Grupo Cibest SA (CIB) 2009 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Bancolombia's Fourth Quarter 2009 Earnings Conference Call. My name is Veronica, and I will be your coordinator for today.

At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session.

(Operator Instructions)

Please note that this conference call will include forward-looking statements, including statements related to our future performance, capital position, credit related expenses, and credit losses. All forward-looking statements, whether made in this conference call and future filings and press releases or verbally address matters that involve risks and uncertainty.

Consequently, there are factors that could cause actual results to differ materially from those indicated in such statements, including changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by our targeted clients, changes in business strategy, and various other factors that we describe in our reports filed with the SEC.

With us today is Mr. Jorge Londono, President and CEO of Bancolombia, Mr. Sergio Restrepo, Executive Vice President of Corporate Development, and Mr. Jaime Velasquez, Chief Financial Officer.

I would now like to turn the presentation over to Mr. Jorge Londono. Please proceed, sir.

Thank you. I would like to extend a warm welcome to all of you, and our gratitude for being attending to this conference call, in which we are going to present our results for the fourth quarter and the full year of 2009.

We would like to make first a presentation of the financial market and the macroeconomic environment of the region where we work, and particularly of Colombia and El Salvador. Sergio Restrepo, our Executive Vice President, is going to make this presentation. Please, Sergio, go on.

Thank you, Mr. Londono. Good morning. And let me start saying that Colombia and El Salvador were not immune to the declining global economic activity during 2009. The Salvadorian economy contracted around 3% in 2009, while its headline inflation ended in a negative territory, contracting 1.4% over the year.

External shock caused a significant reduction in external demand, lower remittances, and lower foreign direct investment. The Salvadorian financial system reported a 7.5% loan contraction in 2009. Nonetheless, the solid capital base obtained in the years previous to the economic slowdown preserved the quality and the strength of the system. All in all, the system's capital ratio ended '09 at a ratio of 16.6%.

In Colombia, as of December '09, the economy contracted 0.3%, which favorably compares with the region's performance. However, we face a challenging environment. Unemployment figure increased to 11.3% in December '09 from 10.6% the previous year. Remittances decreased 15%, and total, US$4.1 billion, while total exports decreased 13% over the year, particularly impacted by a 34% drop in trade with our second largest partner, Venezuela.

On the positive territory, government spending grew 2% over the nine month period ended September 30, 2009, driven by policy spending in infrastructure projects. Fortunately recent data and leading indicators signal the end of the economic decline phase in Colombia. In fact, some growth during the fourth quarter of the year would take the full year GDP growth variation close to zero.

It is worth pointing out that Colombia maintained permanent access to international debt markets. The amount of foreign direct investment was significant, and the central bank was able to perform countercyclical measures to support the economy. Since December '08, Colombia's central bank reduced its repo rate 650 basis points, while the headline inflation ended 2009 at 2%.

Under these circumstances, we're optimistic, and we expect a moderate recovery for 2010. After this quick review of the economic environment, let me turn the presentation back to Mr. Londono, who will discuss the bank's results.

Thank you, Sergio. I would like to invite you to take a look at the presentation that we have made available in our investor relation website that is going to be presenting some illustration of the areas that we are going to discuss.

In our fourth quarter, our total earnings were COP371 billion. That is 16% higher than the earnings of the third quarter, and 26% higher than the same quarter of last year. For the full year 2009, we have generated COP1.26 trillion in net income. That represents our return on the average shareholders equity of 19.6%.

We are gratified by these results, which are obtained, as Sergio mentioned, in a very challenging macroeconomic environment. And these results are not significantly below what we obtained in 2008. As you can see in that graphic, we are very well above what we had in 2007. And on top of that, we have ended the year with a very strong balance sheet, as we have added significant reserves for loan losses and generated additional capital.

Let us begin the discussion by taking a look at the net interest income. And that is the main component of our operation and income, which is about 69% of our total operation and income.

If we take a look at slide number three, we see that our net interest income totaled just about COP1 trillion in the fourth quarter. And that is an increase of 23% from what we had in the previous quarter. And that was driven mainly by the interest from investment securities, and also for a better net interest margin during the quarter. For the full year, net interest income totaled COP3.8 trillion, with an increase of 7% when we compare it with the previous year.

It's important to notice that during the fourth quarter, our income from investment securities was positively affected by non-recurring effects. I will take a moment further down in this presentation to explain those non-recurring effects in more detail. But, let's now focus on the recurring results on this net interest income.

After deducting the non-recurring positive effects, the income from -- and income from investment, net interest income is still showing a growth of 2% during the year, in spite of margins compression and the reduction of the total loan book.

So let's take now a look at the area of net interest margin and our funding costs. We have some illustration of that in the slide number four. With respective net interest margin, you may recall that the majority of the loan book in Bancolombia is in variable rates. In addition, the repricing pace of our assets tend to be faster than that of liabilities.

However, we focus on trying to speed up the process of repricing our deposits, and we were successful of that in the second half of the last year. Those efforts, together with a richer funding mix -- a better funding mix, resulted in a lower funding cost.

The annualized weighted average deposit cost dropped to 3.4% in the fourth quarter, down from 4.2% that we have in the third quarter of last year. This lower cost of funding allowed us to defend our margins in spite of additional reductions in interest rates during the quarter. In fact, our recurring net interest margin rebounded 40 basis points to 6.7% in the fourth quarter.

Looking ahead, we expect net interest margin to be much more stable during this year, 2010, than what it was in the previous year when we were suffering the adjustments of the monetary policy of the country during in the crisis.

Now when we look at volumes of credit, we have some illustration of the movement of it in slide number five. And as we can see, there was a reduction of loans in the fourth quarter. Our gross loans ended the year with a decline of about 6%.

The second half of the year was a period marked by very significant prepayment of loans and some sluggish credit demand. And all of it was mainly caused by the various strong bond issuance activity of local firms in the domestic as well as in the international debt market.

We have the estimate that COP6.6 trillion in bonds were issued by non-financial firms during the year, COP5.3 trillion more than what they issue in previous years. As a result of this environment, corporate loans declined 9% during the year. Likewise, tougher economic conditions and a weakened labor market and lower consumer confidence in general, together with a more [current] stance in our part has slowed the retail and SME lending activity. As a result, loans in this segment declined 5% during the year.

In contrast, mortgage lending activity remained very dynamic, driven mainly by the Colombian government housing subsidy program that was implemented in April. Taking into account securitized loans, the mortgages for Bancolombia increased 4% over the quarter, and 9% over the year.

Looking ahead, we continue to expect a moderate loan growth for most of the year, with an acceleration of the activity by the second half of the year. Given the expected GDP growth between 2% and 3%, we expect loans to grow between 5% and 8% this year.

We would like to give more detail on the interest on investments. Going indeed to slide number six, we see that the interest on investment securities increased significantly as a result of the better performance of our fixed income portfolio, due to higher bond prices, and also as a result of non-recurring effects on the quarter. As seen in the graph, some of the investments were positively affected by revenues of COP158 billion, obtained in the fourth quarter in connection with non-recurring events.

In the first place, Bancolombia holds an investment of the private capital firm Fondo Inmobiliario, which acquires and manages real estate assets. Since the beginning of October, we stopped the consolidation of these investments, because we were not any longer holding a controlling share of this firm.

Therefore, not having a controlling share, we reclassified such investment as trading. And we started to take the valuation of this fund into our net income. Consequently, the interest income from investment securities was positively impacted by non-recurring income from this source in about COP100 billion, derived from the increased market value of the units represented real estate that the fund holds.

Additionally, the Colombian financial regulators make adjustments in the process used in the accounting of the residual income generated by pools of securitized mortgages. As you know, we hold about 70% of all the mortgages that we securitize, and the process of the (inaudible) of these pools is very conservative.

Therefore, at the end of the period of each one of the pools, there is profit which is not accounted for. As a result of that, we accounted for about COP58 billion in the fourth quarter in profit coming out of the securitized mortgage that are in our books.

Now I would like to take a moment to explain the non-interest income, and also our expenses. We have some illustration of it in the slide number seven. Net fees totaled COP1.5 trillion for the year. And that is an increase of 15% compared with the same period of last year; a very positive result that demonstrates the value and the strength of the model -- the whole financial service model that we are developing.

It is worth mentioning that credit, debit card and fiduciary business fees show a very significant growth during the last year. Other operating income totaled COP381 billion, and that is a decline of about 41%. The drop in this figure is explained by less income related to derivative financial instruments, which was abated by non-recurring charges realized from regulatory adjustments that we explained to you in the first time of -- during the first half of 2009.

In addition, there is a base effect that should be taken into consideration for comparison. And it's that, as you probably recall, in 2008, Bancolombia sold its interest in Multienlace, which as part of that transaction, we had non-recurring gains in that year of COP92 billion.

Looking ahead, we continue to be optimistic about non-interest income. We are still focusing in cross-selling initiatives that could help us deliver double-digit growth in fees, while we believe that other operating income will be stronger this year since we are not longer affected by non-recurring charges and devaluation of derivatives.

With regard to operating costs, 2009 operating expenses totaled COP2.83 billion. That is an increase of 10% over the previous year, and represents 51% of our income; a higher cost to income rating than the 48% of the year 2008.

During 2009, we continue applying a lot of cost containment initiatives. We expanded our cost manager program, which assigns monitoring responsibility to a group of specialized participants over the major categories of expense with the objective of identifying and eliminated efficiencies, and doing an internal benchmarking of best practices that have had already good results. And we can see that we've continued to have good results in the management of expenses.

We also continue to enforce our strict -- very strict vendor and outsourcing policy, which is the time to take advantage of our local scale and the position of the bank in the local market. However, our cost cutting effort remains limited by increasing charges and expenses related to the software development and IT upgrades that we continue to invest in the overhauling on our banking core systems and our operational process. This ongoing effort will continue for a couple of more years, and aims at elevating our productivity and efficiency in the long run.

The asset quality area is a very important element in this year, and that has to be analyzed in detail. We have some illustration of it in the slide number eight. Past due loans, in our case those loans which are overdue more than 30 days, decreased over the quarters, and totaled COP1.63 trillion. Consequently the past due loan ratio improved slightly, reaching 3.9% at the end of the year, down from the 4.1% that we had at the end of the previous quarter.

Despite these times of (inaudible) delinquencies, credit costs grows for the fourth quarter, and even increased as compared with the third quarter that was already had. Provision charges, net of the coverage, totaled COP300 billion, which is 2.9% on the average loans when we analyzed that ratio.

Bancolombia maintained a very strong and very well covered balance sheet against these credit risks. Allowances for loan losses represented 5.8% of total loans, but allowances represented 149% of past due loans, and 113% of loans classified C, D, and E. Again, remember that the parameters of our past due loans are very strict. And we apply the Colombian [installment] to all our books, including the Salvadorian book.

Looking ahead, we have better expectations for economic activity and signs of a stability in the asset quality. And our currently adequate levels of reserves allow us to be more positive about the asset quality and provision burdens of 2010.

For the last ten years, annual provision charges have represented an average of 1.6% of total loans. Today, up to two years provision and about 2.5% of loans a trend of declining credit costs is taking hold. It might be reasonable to expect that provisions will return to a level between 2.0% and 2.5% during this year, given the sustained recovery of the economy.

In liquidity, that we illustrate in the slide number nine, we have had very good outcome. Deposits outpace loans, reaching COP42.15 trillion, and increasing 4% during the year. Consequently, our liquidity position was further strengthened.

And ratio of loans to deposits and borrowings from development banks reached 88% at the end of the quarter -- at the end of the fourth quarter, which compares very favorable with the 96% level that we had at the end of the year 2008.

Overall, regardless of the type of currency, we maintained a solid liquidity position, one of the cheapest funding costs, and a stable base of deposits which constitutes our main pillar of our competitive advantage.

Capital position also is very good. You can see that in slide number ten. Driven primarily by the banks operating results and capital generation, our shareholders equity ended the year at COP7.03 trillion, or $3.44 billion. This represents an increase of 15% compared with the previous year.

Additionally, Bancolombia's capital ratio increased during the year from 11.2% to 13.2%. Our accordant capital adequacy ratio is 423 basis points, above the minimum required by the Colombian regulating agent, while the basic capital ratio of tier one represented 10.4% of risk weighted assets.

And intangible capital ratio, which is equal to shareholder equity after deducting goodwill and intangible assets, divided by tangible assets, represented 9.9% at the end of the year. On a quarterly basis, the capital ratio decreased as a result of the regulatory adjustments, and increased the impact of financial derivatives in the risk weighted assets in Colombia.

Let me finalize by saying that we are gratified by the performance of the bank throughout this very challenging period. Our return on average shareholders equity was 19.6%. And that demonstrates the value of our franchise and it's earning potential in a year like the one that you -- we have just left.

We are also very happy with the results that are backed by a very strong balance sheet, as well as by lower leverage capital structure. Looking ahead, we are confident regarding the future prospects of our business and our ability to generate value for shareholders who are investing in our operation, as well as remaining committed to serve our clients.

Our strong balance sheet, solid liquidity, and capital position place us competitively in our markets, from where we will pursue the opportunities and face the challenges that we encounter.

At this time, we will be very happy to take your questions and to respond to your comments. Thank you.

(Operator Instructions)

Your first question comes from the line of Tito Labarta from Deutsche Bank. Please proceed.

Hi, good morning. I just had a question regarding more the political environment, just given the recent announcement that the President can run this year. I'd like to get your thoughts on how you think that could play out and how that could affect the economy and the outlook for the bank because of that. Thank you.

Thank you, Tito. Yes, in fact as everyone knows, the possibility of a referendum to decide on reelection was generated by the code. We believe that from the economic point of view, this is an event which is positive in the sense that it first of all shows that we have in Colombia a democracy, and an institutional infrastructure that works.

As we have expressed in the past, we are very confident in the possibilities of the current policy of the government to be maintained. Most of the candidates that have a possibility of being elected hold a very similar strategy and a very similar political stance in front of the private firms and in front of the management of the economy.

We used to say in Colombia anything that is more favorable and more acceptable than Uribe, is Uribe's policy. So all the candidates are holding a similar stance on the economy. And that doesn't bring any anxiety to the future performance of the firm.

Okay, great. Thank you very much.

Your next question comes from the line of Jason Mollin from Goldman Sachs. Please proceed.

Hello, everyone. My question would be what is your general outlook for the macro environment for Colombia and El Salvador in 2010, particularly in terms of GDP growth, and what you think the market will grow -- the banking sector will grow in each market in terms of loans? And if you think that Bancolombia will be able to gain share in each of those markets. Thank you.

Thank you. That is very interesting. As a matter of fact, there is a lot of discussion about what is the perspective. We are still seeing in Colombia a growth of about 2% and 3%, even though we learned today that a general poll performed by the central bank is a little bit more pessimistic than that. But we believe that there are possibilities of that growth. And in El Salvador also we have seen a growth of about 2.5% for the economy.

The reasons for that are clearly that the main market for our exports in El Salvador and Colombia, which is the United States, is recovering already and therefore, opportunities are opening for the industry.

And also, as you very well know, that there are not serious damage in our economies as a result of the crisis in the sense that the financial sector and the industrial sector and the individual sector didn't have a loss in the value of their assets.

So we had a decline in the GDP growth, but the infrastructure of the economy is still up and running. And we will be able to take the opportunity to recover the pace of growth very quickly.

In respect to the opportunities of our bank, as we said at the end of the presentation, we are optimistic that we are in a very favorable position to take advantage of the opportunities that this new growth offer to us. We believe that with this growth in El Salvador and in Colombia, we will be able to have a growth on the economy of total loans of between 5% and 8%, I would say.

And the bank is with very high liquidity, very highly capitalized. And with a good coverage of our past due loans. So we will be having a good chance and a good opportunity of taking advantages of those conditions.

And in -- so is that 5% to 8% is for the Colombian banking sector in total. What about in El Salvador?

In El Salvador we are about the same. We expect that 7% will be the growth of the sector in El Salvador -- 7%, 7.5%.

And what kind of conditions would you anticipate for that loan growth to -- that would be, I guess -- that's nominal loan growth, correct, and the 2.5% to 3% -- the 2% to 3% would be real GDP growth. So your -- and your expectations for inflation, you're basically expecting loan growth in line with nominal GDP? Is that correct? What would it take for, let's say, loan growth to accelerate to levels in the past, to grow at a faster pace than GDP?

Okay, first let me make some comments about expectations of inflation for Colombia and for El Salvador. In Colombia, currently we are experiencing some high pressure on consumer index, derived from the pressures in agricultural products, from the dry season from El Nino phenomenon.

However, the central bank has made a very good analysis of what the impact of El Nino phenomenon is in the midterm performance of the economy. And what they have found is that the phenomenon El Nino in previous years has not had a macro economic effect of midterm stance. It is just a short term impact in the price of food and agriculture.

So the central bank is quite confident that in Colombia the target is going to be met. In other words, that the inflation for this year is going to be below 4%. And we believe that that is certainly achievable. So the total loans that we are expecting, as you very well say, very much in line with nominal growth of the economy.

We are in a very good competitive stance. And what we think is that with a more aggressive position for this year than what we had in the 2009, we are going to be able to grow a little bit faster than that.

Similar thing happened to El Salvador. Salvadorian economy is dollarized, as you know. Inflation could perform well this year because there is not such a high pressure as in the previous year. We are expecting there an inflation of no more than 3%, and a good possibility also in the competitive area.

If you look at our competitive stand in El Salvador, Banco Agricola performed very well. And we are proud of that in the sense that was on comparison with the average of the industry. We were the ones that were better able to preserve the profitability of the bank.

Banco Agricola performed in a profitable way during the year, which was not the case of all of our competitors. So we have a model in El Salvador that is working well and that has proved to be effective.

So just as a follow up in terms of -- so you at this point think that Bancolombia can grow a little bit faster than this 5% to 8% that the sector will grow at. Is that -- is 10% -- 10% to 12% -- I believe in the past you might have been indicating in a range of 10% to 12% loan growth for the bank. Is that still reasonable guidance for 2010?

As usual, we have bond risks to project our own figures. What I will strongly hold is that the bank has had a history of being very competitive, very effective in the competition. And that we at the current time are in a very good position to take the opportunities that this recovery of the growth path for our economies are presenting to us.

I will stop it there. And --

That's fantastic -- that's very helpful. I agree. You've done -- you've shown that in the past. Thank you very much.

You're very welcome.

(Operator Instructions)

And your next question comes from the line of Andres Jimenez from Interbolsa. Please proceed.

Yes, good morning, gentlemen. Basically I have two questions. The first question is do you consider that it's an inflection point already that we're seeing in the NIM? I see that actually if you exclude the non-recurring that you reported in fourth quarter of '09, the NIM is actually around 6.3%. I see that it starts increasing. Is that going to be the trend going forward?

And also on the PDLs, I see that you actually started to actually show a decrease now. Is that also an inflection point? That would be my first question, how comfortable do you feel for that?

And my second question comes in more in the line of provisions -- sorry, on allowance, past due loans, which I see that you guys actually already reached numbers of 150, very far away from your average of 130, 125. Is this policy going to continue, or are you going to actually start decreasing it during 2010 to actually jump into that same average of 130, 125? Thank you.

Okay, thank you, Andres. On regard to net interest margin, the answer is yes, we see that there is a more stable environment which is going to be derived from probably a slower movement in the monetary variables.

The central bank has been very explicit in saying that for the moment, if nothing extraordinary occurs, they don't see any reason for changing the monetary policies that they are presenting. In other words, we are confident that we are going to see sufficient liquidity and that we are going to experience still some long term of low interest rates in the Colombian economy.

In El Salvador, we have performed well in the process of funding the institution, and the liquidity of the bank is good. So we believe that the elements that were affecting our net interest margin, in other words, the very fast process of decline of interest, are going to be absent during this year.

So we are going to be in a more stable process, and we are going to divide the gains of better -- cheaper funding of the bank and things like that. So we will defend our margins easier this year than the previous year.

And on provisions, probably the inflection is a bit higher. What we presented is that we have reached a very high level of coverage of our past due loans already with 150%. We certainly don't see any reason why we should increase that even higher. We have 113% coverage of qualified assets, and we feel comfortable with that.

And what the economy is showing is that the process of deterioration have stopped. And we foresee that the total cost of credit is going to be reduced in this year. And rather than being above 2.5%, we believe that we are going to be below 2.5%, probably between 2% and 2.5%.

We don't want to be very extremely optimistic about it in the sense that this is certainly a slow process of recovery, and things are not going to change dramatically over the short term. But it's certainly going to be an inflection and a change in the pattern of movement of the main variables.

And a follow up question, just following with what you mentioned, it's (inaudible) here in Interbolsa that actually were encountering already (inaudible). I see the currency that's now trading at 1,894, way below what we actually called yesterday. On that performance on the loan portfolio, what type of measures have you taken more on the retail side of that loan growth on the retail sector and SMEs to actually prevent from actually having past due loans increase on that side? Thank you very much.

I don't know if I understand it correctly. Do you want to see what are the impacts that we see in the retail side from the devaluation that has taken place? Is that right?

That is correct. Basically what we're seeing is that we're seeing a very strong peso and that is basically affecting several parts of the industries. Actually we saw the other day that there was some forecast of actually the industry or the manufacturing sector decreasing considerably during the year. How could that actually affect your loan portfolio and the growth of your loan portfolio, and the actual increase of your PDLs going forward?

Well, we believe that the total weight of exports in our economy is by comparison with other countries quite low. The recent increase of exports of Colombia are mainly supported in the mining sector and new markets that are open.

We think that in the small and medium enterprises the capacity to continue to exploit the markets that they have maintained is very reasonable. And the movement of the revaluation, what we foresee that shouldn't be as strong as in the previous year in 2010.

So we don't discard the risks of revaluation of the peso. But, we are optimistic of the growth of the possibilities of lending to the retail and the small and medium enterprise market.

We believe that the small and medium enterprise market in Colombia is mainly affected positively by the growth of the internal market. Because even though the unemployment in Colombia, we have to keep in mind that income per head has more than doubled in the last ten years, and the internal market of Colombia is very dynamic and is presenting a lot of opportunities for middle size companies.

Thank you very much.

You're welcome.

Your next question comes from the line of Alonso Aramburu from BTG Pactual. Please proceed.

Hi, good morning, everybody. A couple of questions. First, if you could comment on the activity in the first couple of months of the year, whether you've seen any change in the trends, particularly in the growth of your portfolio.

And second, regarding the adjustment you made to securitized mortgage portfolio, is that something that you will have to do every year, or is that something that was done only this time and this will be the only time you can do it?

Okay, on the first month -- we don't have unconsolidated figures of February yet. But on the first month of the year, Alonso, we had quite a strong movement of prices in our investment portfolio. The interest rate moved a little bit erratically during the month of January.

February, on the contrary, even though we still don't have the results, but have been much more stable. And we believe that what happened in January was rather odd; it is not going to be the typical thing of the year. As we mentioned previously, we are seeing a very stable environment for the interest rates, and that is going to support the profitability of our investment portfolio.

Now, in the second question, the securitized mortgage portfolio, which forms a big part of our total investments, had during the end of the year a modification in the regulation of how to account for it. Just to give a small explanation -- you will understand it very easily. What happened is that this structuring of securitization in Colombia is very conservative. And a good percentage of the total value of the securitization has to be kept as a guarantee of the securitization.

When the securitization pool -- when the securitization program comes to an end, we could account for the part of the guarantee that has not been used up. There was some modification that allowed us to take that in our balance at, let's say, more of -- in a quicker manner. And that was once in a lifetime effect. That was a non-recurring effect.

But certainly, we will be able to continue always to be able to benefit from the programs that are coming to the end. And that is something that we didn't have at the beginning. Now we are seeing the maturity of our first programs of securitization. And when it comes the maturity of them, we are able to account for the guarantee which has not been used up.

But apart from that, also there was this modification in the accountancy that was a single effect of last year.

I don't know if that answers your question, Alonso.

Yes, thank you. That was very clear. But just to round it up, so that means that as the new portfolios of securitized mortgages mature, you can continue to book some of these gains going forward. Is that correct?

Right, that is absolutely correct. We are going to book some of the profits, but not as much as a percentage as we did at the end of first year.

Great, very helpful. Thank you very much.

You're welcome.

Your next question comes from the line of Jose Restrepo from Interbolsa. Please proceed.

Good morning, everybody. I have a question regarding the investment in technology that you have been doing for the last two years. And we want to know which is the amount that you're spending in changing the whole technology platform of the bank.

And regarding the problems that you faced last weekend with your server, these problems could be -- could happen in the short term and will affect growth because the problems affect badly the image of the bank to the troubles that the customer had trying to obtain money.

So I want -- my first question will be how much do you spend? And that IT problems would affect the growth in the bank in the short term.

Okay. Thank you, Jose. The fact is that during last weekend we had an operational failure that affected the transactions of our clients. But that doesn't have anything to do with the (inaudible) process of modernization of our platform. As a matter of fact, the only area in which we have already introduced our new software is in treasury but not in the core banking platform.

What happened was one of those accidents that sometimes take place in the technical system that is already overcome. And that -- right now the bank is working again at 100%. And in no time there was maintenance to the accounts of our clients or anything that could mean a vulnerability of the system.

On the other hand, total cost of our -- but I would like to say that that failure also is not showing any restriction for growth of the bank. The bank has a platform that allows us to grow and to operate the bank for the coming years without any difficulty.

The new software, what it's going to provide us mainly is with the ability to make a much modern administration of the bank. In other words, to manage the information. Also, the software which most of the financial industry is running was software that were concentrated in automatizing the transactions of the bank and the processing of the bank.

The current software, what it is doing is giving us a higher capacity to manage information for the purpose of risk management, for the purpose of management -- the marketing of the bank and market relationship management and things like that. And that is something that we are going to [write] from the software. But the growth is guaranteed, even in the current platform.

The total investment that we are expecting to have in this modernization is about $200 million.

And another question, this IT change will cover also the affiliates, including Banco Agricola?

All the subsidiaries are going to be covered eventually. In the beginning it is going to be applied to Bancolombia and to some of our offshore companies. And later on, it will be applied to the entire group of Bancolombia infrastructure.

Okay, thank you.

Okay.

Ladies and gentlemen, this concludes the question and answer session. I will now hand the call over to Mr. Jorge Londono for closing remarks.

Okay, thank you very much again for your attendance to this conference call, in which we presented the results of 2009 and our last quarter. And we showed that the results were very satisfying and very favorable, given the very challenging environment in which we developed this year.

And also the bank ended the year with a very solid and very strong balance sheet, which prepares us very well for the year 2010 that is going to present some opportunities for growth. Thank you very much.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. Have a great day.