up from 5% to 13% contraction a quarter earlier.
Diego: The most notable recovery wasn't consumer loans for disbursements grew 18% over the quarter and 48% year on year, reaching 19 trillion.
Diego: Even though a strong rebound this tier three fourths dispersed was disbursed eight quarters.
Diego: On page nine the quality of consumer loans continued improving.
Diego: In the Colombian banking system, while commercial loans and mortgages slightly deteriorate.
Diego: Our banks continue to exhibit a better loan portfolio quality to you in the system.
Diego: <unk> categories.
Diego: I will now move to our consolidated results.
Speaker Change: Andre and photos.
Speaker Change: Starting on page 10.
Speaker Change: Assets grew one 3% of the quarter to 321% versus accumulating tons three increase year on year gross loans. Our main assets reached 195 2 billion pesos growing 7% during the quarter and four 3% year on year.
Speaker Change: Actual loans and mortgages continued driving our year on year growth, while consumer loans with June quarter on quarter growth following two consecutive quarters of contraction.
Speaker Change: Commercial loans expanded 5% year on year, and 1% over the quarter consumer loan growth, even though steel at a soft 0.8% year on year grew <unk>, 9% during the quarter.
Speaker Change: With payroll loans and auto loans growing one four and two 1% respectively. During the quarter personal loans growing for the first time in three quarters at 8% credit cards continuing to contract at one 8% during the quarter and finally mortgages growing at four 8% over quarter enter two 7%.
Speaker Change: Year on year.
Speaker Change: We anticipate loan growth rates to pick up in 2025 to a normalization of monetary policy stronger GDP growth and improvements in consumer loan quality, we expect to continue outpacing the banking system loan growth.
Speaker Change: On page 11, we present funding and deposit evolution.
Speaker Change: On the funding increased one 2% during the quarter accumulating seven 3% year on year.
Speaker Change: <unk> hundred 93, 4% of our funding growing eight 7% year on year, and decreasing one 2% quarter on quarter.
Posit to net <unk> ratio closed at 106%.
Speaker Change: On page 12, we present the evolution of our total capitalization, our attributable shareholders equity and the capital adequacy ratio of our banks. Our total equity grew three 5% for the quarter and six 6% year on year, while our attributable equity increased 4% over the quarter and six 1% year.
Speaker Change: During the quarter.
Speaker Change: Why don't we just issued.
This $50 million versus June two subordinated bonds that added around 130 basis points with solvents.
Speaker Change: On page 13, we present, our yield on loans cost of funds spreads and things.
Speaker Change: Namely increased 47 basis points quarter on quarter, and three 9% year on year, driven by an improvement in my investments to two 8% during the quarter.
Speaker Change: Our consolidated NIM on loans was seven basis points lower at four 2% NIM on retail loans predominantly priced at fixed rates expanded 22 to five 3%, while NIM on commercial loans.
Speaker Change: We've slowed that over ABR fell 28 basis points to three 4%.
Speaker Change: Regarding our banking segment, it's in the money loans contracted six basis points quarter on quarter to four 9% fueled part below historic levels. This incorporates our name on retail loans that expanded 28 basis points to 6% and the numerous commercial loans fell 30 basis points to four 1%.
Speaker Change: The tone of our banking segment expanded 35 basis points to four 6% driven by the same trends impacting our consolidated.
Among those expenses.
Speaker Change: <unk> two ecosystem.
Due to high funding costs, resulting from a central bank intervention rate production phase and regulatory pressures such as changes in interest rate caps that forced additional reductions in products such as credit cards and personal loans. In addition loan spreads new laws have been lower given the concentration of growth in.
Speaker Change: Higher quality lower rate as well.
Speaker Change: We expect that the central banks.
Two accelerated space and rate cuts during 2025, given the positive evolution of inflation and the current high forward looking real interest rate levels. This scenario.
It supports our view of NIM NIM.
NIM expansion over the following quarters.
Speaker Change: On pages 14 through 16, we present several loan portfolio quality ratios starting on page 15, 38 deals decreased three basis points to five 8%, while 98, Pdl's increased five basis points to four 3% consumer loans and mortgages PDL formation improved both on a 30.
Speaker Change: And the 98 basis.
The evolution of asset quality eight points to you and other consumer loans credit cycle with PDL ratios NPL formation picking during first quarter 2024 across all products.
Speaker Change: Formation for credit cards, and personal loans was the lowest in seven quarters.
Speaker Change: In line with our expectation commercial loans deteriorated over the quarter as what we presented in a couple of pages with behavior, partially offsetting the favorable effect on cost of risk up improvement in consumer loans.
Speaker Change: Finally, the annualized ratio of charge offs to average 19, Aps was <unk> 67 times.
Speaker Change: On page 15.
Speaker Change: Share of our portfolio classified as stage one portfolio remained stable over the quarter driven by a better performance in consumer loans and mortgages was offset by commercial loans coverage measured as allowances for stages, two and three as a percentage of stages, two and three known slightly fell during the quarter to 36, 5%.
Speaker Change: With coverage for consumer and commercial loans at 44, 6% and 34, 9% respectively.
Speaker Change: On page 16.
Speaker Change: Dissipated the cost of risk improved during the quarter, we expect cost of risk.
Speaker Change: 2% area with following quarters, nothing on a more favorable local macro scenario.
Speaker Change: Cost of risk net of consumer loans improved to 175 basis points to four 3%.
First quarter, yielding a positive risk adjusted NIM on loans or consumer loans in six quarters.
Speaker Change: Cost of risk net for commercial loans was 9%.
Speaker Change: On page 17, we present net fees and other income gross fee income grew four 7% year on year and decreased 5% quarter on quarter net fee income increased two 6% and decreased two 1% respectively. During these periods.
Speaker Change: Gross pension and severance fees grew 15, 7% year on year, and 8% quarter on quarter due to higher mandatory pension fund management fees.
Speaker Change: Banking fees decreased 3% year on year, and 8% quarter on quarter due to lower transaction volume and our system wide decrease in active outstanding credit cards.
Speaker Change: Income from the non financial sector contact with 18% year on year and 16, 8% during the quarter as mentioned in past calls are you on the outperformance has been driven by some concessions that are transitioning from the construction to the operation space.
Speaker Change: Finally on the bottom of the page importantly performance in other operating income was similar to that.
Speaker Change: This quarters with a higher contribution of net gain on sales of investments and OCI realization and weaker results in derivatives and FX.
Speaker Change: On page 18, we present, some efficiency ratios efficiency metrics reflect our operational efficiency initiatives.
Speaker Change: This has decreased two 3% quarter on quarter increased three 1% year on year.
Speaker Change: General and administrative expenses decreased 10, 8% quarter on quarter, and 9% year on year with operating taxes and deposit insurance accounting.
Speaker Change: 37%.
Speaker Change: Cost to assets for the quarter was two 6% improving 12 basis points quarter over quarter, and 90 basis points year on year quarterly cost to income improved to 58, 7%.
Speaker Change: Finally on page 19, we present, our net income and profitability ratios.
Speaker Change: Net income for the quarter was 416 billion pesos or $17 five pesos per share are we starting to average assets and return on average equity for the quarter were 9% and nine 7% respectively.
Speaker Change: Before passing the call back to Maria Laura and I will now summarize our general guidance for 2024, and our initial view on 2025.
Maria: For 2024, we expect loan growth between $6, having 7% with commercial loans growing between seven five and 8% in retail loans growing between five and 6%.
Maria: In the three 6% with NIM on loans.
Maria: Yes.
In the 475% NIM.
Maria: NIM of our banking segments, and the four 4% with NIM on loans in the five 1% area cost of risk net of recoveries in the two 2% area.
Maria: Two assets in the two 7% area income from the nonfinancial sector up 80% of that or 2023.
Maria: Income ratio between 20%, 25% finally, we expect our 2012 for ROE to be in.
Maria: And the six out of quarter percent.
Maria: Moving to our initial view for 2025, we expect loan growth in the 10% direct commercial loans growing at 9% and retail loans growing at 11% NIM.
Maria: NIM in the four 4% area with NIM on loans in the four and three quarters area.
Maria: All of our banking segment, and the 5% arrow with NIM on loans and a five 5% direct cost of risk net of recoveries in the 215% area.
Maria: Cost to assets in the two 8% tariff income from the nonfinancial sector of 80% of that for 2024.
Maria: The income ratio in the 20% area and finally, we expect 2025 Roe to 11%.
Speaker Change: Okay. Thank you.
Moving into questions and answers I would like to share some thoughts of Columbia and Blue bar in the coming year.
Speaker Change: Even though the economic update has been challenging over the last couple of years, our recovery trend continues to constantly.
Speaker Change: In 2025, we expect GDP growth to return to levels exceeding 2525.
Speaker Change: Present, we view a more predictable and lower inflation that is expected to fall we've been waiting days in cutbank.
Speaker Change: <unk>, allowing for a lower interest rate environment.
This will favor investment as well as businesses.
Speaker Change: And consumer confidence.
Speaker Change: Towards the end of the consumer credit and interest rate cycle.
Speaker Change: This country.
Speaker Change: We expect to return to double digit profitability.
Benefit premise stronger growth in real time.
Speaker Change: Yeah.
Speaker Change: Our increase in profitability will be driven by.
Speaker Change: And improvement.
Speaker Change: Adjusted NIM on loans.
Speaker Change: Our cost of funding of our non financial business.
Speaker Change: Commercial and operational effectiveness.
Speaker Change: Higher net income related to an increasing origination and satisfaction.
Speaker Change: So we are now open for questions.
Speaker Change: Okay.
Speaker Change: Thank you we will now begin the question and answer session. If you have a question. Please press Star then one on your touch telephone if you wish to be removed from the queue. Please press star. One again, if you are using a speakerphone you might need to pick up the handset first before pressing the numbers once again to ask a question. Please press Star then one on your Touchtone phone.
Our first question comes from the line of Brian Flores with Citi. Please go ahead.
Brian Flores: Hi team. Thank you for the presentation on the islands just wanted to ask you a bit on on mortgages.
Right because you are gaining market share.
Brian Flores: It seems that the markets.
So it's complicated in terms of delinquencies steel can you just wanted to think about your strategy for 'twenty 'twenty. One should we continue to see you.
Gaining share in these markets do you think the market will improve.
Brian Flores: Future growth.
Brian Flores: Just to have a maybe a better vision here.
Speaker Change: And also if I can a second one just a real quick just to confirm youre seeing Roe trends going into 11%.
Speaker Change: I'm just thinking this is more coming from.
Speaker Change: NIM, which I think it could be the case or a betterment in terms of cost of risk. Many thanks.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Okay Brian.
Speaker Change: Okay two questions regarding mortgages.
Speaker Change: Yes, we do expect to outpace the system or the reason for that is we are widely under weighted in mortgages compared to our peers. Therefore, we're having a chance to better what our customers are we are sending out around 15% with our let's call. It natural share somewhere about one fourth of the market. So yes, we do expect to put to use.
Speaker Change: Seeing that trend into the future then regarding the ROE trend.
Speaker Change: Basically touched on the point.
Speaker Change: When you look at our numbers our numbers have improvement in cost of risk we have cost control.
Speaker Change: And we have two headwinds there.
Speaker Change: Number one the system is growing at a low rate and we do expect the market to help us in process because we do expect to continue outpacing the system gaining some market share. The other part of the equation is the central bank is yet due to reduced over 300 basis points.
Right.
Speaker Change: We'll benefit very strongly our portfolios that had contracted previously in the cycle. The airport the key driver of recovery.
Speaker Change: A combination of those two going back to Rio.
Speaker Change: The growth rates in Colombia, and then expansion in NIM on loans as mentioned by Martin Red.
Speaker Change: We do expect the ROE to improve throughout.
Speaker Change: The year and this implies obviously going back to numbers.
Speaker Change: Closer to what our long.
Speaker Change: Sure.
Speaker Change: <unk> rates should be.
Speaker Change: By the end of the quarter and into 2020 six.
Speaker Change: Yes.
Speaker Change: Yeah.
Speaker Change: Our next question will come from the line of Daniel Mora with credit core capital. Please go ahead.
Speaker Change: Hi, good morning.
Speaker Change: Three questions from my side.
Speaker Change: I would like to understand the first one we prefer a clear downward trend in the consumer segment.
Speaker Change: Marshals continue.
Speaker Change: Alrighty.
Speaker Change: Why is the commercial segment taking longer than expected when compare today to the consumer one I would like to understand if there is a particular sector showing even a more challenging scenario. When do you expect to see an improvement in this segment, but it will be my first question.
Speaker Change: The second one is regarding <unk> I would like to understand if you can provide further color regarding the MIM and without the trading income what was their strategy taken during this quarter does show a strong improvement in booking Beckman onshore consider these to be a one off or can.
Speaker Change: We expect a better performance going forward.
Speaker Change: The last one and this question is can you repeat the guidance of the NIM for 2024 and 25% this month and the last one is regarding.
Speaker Change: The loan program with the government can you repeat how much do have disbursed under this program and what are the conditions of these loans through the half hour guarantee a batch or a subsidy of interest rates. Thank you so much.
Speaker Change: Yes.
Speaker Change: Well.
Regarding your first question on the cycle.
Speaker Change: The reason why you see commercial still lagging and the reason why we have guided into that kind of behavior is that.
Speaker Change: What you usually see in the cycles as the consumer cycle anticipates, what happens with the commercial cycle given that household start to suffer and with some that companies see the impact of other sales dropping and margins.
Starting to feel pressure. Therefore, what is happening was expected and is what you usually see in it is commercial cycle goes after the consumer side.
Speaker Change: Regarding your question on sectors.
Speaker Change: Have to realize that coupon has one partner market. Therefore, we're exposed to all sectors as in all parts of the cycle during the.
Parts of it but we do have sectors that we have to look into that are affected by the macro conditions. Therefore, obviously, we've done or what.
Speaker Change: Several years already looking into different sectors that are sensitive either to increase inflation increase in grades changes in.
Speaker Change: In exchange rate, our new telco download. This therefore, we do.
Speaker Change: Have all the time different sectors, we are looking into so I'm not going to stop in any of those to point them out as a special segment I would say at this point, we're not anticipating any large single event coming on so this is more of how the economy is reacting what gets reflected into our numbers.
Speaker Change: Regarding your question on Nemo trading income Thats, a tricky one because.
Speaker Change: It depends on how interest rates are falling down so I think youll have to look beyond the cycle and looking to the averages.
Speaker Change: Members behave.
Speaker Change: Part of the offsetting our numbers, obviously is what happens in the FX and derivative line well.
Speaker Change: What you can see into our numbers as you usually have some sort of offset those numbers that the quarters, where we have good results in the main investments are quarters, where we have poor results.
FX and derivatives given.
Speaker Change: The hedging activity around our trading portfolio.
Speaker Change: And then repeating the guidance on NIM.
Speaker Change: I'll start with the Neiman and bank for the banking sector that is more comparable to banks that do not have the nonfinancial sector. What we're seeing for this year 2024 is total NIM for the banking segment in the four 4% that we among launching a five 1%.
Speaker Change: 25 that same numbers are for the banking segment total name in the past.
Speaker Change: Percent resi 60 basis points roughly improvement in NIM on loans in the five 5% area 40 basis points improvement yet below what historic averages look like.
Our guidance for total name that includes the interest expenses from our non financial sector.
That caused the numbers down total NIM for this year and the three 6% area and NIM on loans in the 435% area for next year, four 4% total NIM and NIM on loans or 75%.
Speaker Change: I can.
Speaker Change: Regarding the possibility of Jay.
While the financial sector our commitment.
Speaker Change: The financial sector.
Speaker Change: Whereas 55 trillion pesos in loans now so after one more then.
Speaker Change: We saw that.
Speaker Change: Dissipating.
On Colombia.
Speaker Change: Colombia policies about the results of these operators.
Hey, Tom Weyl Rainbow these bars and pinpoint seek Sweden vessels.
Speaker Change: Shelley in industry renewal energies housing tourism and the only sector that is not according to our our homes.
Speaker Change: When they let the government call popular economy. So we have to find a way that we can.
Oh.
Speaker Change: Uh huh.
Speaker Change: The demand for is creating in the marketplace in the clubs.
Speaker Change: Perfect. Thanks, so much.
Speaker Change: One last question regarding the same six trillion, but you already disbursed.
Speaker Change: What are the conditions of these loans do they have.
Speaker Change: We're on piano onshore there is a subsidy to the interest rates or are they under normal conditions.
Speaker Change: As you know all of that nature, and then housing great. We have a special conditions, because lower right now with the rate of New Orleans.
Speaker Change: Some guarantees.
Speaker Change: And we are working for our equity business.
Speaker Change: Mi pulmonary economy with some entities.
Speaker Change: Government like caffeine and feed.
Speaker Change: But nothing on the guarantee that this is the way we're working these hospitality.
Speaker Change: Our next question will come from the line of Marlin Medina with Jpmorgan. Please go ahead.
Marlin Medina: Thank you.
Marlin Medina: I'll follow up on the loan growth outlook I would like to ask.
First.
Speaker Change: You mentioned in the guidance.
Speaker Change: So you can kind of repeat the great quality loan growth between commercial and consumer and number two the competitive environment promotional we want to keep our growth in both houses.
Speaker Change: Competition in your view like react group. Thank.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: Perhaps the main change that we are already seeing is a pickup in growth or consumer.
Speaker Change: There are many reasons for that from the supply and demand side from the demand side rates have fallen substantially and we're looking into over 300 basis points reaction next year.
Speaker Change: So from the demand side, you see that then yes.
Speaker Change: Unemployment hasn't deteriorated setting a different way the employment market continues to eat healthy.
Speaker Change: And finally from the supply side.
Speaker Change: We've already begun to see an improvement in quality that it allows us to be more determined and lending in those segments in certain products that we have shied away for some time and therefore, it's a good mixture from the demand and supply side to see that.
Speaker Change: Increased.
Speaker Change: Sure.
Speaker Change: One of the drivers that is coming into the team here is.
Speaker Change: We are returning to see much better growth real terms growth foremost consumer products.
Andy.
Andy: I know you had a last question you were.
Speaker Change: Hey, David are competitive the competitive landscape.
David: Colombian market is very competitive and we've mentioned that as well. Other calls for example, we are concentrated in his berthing and the higher quality loans.
David: <unk> segments. Therefore, we see a lot of competition there because the market does behave in that manner.
David: We have.
David: Very strong competitors that we respect.
David: Not only the larger players, but also other players in certain products. So that's the dynamics of the Colombian market. We are ready to be part of that and are ready to eat and what part of what generates competition in the system.
Speaker Change: Perfect very clear. Thank you and then just can you repeat the loan growth you're expecting for commercial and consumer.
David: Specifically.
David: Yes.
David: Loan growth.
David: For this year for commercial with the seven 5% to 8% with retail growing at five 5% to 6% retail including consumer.
David: And.
David: In mortgages and then for next year, we're looking into commercial.
David: 9%.
David: That is a slight pickup compared to this year, but retail growing at 11% that is very substantial compared to this year.
David: So overall this year would be between six 5% to 7% and next year and 10%.
Speaker Change: Again, if I can ask a question press Star then one on your telephone keypad and our next question will come from the line of.
Speaker Change: Julian <unk> with <unk>. Please go ahead.
Hi, everyone and thank you for the question.
First of all I would like to I don't know if you already spoke about that.
Speaker Change: Thank you Nicole, but I don't know if you mentioned something about the R&D 90 bonds that you are trying to issue for 400000 million pesos.
Speaker Change: You can give us a little bit corner of the uses of guide on what is important for us too.
Speaker Change: To acquire shares of some subordinated financial entities. So just to have a little bit color of that.
Speaker Change: <unk> related.
Speaker Change: What do we need and Coca Cola again, I don't know you can turnaround time.
Speaker Change: About <unk> operation what are your expecting for 2025.
Speaker Change: And it was.
Speaker Change: What was the main positive impact of those company into in the risk of default during this quarter.
Speaker Change: Finally, just two to no one.
Speaker Change: The expectation, making the long term in terms of ROE.
Speaker Change: You mentioned that the provisions for 2075% I don't know what have you.
Speaker Change: Lincoln put on a higher ROE for the next few years or that she has been long term ROE that you are trying to get thank you.
Speaker Change: Okay. So let me start.
Speaker Change: Bottom.
Speaker Change: Regarding our OE.
Speaker Change: We expect our row long term or medium term to return back to north of 15%.
Speaker Change: That's where we believe we should be heading it by the end of next year and into the following year.
Speaker Change: Regarding Puerto Andino.
Speaker Change: For many it has been.
Speaker Change: Yes.
Speaker Change: Rather than the operation throughout this year.
We expect it to continue to add to a group wide.
Speaker Change: Obviously, there's many scenarios there business is usually there is no. If there is any change with the pension reform, where the numbers will be similar to what we've seen in the past and then is a reform.
Speaker Change: Yes as expected.
Speaker Change: You might see a pick up in net income for the following years.
Perhaps lower growth longer term.
Speaker Change: Regarding corticotropin Canaccord Columbia, I know you've heard our last calls we've been guiding into a reduction in income from the non financial sector over time and the reason that we have given as we've seen.
Speaker Change: We are proud of our projects moving from the construction toward the operation space. Once we have information to disclose on the new projects that we are trying to build a pipeline that we're building you will get that information, but that's where we're focused at this point short term critical I'm gonna will strongly benefit from.
Lower interest rates given that their projects.
Speaker Change: Have a relevant portion of the impact of interest rate expense and as interest goes down and Youll see particular, OPI that picking back up.
Speaker Change: Regarding.
Speaker Change: Our local bond.
Speaker Change: It's a small bond.
Our bond that should be.
Speaker Change: Let's say somewhere around $70 million, we're the one of the main use is as we have.
Speaker Change: Year end.
Speaker Change: During this weekend in a few weeks we have some.
Speaker Change: Bonds coming due that.
Speaker Change: Shored up $40 million and we want to continue being present in the market. Therefore, that's the reason why we're going back to the mine.
Speaker Change: There are no further questions at this time.
Speaker Change: With Daryl I turn the call back over to you.
Speaker Change: Okay.
Thank you very much for being with US in this call and see you in the next call.
Speaker Change: If I can say.
Speaker Change: Thank you ladies and gentlemen. This concludes today's conference. Thank you for joining you may now disconnect.
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Speaker Change: Yes.
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Speaker Change: Okay.
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