Q2 2025 Bancolombia SA Earnings Call

Speaker #1: At this time, all participants are in listen-only mode. Following the prepared remarks, there will be a question-and-answer session. During the question-and-answer session, if you have a question, please press star then one on your touch-tone phone.

Speaker #1: Please note this conference is being recorded. 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.

Speaker #1: All forward-looking statements, whether made in this conference call, in future filings, in press releases, or verbally, address matters that involve risks and uncertainties consequently.

Speaker #1: 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.

Speaker #1: With us today is Mr. Juan Carlos Mora, Chief Executive Officer, Mr. Mauricio Botero Wolff, Chief Strategy and Financial Officer, Mr. Rodrigo Prieto, Chief Risk Officer, Mrs. Catalina Tobon, Investor Relations, and Capital Markets Director, and Mrs. Laura Clavijo, Chief Economist.

Speaker #1: I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer. Mr. Juan Carlos, you begin.

Speaker #2: Good morning. Welcome to Grupo Sebas Second Quarter Results Conference Call. Please go to slide three. I am pleased to share our first results as Grupo Sebas.

Speaker #2: Our new holding company. Our formation involved legal transactions, asset transfers, and mergers that led Bancolombia to transfer Banizmo Banco Agricola, BAM, Neki, Renting, Wenia, Wampi, and other investments to Grupo Sebas.

Speaker #2: This transformation did not impact our operations, asset portfolio, debt structure, or revenue generation capacity. Therefore, the consolidated financial results reported under Grupo Sebas correspond to those that Grupo Bancolombia will have achieved if the corporate changes implemented on May 16th have not occurred.

Speaker #2: For my goal is to optimize capital allocation. Increase corporate flexibility and boost value creation and distribution. Such through our ongoing share repurchase program, launched on July 17th, with the goal to buy up to 1.3 trillion pesos in a bination of common preferred and ADRs until June 24th, 2026.

Speaker #2: As of July 31st, 5.2% of the total shares had been repurchased. Now, please proceed to slide four. With the creation of Grupo Sebas, we consolidate our position as a solid regional financial group with a strong footprint.

Speaker #2: We offer an integrated client-focused value proposition by delivering customized financial solutions to a wide range of clients in our operating countries. Our approach adapts to local market trends while drawing on regional strengths promoting diversification and supporting sustainable long-term growth.

Speaker #2: Additionally, the corporate structure supports efficient capital allocation for both organic and inorganic growth, as well as various organizational developments, with the aim of creating value for stakeholders.

Speaker #2: In addition, our ability to expand complementary businesses supported by customer insights and data access contributes to our value proposition and competitive advantages. Now, please proceed to slide five.

Speaker #2: We offer a wide range of financial services covering banking intermediation, transactional and banking services, asset management, treasury, and capital markets, amongst others throughout Colombia and Central America.

Speaker #2: As of the second quarter of 2025, we serve over 33 million clients. Colombia remains our core market in which Bancolombia leads the financial sector with over 18 million clients and a market share of 28% in loans and 26% in deposits.

Speaker #2: At a consolidated level, Bancolombia integrates fiduciary, brokerage, investment banking, real estate fund, and offshore banking services. Our Central American operations offer valuable diversification. Banco Agricola leads in El Salvador.

Speaker #2: Banizmo is second in Panama, and BAM ranks fourth in Guatemala, each with growth potential in their markets. In addition to our traditional banking services, we are continuously enhancing our digital and transactional ecosystem.

Speaker #2: Neki, our digital bank, now serves more than 25 million clients with an activity ratio approaching 80%. Wampi, our payments platform, facilitates both payings and payouts for small and medium-sized enterprises.

Speaker #2: Furthermore, Wenia is a strengthening our presence in the digital asset sector throughout initiatives such as COPW, a stablecoin-backed by the Colombian peso. Now, please proceed to slide six.

Speaker #2: From a capital allocation standpoint, Grupo Sebas principal entities are its four banks: Bancolombia, Standalone Accounts for 48% of the holding's equity, and 66 percent of the total assets as of June.

Speaker #2: While Banizmo, BAM, and Banco Agricola comprise the remaining portions. Moreover, returns over capital are mixed. Bancolombia Standalone recorded a 26% pro forma ROE in the second quarter, calculated over the average equity of the first and second quarters assuming the transaction had been executed by ERN 2024.

Speaker #2: Which implies a lower amount as per the capital de-consolidation that took place. What this metric clearly reflects is the merits of the corporate evolution demonstrating more efficient capital allocation on the main operational entity, thereby driving value creation for shareholders.

Speaker #2: On the other hand, Banco Agricola continues to deliver high returns that significantly exceed its relative size, outperforming both Banizmo and BAM. Now, please proceed to slide seven.

Speaker #2: In the second quarter of 2025, we achieved robust financial performance. Aligned with our long-term corporate strategy and supported by our operational strengths. Return on equity increased to 17.5%.

Speaker #2: Primarily due to strong net income resulting from an improved net interest margin and reduced provision expenses. Notably, the net interest margin rebounded to 6.6% driven by growth in both loans and investments, which will be discussed in further detail.

Speaker #2: Cost of risk of 1.6% and declining non-performing loans ratios highlight the ongoing enhancement of our asset quality. It is also noteworthy that deposits continue to exceed loan growth on both quarterly and annual basis, maintaining a notably low cost despite increased competition.

Speaker #2: The double leverage ratio for Grupo Sebas is at 105%. Indicating solid creditworthiness and providing capacity for further expansion. Furthermore, Neki reported loans totaling 1.1 trillion pesos, reflecting a substantial 4.7-fold increase over the previous year.

Speaker #2: This growth has also driven further cost efficiency, which will be discussed in more detail later. I now hand over to Laura Clavijo, Chief Economist, for a summary of the macroeconomic landscape.

Speaker #2: Laura?

Speaker #1: Thank you, Juan Carlos. If you could please turn to slide nine. The Colombian economy continued to gain momentum during the second quarter, driven by strong domestic demand, household consumption, and a modest recovery in investment.

Speaker #1: The IEC, a monthly indicator of economic activity, expanded at an annual rate of 2.7% in May. Meanwhile, our now-cash Bancolombia, based on transactional data, suggests the economy grew by 2.9% during the first half of 2025.

Speaker #1: As a result, we maintain our GDP growth forecast of 2.6% for this year and 3% for 2026. Key macro indicators including inflation and employment and consumer confidence have continued to stabilize and have thus far mitigated the impact of a volatile global environment and broad-based risk aversion.

Speaker #1: Nonetheless, both monetary and fiscal policy face significant challenges ahead. The central bank has adopted a cautious stance throughout much of 2025. Despite inflation falling to 4.8% year over year in June, the monetary authority has kept the policy rate unchanged at 9.25%.

Speaker #1: These decisions reflect the need to anchor inflation expectations anticipate potential price pressure from a higher than expected minimum wage in 2026 and prevent second round effects.

Speaker #1: We expect inflation to end the year above 5%, with interest rates maintaining a predominantly restrictive posture. On the fiscal front, Colombia faces mounting challenges in both the short and medium term.

Speaker #1: In recent years, the fiscal deficit has deteriorated, widening from 4.2% of GDP in 2023 to 6.7% in 2024 and is projected to exceed 7% in 2025.

Speaker #1: Overly optimistic revenue projections high interest payments rigid budget structures and reluctance to implement necessary spending cuts led to the activation of the escape clause of the fiscal rule for the 2025-28 period.

Speaker #1: Furthermore, the generous 2026 budget proposal underscores ongoing concerns about fiscal sustainability. As a consequence, credit rating agencies Moody's and S&P recently downgraded Colombia's sovereign rating—a move that had largely been priced into sovereign assets, which have weakened in line with increased risk premium.

Speaker #1: Nevertheless, Colombia continues to enjoy a strong reputation in financial markets with a solid track record of debt repayment and credibility that compares favorably to other countries in the region.

Speaker #1: Please turn to slide 10. Turning to Central America, most countries are closely monitoring slower than expected US growth. New tariff announcements and potential policy shifts that could affect remittance flows.

Speaker #1: El Salvador is expected to grow by approximately 2.2%, supported by low inflation and robust investment and infrastructure and tourism. Country risk has improved significantly in recent years, and a newly signed IMF agreement has placed fiscal consolidation at the forefront of policy.

Speaker #1: Guatemala, known for its macroeconomic stability, is projected to grow 3.6% this year, driven by strong domestic demand that uld help cushion a ential slowdown in exports.

Speaker #1: Finally, Panama is gradually recovering from the 2024 copper plant shutdown and disruptions to its canal operations. Growth is expected to reach 3.7% in 2025, underpinned by increased infrastructure investment and solid tourism activity.

Speaker #1: I will now hand over the presentation to Mauricio Botero, who will provide further insights into the 2025 second quarter results. Mauricio?

Speaker #2: Thank you, Laura. Please go to slide number 12. As of the end of June, the loan portfolio represented 75% of our total assets. It was almost flat during the quarter, partially explained by a peso appreciation of 2.9%.

Speaker #2: However, these results represent a 4.4% growth over the year. The commercial loan portfolio remained almost flat over the quarter, as demand remains weak. On the flip side, consumer loans regained momentum, primarily driven by our operation in Colombia.

Speaker #2: Tied to Neki's exponential loan growth and a continued positive trend in credit card and payrolls. Mortgages remain at the fastest growing segment on a quarterly and an annual basis.

Speaker #2: Fueled by the rate cut program launched a year ago. Please go to slide number 13. As of the end of June, our loan portfolio in Central American banks represents 25% of our total loan book in pesos, providing valuable diversification across markets and currency exposure.

Speaker #2: These, combined with the commercial loan book from our offshore operations in Panama and Puerto Rico, bring the overall loan book in US dollars to 31% when converted into pesos.

Speaker #2: When analyzing by operations, Bancolombia and Banco Agricola continue to lead loan growth, whereas BAM and Banizmo experienced slower activity in different segments. Please go to slide number 14.

Speaker #2: Deposits grew 2.4% in the quarter, accumulating a 9.6% expansion during the year, outpacing loan growth. Such growth is especially positive in savings accounts. Which was 4% over the quarter and 16% over the year.

Speaker #2: Driven by Bancolombia and Banco Agricola. Where our rich and client engagement are particularly strong. Time deposits were almost flat during the quarter. But grew 4% over the year, and checking accounts kept on growing steadily.

Speaker #2: This ability to attract and retain a stable low-cost deposit remains a key competitive advantage even as new competitors emerge. Furthermore, it provides ample room for loan origination going forward.

Speaker #2: Please go to slide 15. It's encouraging to see the evolution of the funding mix, with savings accounts now representing 42%, which has a very positive effect on overall cost.

Speaker #2: Most of those accounts are very transactional, which provide a stable and low cost of funding. Interestingly, as well, is the fact that within time deposits, online time deposits continue outpacing institutional time deposits, contributing not only to a more stable but also cost-efficient funding base, as this allows for faster repricing.

Speaker #2: Thus, cost of deposits remained very competitive at 4.2%, recording a slight increase over the quarter, but remains well below Colombia's industry average and central bank's reference rate.

Speaker #2: Also of note, the cost of other liabilities fell due to the maturity of loans with banks and long-term debt. Please go to slide 16.

Speaker #2: Net interest income increased by 2.5% during the quarter, driven by growth in loans and investments. In the case of loans, despite mild overall growth, the expansion of the consumer segment offset the impact of lower interest rates, resulting in a 1.8% increase in interest income from loans.

Speaker #2: On the other hand, given the ample liquidity kept during the quarter, we held an enlarged investment portfolio that generated incremental yields, recording a 12.2% interest and valuation income growth in the quarter.

Speaker #2: This positive performance on interest income coupled with a very competitive funding cost explains the rebound in NIM, up to 6.6%, reflecting our effective assets and liability management.

Speaker #2: When broken down by entity, Banco Agricola and Banizmo posted higher NIMs driven by robust loan growth in the case of Banco Agricola, and higher reference rates in the case of Banizmo.

Speaker #2: In contrast, NIM at BAM remained flat, as loan expansion was concentrated in the commercial segment, which carries lower yields. This proceeds to slide 17.

Speaker #2: Revenues from fees increased over the quarter and over the year, the positive performance in the quarter is mainly explained by an increase in transactional volumes.

Speaker #2: Particularly in credit and debit cards. And higher revenues generated through wealth management services, brokerage, trust, and investment banking. Also of note, bank assurance resumed its growth in the period, and despite the year-over-year deceleration, were confident that as we increase consumer loan originations, this income source will increase accordingly.

Speaker #2: Peer-related expenses increased during the quarter, driven by higher royalties on credit and debit cards, increased third-party collection costs, and higher expenses related to banking agent transactions.

Speaker #2: Please go to slide 18. Moreover, I want comment about the significant progress we're ing in developing and scaling other complementary businesses within the group, which play a critical role in strengthening our competitive advantages in terms of low cost of funding, access to transactional data, and fee income generation.

Speaker #2: For example, Wampi has built a robust, scalable payment gateway for small and mid-sized merchants that has achieved sustained growth in active users and transactional volumes through payments, disbursements, and an array of other value-added services.

Speaker #2: In the case of Wenia, we have seen promising client engagement and a growing volume of digital asset operations in its earliest stage. As more users joined the ecosystem and scaled their transactional activity, we anticipate sustained revenue growth in the medium and long term, driven by increasing fee generation.

Speaker #2: And finally, Neki, has proven its ability to attract and retain users by scaling up the digital neobank platform as we will discuss later. Please go to slide 19.

Speaker #2: In line with the positive momentum observed in the last 18 months, asset quality showed further improvement in the second quarter as all geographies exhibited good performance in general.

Speaker #2: With the exception of the retail portfolio in BAM. Consistently, the 30-day NPL ratio declined while the 90-day remained flat. Both displaying comfortable coverage levels.

Speaker #2: Notably, consumer loans continue recovering, which is particularly relevant as we plan to continue growing in this segment. Especially in Colombia. The sustained improvement in credit performance is particularly evident when analyzing the loan book by stages.

Speaker #2: Over the past year, the share of loans classified in stage one has consistently increased, indicating a healthier portfolio. Consistently, the shares of loans in stages two and three have steadily declined, mainly associated with retail segments in Colombia and in Panama, where we have made significant progress in the recovery of non-performing loans.

Speaker #2: Please go to slide 20. Moreover, net provision expenses came in at 1.1 trillion pesos. Recording a 32% annual drop. This was explained by a better-than-expected performance across all segments, along with a specific provision release that offset an increase driven by revisions to macroeconomic forecasts.

Speaker #2: An update to model parameters. Thus, the quarterly analyzed cost of risk was 1.6%, flat to the previous quarter. When broken down by entities, the trend of cost of risk is mixed reflecting diverse macroeconomic and portfolio dynamics.

Speaker #2: In Colombia, the bank continues to benefit from predicted tools resulting in healthier vintages. In the case of Banizmo, the better performance observed during the quarter on consumer and mortgage resulted in lower provisions on retail.

Speaker #2: However, compared to the first quarter, provision expenses increased due to higher expected credit losses for a specific corporate clients and a base effect stemming from a parameter update implemented in Q1.

Speaker #2: On the flip side, Banco Agrícola and BAM increased provision charges in the quarter, driven by an increase in consumer loan origination seeking to boost risk-adjusted returns.

Speaker #2: All in all, the consistent better performance exhibited during the last year is a clear example of our disciplined approach to risk management. Leveraged by robust underwriting models and predictive analytics, which support smarter and faster decision-making through the credit cycle.

Speaker #2: Please go to slide 21. Operating expenses grew 5.7% during the quarter, mainly driven by administrative expenses such as financial transaction taxes related to the payment of ordinary and extraordinary dividends.

Speaker #2: Legal fees tied to the incorporation of Grupo Sebas and technology-related costs supporting transactional channels amongst others. Thus, the efficiency ratio increased to 51%. On a yearly basis, expenses are growing 11.8%, primarily explained by an increase in other taxes and a base effect on bonus client provision aligned with stronger projected year-end results.

Speaker #2: Net of FX effects, annual operating expense growth would have been 10.1%. As the year progresses, we anticipate that the annual growth figure will moderate.

Speaker #2: Influenced by seasonal patterns and base effects. It is worth mentioning the efficiency gains across our Central American operations where we expect to sustain a gradual improvement on our cost to income ratio as we remain committed to operational excellence and regional scalability.

Speaker #2: Please proceed to slide 22. Net income increased by 3% quarter over quarter, driven by the rebound in NIM consistent growth in other income sources and lower provision expenses.

Speaker #2: Bringing the year-over-year growth to a strong 24%. Consistently, ROE jumped to 17.5%, and ROTE to 21%, reflecting the strong operational performance. Bancolombia remained as the primary contributor with close to 78% of total net income.

Speaker #2: Outpacing its share of assets and capital respectively. Now, please proceed to slide 23. Shareholders' equity for Grupo Sebas increased 1.6% quarter over quarter, mainly driven by net income generation despite the payment of extraordinary dividends.

Speaker #2: Tier one ratio for Bancolombia Standalone as of June closed at 11%. Which, if compared with the previous quarter on a pro forma basis, it grew 43 basis points over the quarter and 75 basis points over the year.

Speaker #2: Reflecting the organic capital generation, Bancolombia's total solvency reached 13.5%, growing 22 basis points during the quarter and 92 basis points during the year on a pro forma basis.

Speaker #2: Now, please proceed to slide 24. Neki continues making good progress towards reaching break-even. Performance over the last year has been remarkable. Deposits have grown over 77%, reaching nearly 6 trillion.

Speaker #2: Loans have grown nearly five times. Its activity ratio is now close to 80%, and its total income has increased 90%, contributing to significant cost dilution and robust ARPAC growth.

Speaker #2: We're y optimistic with Neki's business model. It's a scalability and long-term value generation potential. With this, I will now hand the ation to Juan Carlos.

Speaker #2: Juan Carlos? Thank ou, Mauricio. Please proceed to slide 25. Year to date, Grupo Sebas originated 35 trillion pesos as part of its business with purpose strategy.

Speaker #2: Achieving a total of 324 trillion pesos. The organization's objective for 2030 is to disburse 716 trillion pesos throughout initiatives aimed at supporting sustainable communities advancing financial inclusion, and enhancing the country's productive capacities.

Speaker #2: Regarding Bancolombia, additional accomplishments in this period include the validation of the its emission reduction targets by the Science-Based Targets Initiative, SBTI, as well as achieving the top ranking as the best company to work for according to Merco.

Speaker #2: Please refer to slide 27. Finally, I would like to present our revised guidance for 2025. According to recent market dynamics and updated macroeconomic forecast for the year-end, loan growth has been adjusted to approximately 5.4%, and net interest margin to about 6.3%, reflecting changes in net income and loan volume.

Speaker #2: The cost of risk is now projected to range from 1.6 to 1.8% due to ongoing improvements in asset quality. Consequently, return on equity has been revised to approximately 16%.

Speaker #2: Please proceed to slide 28. The transition to Grupo Sebas represents a significant advancement in our strategy to enhance shareholder value. Neki is steadily progressing toward its goal of achieving break-even by the first quarter of 2026.

Speaker #2: Demonstrating disciplined growth and operational efficiency. The improvement in our asset quality supports expansion into higher yielding consumer loan segments, thereby strengthening our profitability prospects.

Speaker #2: With a solid balance sheet and a stable liquidity, we are well positioned to capitalize on growth opportunities and adaptably manage the complexities of the current macroeconomic landscape.

Speaker #2: This concludes our presentation of the second quarter results. At this time, we welcome any questions you may have.

Speaker #1: Thank ou. We will now be conducting a question and answer session. If you have a question, please press star then one on your touchtone phone.

Speaker #1: If you wish to be removed from the queue, please press star then two. If you are using a speaker phone, you may need to pick up the handset first before pressing the numbers.

Speaker #1: Once again, if you have a estion, please press star then one on your touchtone phone. Our first question comes from a line of Ernesto Gabilondo with Bank of America.

Speaker #1: Please proceed with your question.

Speaker #3: Thank you, Hi. Good morning, Juan Carlos, Mauricio, Catalina, and good ning to all your team. Congrats on your results, and the revised guidance, and thanks for taking my call.

Speaker #3: My first question is if you can provide any update on the political landscape ahead of the presidential elections. And what do you think are the key dates that we should be monitoring?

Speaker #3: And the second question will be on your NIM expectations. Just wondering, what do you see NIMs normalizing after more stable interest rates over the next years?

Speaker #3: We have been seeing resilience rates in this year. So how do ou see NIMs evolving next year? Should we expect more pressure? And on other hand, what will be the strategy to protect NIMs?

Speaker #3: I don't know if with a better loan mix, when I look to consumer loans today represent 20% of total loans, I noted that in the last year they represented around 22% of total loans.

Speaker #3: So I don't know if that could be one of the solutions to protect NIM in the next years. And then I have a question of cost of risk.

Speaker #3: It performed much better than expected. As you mentioned, it could be around 1.6, 1.8% a year. So what do ou see the sustainable level for the cost of risk over the next years?

Speaker #3: Especially if you start to resume consumer loan growth, if you have better economic prospects. Thank you.

Speaker #2: Thank you. Thank you, Ernesto. And thank you for your questions. Let me address some of them, and I'm going to ask Mauricio and to help me with some of your of the answers.

Speaker #2: And also, I am going to ask Laura Clavijo to provide additional color on the macro situation, because it's clearly related to what is going to happen with our NIMs in the coming year.

Speaker #2: Let's start with your first question. The political landscape in Colombia is fraught with issues. I mean, there is a lot of polarization in the country.

Speaker #2: We just yesterday was started the last year of the current government. Meaning that already we have three years of this government. So the all the electoral noise started very early in Colombia.

Speaker #2: And it will continue to be an issue in the coming months. Still, it's a little bit early to try to understand how it's going to be that the environment and the who is going to be going take the lead on this electoral process.

Speaker #2: I think by October, there are some primaries in some political parties that will start adding some clarity of who are going to run. And by the end, by the beginning of next year, we will have, I think, clarity on who are going run.

Inflation remains a risk and is not yet in the target of the central bank that will probably delay, the reduction of interest rates next year and we will we will have um, a better marginal respected in in the coming year. But by the end of the year, probably we will we will reach around 6%. Nim at this point, I I will ask Laura to give us some more color about how we see inflation, and how it's going to be the posture of the Central Bank related to that inflation trends.

Thank you, hon, Carlos to compliment a bit. Um, we are seeing, um, good Dynamics in terms of, uh, economic activity. Uh, our Now cast Bank Columbia with, uh, information to to towards July is showing uh, 3 moving, uh, H months average of 3.2% growth. This is kind of uh a precursor to what we might expect of, um, GDP growth, moving forward. So we're seeing robust activity. Uh, mainly driven by consumer, uh, the Commerce sector and, uh, we still see the agricultural sector, uh, quite strong, as well as Services coming from the entertainment business. Uh, this uh, in line also with the inflation expectation is something that also the Central Bank noted as possible.

Also, uh, have some, uh, doubts regarding when to lower rates, uh, given inflation pressures. Uh, and in general sense, that's why we, uh, still maintain our 5.1%, uh, inflation, um, forecast for this year and 3.9%. Uh, next year, we will be revising, uh, these, uh, issues. Uh, as soon as we come around September. Uh, but um, we also anticipate a, a minimum wage, uh, that will be packed for for, for 2026 that, uh, is announced. May come also at a high rate as, um, in in previous years. So In Sum these pressures to inflation, uh, lead us to believe that, uh, the central bank will continue with a more cautionary approach. Uh, even though, of course, inflation will continue its descent and uh, rates will, um, come to to, to, uh, a trend of cuts, but at a lower pace.

Uh, thank you Laura with, with this, uh, Ernesto. We will, we will continue seeing, uh, some pressure on on him but probably delay on time, uh, and that will help our our results. And as you mentioned and and that's going, that will be, that is going to be the, the case we will continue adding more Consumer loans that that also will help on, or on on maintaining our our margin. Uh,

I've been some pressure on on, Provisions, since the, the original origination of Consumer loans will will add some, some Provisions. But, uh, with all of of these elements, we think that we can manage that, uh, reduction that is going to happen in on, on time. And we will adapt very well to to that to that, uh, to that trend.

Regarding cost of risk. Uh,

as you mentioned, our guidance is between 1.6 and 1.8 for this year. We think that uh, you to the last results and what la la mention about the economic uh performance of the of the Colombian economy, er, er, we see positive Trends. So we are optimistic that we can continue managing the cost of risk and, uh, we could be more around 1.6. Uh, by the end of, of the year. Uh,

Our sustainable level is more around 1.8 to 1.9. So this year, due to what I mentioned regarding economic activity, the level could be more around 1.6. I don't know about you, but if you want to add something about NIO or cost of risk.

No 1. That's a very clear thanks. Yeah, no, super helpful. Thank you very much.

You are welcome.

Our next question comes from the line of Yuri, Fernandez with JP Morgan please proceed with your question.

Thank you all and and congrats a very good quarter here. Uh, I I think that funding uh on the margin side, pretty pretty good. I I have just 1 clarification regarding the, the bunk Columbia unit Roe. Uh I see on your slide 35 uh about 16 and a half. Roe for bunk stand alone but on your press release. I also see 25 Roe for Bond Columbia, stand alone. So just trying to understand because I, I know, with the group there were some, you know, moving Parts on on Google and and, and some intangibles reclassification. So, just trying to understand, uh, here the, the, the earnings power of the Columbia unit, uh, what is the, the Roe you are seeing in the Columbia unit, and then I have a follow-up regarding next. You already discussing the presentation and, and I think the They are packed versus cost to service light. Is a is a pretty nice 1. Uh, if you can comment a little bit on your, uh, views for break, even I I think the message

Has been always for 2026. Um, I know the cost to serve, they don't include kak and some other expenses. But just trying to understand what is your your view for Nike, uh, in the coming like, could we see, you know, break even sooner for 2025, that kind of message. Thank you very much.

Thank you, Yuri. Let me, let me take, take your question about Nikki and then Mauricio will address uh, your, your question about the Roe and

Let me start by saying that we are very happy with the developments at Nikki. The

Number fuse, users active users erh the level of of deposits. Uh, the integration of, uh, Bank Columbia Amano has been very, very successful. Uh, so

Trends are are, are are very positive particularly we are. We are uh, very happy with how the loan book. It's performing and and it's behaving. Uh, we continue adding loans on on Nikki. Now, we are at the level of uh by the end of of of the semester of 1.2 billion uh and continue adding adding more more loans and with that.

With a good performance, which is key. Uh, so uh, we will continue, we thinking that is that Trend um, additional Services also are are positive and are, are are generating fees.

So, on top of this performance, we are seeing that Nikki. It's it's very close to bridge erh.

Uh, the level in which we are at the break-even.

That could happen this year, and we are optimistic that with the trends that we are seeing, Nikki, we will reach, uh, probably that level.

Uh, by the end of this year, uh, uh,

And and and as I mentioned activity, activity is good. So we will continue adding additional Services. We have plans to continue adding services to our to our customers. Uh it's Nikki in in in Colombia it's it's today used for more than 21 million uh million uh clients. And also we are started in adding clients in El Salvador and and and Guatemala. So very positive Trends uh and break even. Uh we will think we can reach that app. And second semester is not at the latest in the in the first quarter of of next year. Yuri regarding um, Roe miso will take your your question.

Hi, Judy. And before I go to your question about Roe, uh, I would just like to comment on the, on the measure. We have for Nikki. As you know, uh, most of the fintech in the market, uh, are measured by rpac minus CPS, but when we think about Break Even we like to think about net income break even and that includes, uh, operational expenses and cost of risk. So our measure is is more stringent. And that's why we, we don't believe we, we have reached Break Even yet, but we're very close.

Now.

In terms of ROE, the ROE that you see in the mid-20s.

It's a pro forma ROE for the Colombian operation.

If uh, you calculate, the Roe with the average of the last 12 months of equity, you're going to see that the equity of bank. Columbia was significantly higher, uh, press. So so that's why you see the 16.5%. But the proforma ROE is the 1, you should be looking at and and in any calculation that that you do on the Roe of the Colombian operation,

Is it going to be above 20%?

But bear in mind, we're going to work with proformas until we build the 12-month history.

Look, super clear. Mauricio, and thank you, Hank and Carlos, for the comments.

Thank you, Yuri.

Our next question comes from the line of Lindsay Shema with Goldman Sachs. Please receive it with your question.

In the past, uh, but it sounds like there should be some cost of risk pressure and some of the impression, uh, going forward. So, I just wanted to hear the pathway to kind of maintain that 16% going forward. Thank you.

Hi, Lindsay. Let me break down the guidance for the loan book. So we're thinking about 5.4% overall, and the breakdown is commercial loans, growing at 4.2%.

Consumer loans are growing at 7%, and mortgage loans are growing at 7.5%.

And now, regarding your second question, um,

It's about the sustainability of the ROE, right? Mhm.

Yes. So

The the we the way we're thinking about, are we going forward is a managing both operational wise, the banks as you can tell we're um, delivering better results, not only in Colombia but also in Panama. And in El Salvador and we're having a particular retail uh segment asset quality situation.

Ation in bum, but that's going to be looking better next year.

So, operationally, we are looking better in terms of the capital structure, the way we're thinking about buybacks, and the way we're thinking about the double leverage ratio and the different capital ratios. This allows us to consider sustainable ROIs of 16 going forward.

Does that complete your question?

Yes, thank you.

Our next question comes from the line of Andhra Soto with Santander. Please proceed with your question.

Thank you for the presentation and the opportunity for us to ask questions. Uh, my question is regarding your comments on Nike.

I would like to, to understand a little bit about the economics of, uh, lending in Nikki, what is uh, the type of cost of risk that you are getting their. What is uh, the the margins that uh, you are seeing? What is the average loan, how scalable is that business? Considering the the restrictions for interest rates in Colombia, what is the potential, uh, Market within your large customer base. How many of those really can can get a loan? Uh, considering uh,

You know, the the Gap that you have uh on the on the loan yield.

Uh, thank you Andres.

Let me, let me give you some additional information about the loan book in Nikki.

As I mentioned, the level of the volume of the loan book at the end of the semester is $1.2 billion. The average loan is around 2.5 million pesos.

Uh, so meaning that we have around 600,000 clients now with with loans.

uh, the interest rate it's

very close to the

To the highest rate that we can charge. So, it's around 25%.

Uh and remember that the cost of funds of of Nike it's it's very low. So we have a a a financial margin that that is that is good, in terms of that allow us to to absorb uh uh risk and regarding risk. Erh, the the level of past due loans.

ER,

on a 30-day basis is around 5%.

And the cost of risk of those loans, it's more, it's around 9 10% uh but with all with all that economics that loans are are profitable. Uh, so and I want to emphasize something about your question. It's, it's the potential as I mentioned, we now have around 600,000.

Loans. But we have a total number of users of 25 million 20 active, so we continue uh evaluating the credit worthiness of of these clients and and they and the potential and we will continue adding uh adding loans.

uh,

taking care of of risk because that's for us. That's the the key part. I mean, we have the potential, we have the customer base. Uh, they are now, uh, recurring users of, of, of Nike. Uh, but we need to to continue building, uh, on how. Uh, the, the risk is, is performing. Uh, so far, we are doing very well in that regard. It's into the parameters that we were, that we estimated. Uh, and, and as I mentioned, we will continue, we will continue adding adding, uh, loans on on that book. So the the perspective are are in our view, very positive Andres,

Thank you very much, very helpful. Um, and and, and you you mentioned, uh, the the average loan. What, what is the duration of of that loan on on on average and as you scale up the business, are you expecting to extend duration or is is going to be the the same type of product that you are offering? Now, just of being offered to a

That are based on customers.

Hi, Andreas. The average ticket in Nikki is around $100 and the duration is up to 5 years, but the average is 28 months.

And we will continue with that product. I mean, we, we are not expecting to move as I may as well. Mention its 28 months. Uh, we are an average of of 500 dollars to, to 5 to 2.2 million pesos. Uh, uh, so around 20 to 25 months will be, will be the average duration of, of the loans.

That that's very helpful and just 1 final question. Uh, how, how many disbursements new disbursements? Uh, do you guys conduct that quarter, um, or however you measure that?

We are averaging, uh, around 100 and, uh, and 150. Uh,

150,000 pesos; that's around 50 million. Uh,

40 million a month.

Uh, with an average of 500. So uh,

Until until or in the first semester that uh, adds uh, around 600,000.

300 billion pesos to the, to the loan, uh, to the loan book. So, the dynamic is very positive and it's it's every month we we are in around uh,

Uh, something like 50,000 new customers to that, to that, uh, book.

Perfect. That's very clear. Thank you. And congratulations on the results. Thank you. Andrés.

Our next question comes from the line of Brian Flores with City. Please proceed with your question.

Uh, hi, Tim. Good morning, and thank you for the opportunity. Uh, I want to ask you about your efforts in cost of funding, particularly in Colombia. We see...

Very stable as a percentage of the reference rate, right around 50%. So, I just wanted to ask you if you think this is sustainable, and if you could elaborate a bit on that.

On, on the Air Force, you're doing how sustainable they are to see this. I would say very controlled cost of funding in Colombia and then I have a question, maybe it's a follow-up on on Capital distributions. You mentioned about the BuyBacks.

And would you be accelerating this mechanism at, at the current levels? Given the, the price action? And I think that's it would be a great to understand. Thank you.

Hi, Brian. And

Regarding uh, cost of funds and we're focusing more than in a rate per se. We're focusing more on the value. Proposition we have for our customers and making that value. Proposition is interesting enough.

Principality of our customers maintaining transactional as the focus of our strategy allowing us to to maintain various stable low low cost of funding. And that's the way you see savings accounts growing significantly.

even though the the cost of funds for those savings accounts, it's

2.3% now uh we're growing savings accounts. We're growing um checking accounts and in time deposits we're not only growing but we're also um changing the mix evolving uh from institutional investors time deposits to retail digital investors time deposits, allowing us to have lower rates and allowing us to re price faster, erh those time deposits. So

Overall uh a very uh positive uh trend on funding costs which allows us to manage the margin compression that we mentioned before. And

Now, going back to your, um, capital distribution and the buybacks. Yeah.

Capital D.

Distribution.

The the way you should think about Capital distribution. Brian is in terms of solvency 1 ratios in the different operating Banks. So remember we used to think about 11%,

Solvency, uh, capital.

Um, Tier 1, capital for Bank Columbia, as the trigger for dividend distribution, that's going to be the the same way going forward.

And the buyback.

Are going to allow us to maintain that distribution levels because of the double leverage ratio. We're having

As you can see the 105, double leverage ratio is a an underlever uh, capital structure. So we the dividends coming from the operational entities.

Plus the liquidity, getting in the holding company, that's going to give us ample space to continue doing both.

BuyBacks and dividend distribution that can grow in real terms.

A perfect super clear if I may just a very quick follow up on on Lindsey's question. Um, you mentioned structural cost of risk around 1.8, 1.9 is this already including the acceleration in Nikki.

Uh, yes, Brian. Yes. Uh, that considers the dynamic in consumer loans, including Nikki.

Support here. Thank you.

Thank you. Alright.

Our next question comes from the line of Carlos Gomez Lopez with HSBC. Please proceed with your question.

Hello and good morning and thank you for extending the call and taking all the questions. Uh, first I wanted to congratulate you because I think you just celebrated your 30th Anniversary listed in the New York Stock Exchange. Um, so many more to come. Um, we have a time in which you are changing your structure. Uh, Surah your main shareholder is also changing in the structure. Uh, do you see

And we have asked this before, but this was checking again. Do you see any change coming from the restructuring, at their level that could affect you or any change in the relationship between the 2 companies in the near or mid-term future? Thank you.

Uh, hi Carlos.

As, as you mentioned, we we are we are very happy with the evolution that we are having. Uh,

Particularly the creation of of, of group, of CVS for us, was was a great.

success, uh, and is showing positive results that is going to give us additional

More clear structure in which all our stakeholders could evaluate, our our performance, the performance of the bank, we will continue adding new, uh, businesses that complement our financial services offer offerings in a different in the different geographies so that the structure allow us flexibility. And and, and, and future developments, uh, uh, uh, at the same time that is, it's, it's very, it's more. It's very clear to, to our stakeholders regarding future developments in terms of of shareholders that depends on, on, on, on them. Particularly we, we have a, a structure in which we have Pension funds. Uh, we have our ATR program, we have our shareholders in in Colombia, and Surah, which is our

Our, our main shareholders. Now, it's concentrated on on financial services and their main main investment is. It's uh, it's a bank Columbia. This is structured. It's, it's in again, it's it's, uh, it's a listed company with all the

Benefits of of uh, public company that reports to the, to the public markets. And and we have a very solid base of of shareholders. So we are very happy with the structure that we that we built. And uh, with the flexibility that adds in our corporate developments and uh we are the main, the main investment of of of Surah that now is a financial services. So I think that will consolidate that relationship.

Um, okay. Now, what 1 thing that we noticed is that both companies have uh, important International operations but they, there is limited to the apps, right? They are in Chile that in uh, Mexico. You, you are in Central America. Uh, do you see that changing in either direction in the future?

As I mentioned, our new corporate structure, give us a lot of of flexibility. And at possibilities, we will explore, uh, any option that is good for the evolution of repositories that and that will add uh, value to our, to our stakeholders. So, uh, with this new structure, we we will continue exploring new, new new avenues of of of growth. Uh and uh we will explore them. And and we will take them if they make sense for our shareholders.

Thank you very much, Juan Carlos again. Congratulations on the results and on the creation of the structure, thank you.

Thank you, Carlos.

Thank you. We have reached the end of the question and answer session. I'd now like to turn the floor back over to Mr. 1 callers more for closing comments.

Uh, thank you for joining our second-quarter results conference call.

We look forward to welcoming you on our

Uh, third quarter call. Uh have a good day everybody.

Thank you for your participation and have a wonderful day.