Grupo Cibest SA (CIB) 2005 Q1 法說會逐字稿

Good morning and welcome everyone to Bancolombia Q1 Year 2005 Earnings Conference Call. Today's calling is being recorded. With us today, we have the President & Chief Executive Officer Mr. Jorge Londono, the Financial Vice President, Mr. Jaime Velasquez, and the Executive Vice President Mr. Frederico Ochoa. At this time, I would like to turn the call over to Mr. Londono, please go ahead sir.

Thank you. I wish to thank each and every one of you for your interest, and attendance to this conference call, which we have prepared to share with you Bancolombia's results, and also to present some comments on the merger in the last part of this presentation. I would like to mention that a slide presentation is being made available at the company Investor Relation web site at www.bancolombia.com, which is also presenting a new design. At this time I would like to introduce Jaime Velasquez, who is Financial Vice President of Bancolombia who is going to explain briefly the latest facts of the Colombian economy. Go ahead Jaime.

Thank you. During the first month of the year, the Colombian economy maintained its positive strength. Last year the GDP grew about 4%, the financial status will 93% and local portfolio performance for commercial bank grew about 80%. During that the GDP (inaudible-heavy accent) for the first quarter have not been release in two separate version and energy demand which are of course typically related to the GDP, have been showing a good performance.

Consumer prices we make are low level. We want to communicate our confidence that the Central Bank will attain this year inflation target of 5%. Similarly, interest rates remains low and stable at 73%. On the other hand, an important (inaudible-heavy accent) available during March has decreased three (inaudible-heavy accent) points within a level of 30%.

The national market has been and will be a source of opportunities for the Colombian economy. During last year, international trade percentage at strong dynamism. Exports increased 26% and imports 21%. This trend been unchanged due to the business of commercial relations, related to trade agreements, import and others about to take place. As you can see these are favorable environments for the financial business. Therefore we expect that the bank install a sustainable as the performance of the Colombian's economy maintaining this trend. After I speak with you of the economy, I would proceed to Mr. Londono who is going to go over Bancolumbia's results. Thank you.

Thank you. With respect of Bancolombia's results we have the following highlights. Net income from the first quarter of the year amounted to 127 billion pesos increasing 3% when compared to the 127 billion for the same period of last year. The bank net loans show various strong growth, they increase 28% in a year-on-year basis. With this very positive figures in corporate and retail segments and on the other hand the investment portfolio only increased 4.6% thereby restructuring the banks assets to the credit portfolio.

Regarding the increment statement on a year-on-year basis, interest of loans increase 22.5% while interest from investments dropped 24.5% explain mainly why the bond prices declined. Net fees and income from services maintain a positive trend. During the first quarter they amounted to 113 billion pesos increasing 14% as compared to the same period of 2004. The result of the figure review is an annual return on equity of 26.9% on an annual return on assets of 3.1%.

Now, let's take a look at the Bancolombia's balance sheet up to March this year. As you can see in the slide five, we have very positive growth figures over the year. Bancolombia's total loans increased 5.8% over the quarter and 27.8% year over year. In slide number 6, you can see that the year with year growth figures are in all types I mean in all the lines of credits. Corporate loan started to grow at 17.5% and this is very significant of the dynamic of the Colombian economy. Retail loans are growing 34.3% and financial leases maintained it's robust growth with an increase of 63%. It shows the that bank has been very effectively targeting the different sources of demand for trade.

Additionally, even we show in the slide number seven, the has new loan as a percentage of total loans, reach a level of 1.66% with our coverage ratio of 255% at the end of March. Now on beside of that liabilities, the bank has been able to form these various strong growth based on its traditional surface of funding such as checking accounts and savings accounts as well as time deposits.

You can in the slide number 8 that the bank deposits increase 17.5 during the year. Interest bearing deposits were up 18.4% over the year while non-interest bearing increase 14% in the same period.

We show the behavior of shareholder's equity in the slide number 5 and as you can see shareholder's equity was down 5.2% during the quarter due to the annual dividend approved during the shareholder's meeting, which is entirely accounted for at this date at the end of the quarter. Nonetheless, if we compare shareholder's equity with the year, this represents an increase of 17.2% compared with the figure at the end of the first quarter 2004.

In March 2005, the Bank's consolidated ratio of technical capital to risk weighted assets was at 13.1% very well above the Colombia's regulatory capital. We already mentioned going to the income statement that we have a net income for the first quarter of Col$127.7 billion. We have a total income of Col$294.6 billion decreasing 7.5% compared with the same period of the previous year. Interest on loans continued its very positive trend while interest on investment decrease 34.5% and that was due to mark to market impact on Colombian's bond prices which took placed at the end of the quarter, when domestic rates incorporated the expectations of faster rate increases by the Federal Reserve of the United States.

As you've probably are aware this was a generally effect in the emerging market seller bonds. Still we would like to give you an update of the Colombian bond prices. You can see in the slide number 12 the historical drop on the most representative bond with a 7-year maturity. This bond was traded at 12.28% interest at the end of 2004 and went up 12 basis points during the quarter. However, now-a-days these bonds is being traded below 12%, recovering and even improving the basis price that it had at the end of last year.

Now on provisions, the provisions of loans and interest amounted Col$32.2 billion during the quarter increasing 8.6% as compared with the previous quarter. The quarterly decrease and in recoveries is sustained mainly by non-recurring events that we mentioned to you in the fourth quarter of the year 2004, that increase recoveries of that period in Col$25 billion. The income continues to be one of the Bank's main strategies, net fee amounted for Col$112.9 billion increasing 5% over the quarter. We showed it in the slide number 13, this is a 14.3% increase compared with the first quarter of the previous year, and it now represents 46% of the operating expenses, and 88% of the Bank's net income.

We now have slide 14, the credit cards, that percent are very good and dynamic. Our billing increased 18.1% during the first quarter resulting in more than 18% market share of the Colombia credit card business. Total operating expenses were stable over the quarter amounted to Col$244.9 billion and that is an increase of 10.6% compared with the first quarter of 2004. As you can see in the slide 15, the bank efficiency seems to stable at 53.9 during the quarter but when comparing with its operating expenses to total assets, the movement trend is evident, some improvement reaching 6.1 during the present quarter that we are reviewing.

Now on operating income, during the first quarter this increased 14.8% in year over year basis. Due to higher dividend income, from all our previous companies such as (inaudible-heavy accent) in which the bank now holds less than 50%, and therefore is not consolidated. On other subsidiaries as we present in the slide number 16 during 2004, Bancolumbia (inaudible-heavy accent) portfolio was stable while its investment portfolio dropped 26%. The bank reported a net income of $6.1 million during the first quarter decreasing 39.6% when compared with the same period of the previous year. On a year over year basis, the interest for loans show a very good performance increasing almost 28% while interest on investments dropped 28% explained by two specific reasons. The first one is the decrease of the investment portfolio in volume and the second one is the lower trading activity.

It is important to highlight the fact that gains of sales of investments totaled 6.1 billion during the first quarter 2004 for Bancolumbia Panama alone while they only amounted about 0.5 million for the first quarter of this year. Now, just some comments on the merger that we announced, the merger process runs on a schedule. As we have announced, we foresee the closing on the first half of the month of July. We are happy to have maintained a very dynamic growth path and a very stable market share for our main products during these initial stages of the process, which are supposed to be the most problematic.

The new management team has been selected. A week after the general shareholder's meeting, it was announced. As you already were able to see, the most professional and best skill executives from the key institutions are now in the new directed management meeting of the new institution. This is what we wanted to present to you related to the more significant events of the bank during the first quarter.

We are now all ready to take your questions, thank you.

[Operator Instructions]

Your first question comes from Ben Laidler.

Hi, good morning gentlemen. I guess its just a general question, just is to what you have seen on the competitive environment over the last 3 or 4 months, first on the lending and the funding side, I guess, especially as you go into the merger process, just what are the competitor's?

Okay, thank you. Yes, as we mentioned, we are maintaining and even increasing our market share in the main probes and particularly lending, we have seen that the dynamic of the bank is very high in its small and medium sized enterprises where we maintain a very healthy growth and in the micro-credit and consumer credit in general. The corporate credit is reviving, it's growing more than 17% and we are happy with this result. We see a very competitive environment as you mentioned, but we maintain the competitiveness of our wholes and our commercial agents and we believe that this going to remain so in the coming months.

If I can just follow-up, I mean do you think the environment has become more competitive over the last three or four months?

Certainly it has because that the general market is growing faster and the liquidity of the market is very, very high. The market has been more competitive, but Bancolumbia is behaving in the same way and maintaining its market share.

Right, thank you.

You are welcome.

Your next question comes from Valerie Fye(ph).

Yes, hi good morning. My question is related to the asset quality of the bank. In the first quarter, we saw relatively high increase in the level of loans, I think it was like 21% quarter on quarter. And a slight deterioration in your main ratios, the pass of loans, or the total loans and the coverage, so I am wondering if you expect this trend to continue in coming quarters or do you think this is just related to specific events of this particular quarter or what are we to expect going forward on this issue?

Thank you Valerie. Yes, this is as you mentioned, there was an increase in our quarter loans. We have been expecting this movement to happen because as we were saying in our previous conference calls, the total volume of loans was nothing with the structural process of the bank and with the path that we have been moving very aggressively in downstream in the credit portfolio and also into consumer loans. But we don't believe that, that this is a deterioration that might worry us since this is still into very reasonable ratios. We are going into the future, as you asked, we believe that there may be a slight increase. But we are not seeing anything that means a sign of worry.

Okay, thank you.

: You are welcome, Valerie.

There are no further questions at this time.

Okay. We want to thank again for your presence in this conference call in which we presented our results for the first quarter, in which we have a very strong growth in our credit portfolio, and we also registered some declines in the investment portfolio (inaudible-heavy accent) bond prices that we have explained. But we are satisfied with the results of the bank. On the other hand, we have also reviewed the process of our merger in which we register that we are on schedule and foresee the closing for the merger in the first half of the month of July.

We will be happy to answer your questions and there are the telephone numbers and the name of the people who will be ready to attend any inquiries, and the mail addresses of them as well.

Thank you very much, and good-bye.

Thank you. This concludes today's conference call. You may now disconnect.