Grupo Cibest SA (CIB) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Bancolombia's fourth quarter 2010 earnings conference call. My name is Veronica, and I will be your coordinator for today.

At this time, all participants are in 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, in future filings, in press releases or verbally, address matters that involve risks and uncertainty.

Consequently, there are factors that could cause the actual results to differ materially from those indicated in such statements, including changes in 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. Carlos Raul Yepes, President and CEO of Bancolombia; Mr. Sergio Restrepo, Executive Vice President of Corporate Development; Mr. Jaime Velasquez, Chief Financial Officer; and Mr. Juan Carlos Mora, Chief Risk Officer.

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

Thank you. Good morning, and on behalf of Bancolombia, I would like to thank you, each of you, for your interest and attendance to the [2010] fourth quarter results Conference Call.

Before starting the conference, it is a pleasure for me to introduce Mr. Carlos Raul Yepes, our new CEO. Raul has a law degree from Universidad Pontificia Bolivariana, a degree in business law from Universidad Externado de Colombia, and several extension courses at Delaware, Kellogg, Yale and an IESE-Wharton-CEIBS program in Madrid, Philadelphia and Shanghai.

During the last seven years, he was in charge of Corporate Development, vice presidency in Cementos Argos, a member of the Board of Directors of Bancolombia, a member of the Audit Committee and Risk Committee of Bancolombia.

After that, let me remind you that there is a slide presentation, where you can follow.

Now, I will transfer to Mr. Yepes, who will present Bancolombia's 4 quarter results. Mr. Yepes?

Thank you, Sergio. First of all, let me thank you for your interest in the Bank, and let me also thank you for the warm welcome I have received from some of you.

Let me start the conference with a brief view of our strategy describing the three main points. First, we do not intend to make significant changes in the operation of the Group. Secondly, we will focus our efforts on internal topics of service, efficiency and synergies. And third, we will maintain growth and profitability as our long-term goals.

With these three ideas, let me move to the fourth quarter results. As usual, we would like to begin with a brief discussion regarding the macroeconomic environment.

Let's see the slide number 2. Inflation ended 2010 at 3.17%, and in February, the number is also 3.17%. Colombia experienced pressure on this front mainly from the damages caused by the year-end rainy season to crops and [investiture] across the country.

On February 25, the Central Bank raised the repo rate 25 basis points to 3.25% in response to these inflation sparks to support that decision. We expect the repo rate to end 2011 at 4%, and inflation to finish the year within the range of 2% to 4% established by the Central Bank.

Regarding GDP growth, we consider that the figure for third quarter '10 and the weakening indicators of economic activity, will place Colombia on a figure close to 4% in 2010 and 4.1% for 2011.

Regarding Bancolombia's result for the fourth quarter 2010, net profits COP429 billion, an increase of 14% compared with the third quarter, and also an increase of 16% when we compare it with the fourth quarter 2009.

Cumulative results for the whole year are COP1.43 trillion, 14% higher than those of last year. These results reflect a lower level of provisions and good performance of non-interest income, and a growth of operating expenditures in line with our expectations.

Finally, it's important to stress the growth part of our loan portfolio, the improving quality of our assets, and the low cost of funds that resulted from our funding strategy.

Now on to slide number 3. Bancolombia's gross loans increased 7.13% during the quarter, and reached COP48.6 trillion. Of the total portfolio, 26% were US dollar denominated loans; that is $6.5 billion. These dollar denominated loans grew 13% compared to the third quarter of the year, and 30% compared to fourth quarter '09.

This performance was affected by the 6% appreciation of the US dollar versus the peso during the quarter, whereas in Colombian pesos, this growth appeared as 20% for the quarter, and 21% for the last 12 months.

The remaining 74% of gross loans, those denominated in Colombian pesos, totaled COP36 trillion at the end of fourth quarter '10, increasing 3% with respect to third quarter '10, and 14% with respect of fourth quarter '09.

When analyzing the total loans by the categories that Bancolombia uses, it's clear that Corporate Loans play a key role in the growth of the total portfolio, as they increased 10% with respect to third quarter '10. This growth is explained by the demand of working capital and capital expenditures by [thirds].

Retail and SME loans increased 6% in the same period due to the greater demand of consumer loans, driven by a more dynamic economic environment.

It's all important to mention the good performance that we have seen in mortgage loans, which reached COP3.3 trillion at the end of the quarter. If we take into account securitized mortgages, we see a growth of 4% quarter over quarter, and 11% year over year for this segment.

In the near future, we expect commercial loans to remain dynamic due to the higher level of economic activity. In terms of consumer loans, we continue now to see an increasing appetite that is mainly derived from greater opportunities for the population with respect to the economic performance. And mortgages certainly are significantly under-penetrated in Colombia, and we foresee a good growth also in that line.

Slide number 4 on asset quality, where we can see that provision charges, loan deterioration and allowances for loan losses remaining a good trend at the end of the year. During this period, net provision charges totaled COP81 billion. This represents a lower amount than the charges of the third quarter of 2010, which totaled COP138 billion.

Since we're mentioning the lower level of deterioration during the quarter, that is the loans that started being considered past due during the period, this deterioration was COP41 billion, which is 64% less than the corresponding figure of the fourth quarter of 2009. This is a sign of improving health of our loan portfolio.

Additionally, recovery of the charge-off loans and foreclosed assets increased 31% during the year. It's a positive sign, since it reflects the better economic conditions are actually having a positive impact of the Bank's loan performance.

We can also take a look at slide number 5. Past due loans, those overdue more than 30 days, were COP1.4 trillion at the end of the quarter. This amount represents 2.9% of total loans, and is lower than what we had in the third quarter of 2010, which was 3.4%; and also lower than the 3.9% we had at the end of 2009.

Bancolombia continue with a significant level of allowances for loan losses, which represented 5.2% of loans as of December. These allowances represented 180% of past due loans, a range greater than the 163% presented in the third quarter.

On the other hand, the allowance for loan losses as a percentage of C, D and E loans, was 120%. If we consider past due loans to be those overdue more than 90 days in every category, except for mortgages, where we use our 120 day standard, our delinquency ratio would be 1.7%, and our allowances would cover past due loans 3 times.

Now let's look at net interest income and [earnings] on slide number 6. Net interest income in the fourth quarter '10 amounted to COP851 billion. It was 1% lower than of third quarter '10, and 18% smaller than the figure presented in fourth quarter '09.

The low interest rate in Colombia had put pressure on the net interest income, but has been partially offset by Bancolombia's lower funding cost. This cost is the result of our efforts to re-price the liabilities during the last quarters, and of the change in deposit mix.

The weighted average costs of deposits was 2.4% in fourth quarter '10, lower than 2.5% of the third quarter, and than the 3.4% of the fourth quarter '09.

A year ago, time deposits represented 43% of the total deposits. The fourth quarter of 2010, they represented only 35%. This decline has been in line with the funding strategy implemented by the Bank in the past quarters, and aims to take advantage of the local liquidity and the low interest rates, while increasing deposits in savings and checking accounts, and reducing the time and the cost of the time deposits.

As a result, the funds and remittance paid off in checking and saving accounts went from representing 57% at the end of 2009 to representing 65% in the 2010. The Bank's large distribution network and its strong franchise have made this strategy possible.

On the other hand, the securities portfolio generated 30% less returns than it did during the third quarter. This performance was mainly explained by the decrease in price of Colombian treasury. Profits reached COP43.5 trillion, 72% of liabilities at the end of fourth quarter '10, and increased 3% during the quarter.

Now slide number 7 shows the evolution of margins in the last quarters. The annualized net interest margin was 5.9% in fourth quarter '10, lower than the annualized margin of 6.2% in 3 quarter '10. This decrease is mainly explained by the lower margin of the investment portfolio. As we mentioned before, the funding strategy is focused on keeping lower funding costs in order to defend the margin.

Net fees from services, slide number 8. During fourth quarter '10, net fees and income from services totaled COP420 billion, 8% higher than those presented in the previous quarter, and 7% greater than those presented in fourth quarter '09.

Credit and debit card fees for fourth quarter '10 decreased 3% versus the previous quarter, and remained flat versus the fourth quarter '09. Nevertheless, for the whole year 2010, these fees grew 3% as compared to those of 2009. These fees represent one-third, 31%, of total fees. On the other hand, fees related to payments increased 11% compared to third quarter '10, and 23% compared to fourth quarter '09.

Fees from fiduciary area and asset management's activities decreased during the quarter and during the last 12 months, due to a reduction of the value of portfolios under management. Brokerage fees also presented a 25% decrease versus the same quarter in 2009, but increased by 28% during fourth quarter '10.

It's worth mentioning that the year over year growth of fees for banking services and other services, which includes investment banking fees, they were 38% greater than the fees generated in the fourth quarter 2009.

Slide 9, operating expenses. During fourth quarter '10, operating expenses total COP814 billion. This figure represents an increase of 8% as compared to third quarter '10, and 11% as compared to fourth quarter '09.

Personnel expenses, which includes salaries and benefits to employees, bonus payments, and compensations, totaled COP348 billion in fourth quarter '10; an increase 11% as compared to third quarter '10, and 16% compared to those of fourth quarter '09.

Larger personnel expenses are mostly explained by the annual increase in wages and by the Bank's charges in order to accumulate provisions to pay for salaries and benefits based on actuarial calculation according to international accounting standards. These charges totaled COP58 billion during the fourth quarter, and COP101 billion during the year.

Administrative and other expenses were COP386 billion. This represents an increase of 5% in fourth quarter '10 as compared to third quarter '10, and 5% as compared to fourth quarter '09. This is mainly explained by greater expenditures in [rent], technology leasing, and expenses related to the IT renovation project.

Additionally, the Bank has implemented its strategy for selling real estate properties and taking them under leasing contracts in order to obtain liquidity and fiscal benefits. This has generated gains on sale of fixed assets, and has increased the rent expenses.

In the last quarter, Bancolombia sold or transferred properties worth COP76 billion (sic - see results), which generated a gain of COP38 billion (sic - see results).

The efficiency ratio of the Bank ended 2010 at 57.4%. The main drivers for the increase versus the previous quarter were the expenditure related to the IT renovation project that Bancolombia is currently undertaking, and the extra provision charges regarding salaries and benefits that I just explained.

Slide number 10. Our liquidity position continues to be solid. Our ratio of net loans to deposits, including borrowings from domestic development banks, reached 100% at the end of the quarter.

With regard to shareholders' equity, it ended fourth quarter '10 at COP7.9 trillion, increasing 5% compared to the previous quarter and 15% compared to the same period of the last year. Bancolombia's capital adequacy ratio ended the quarter at 14.7%, which is well above the 9% legal mean in Columbia.

Return on equity and return on assets, slide now 11. The annualized return on equity was 22% for the fourth quarter of the year, and 19.7% for the 12-month period ended December 2010. On the other hand, return on assets for fourth quarter '10 was 2.6%, improving in comparison to the previous quarter, and to the fourth quarter '09, when this ratio ended at 2.4%.

Finally, I would like to recall Bancolombia's successful offering and placement in international markets of senior bonds for $520 million. This happened in the first week of January, and the quantity demanded was 3 times the amount offered. This shows, once again, the trust and confidence that investors have in the Bank, and is a signal of their optimism with regard to the Company's future performance.

Conclude. Our solid liquidity position, our moderate funding costs, the diversity and the strength of our franchises, and our solid capital base, place us in an excellent competitive position to take advantage of the growth opportunities that we are seeing in the market.

At this moment, our Vice President, Sergio Restrepo, Juan Carlos Mora, and Jaime Velasquez, will be happy to take your questions and comments that you may want to present to us.

Thank you so much.

(Operator Instructions). Tito Labarta, Deutsche Bank.

Congratulations on your new role. Just a couple of questions; one specific, and then other more general one. Just first in terms of provision levels this year, a sharp decline in the quarter. I just want to get a sense of how we should look at that going forward. Do you expect more improvements in asset quality, and do these provision levels -- is this a recurring? Or if you can just give some more color on how we should look at provisions going forward.

And then a second question, more general. Since it's your first call, I would like to get your thoughts on your outlook for the banking sector in Columbia, and your vision for Bancolombia, and your perspectives on your strategy.

Thank you.

Tito, good morning. This is Sergio. Regarding provisions, we are thinking that the numbers should run between 1% and 1.2% total loan portfolio. As we have mentioned, the low interest rates, the unemployment, and the economic conditions really tell us that probably we will be able to maintain that number, and which will be significantly lower than what we had in past.

And regarding the banking sector and how we see the economy, I think that when you look at the numbers, you probably remember that the first half of the year last year was pretty flat; no really significant movements. But it took a real moment in the second half. As we have had the opportunity to discuss, car sales, home sales, the whole economic activity really jumped up in second half, and we tend to believe that that will be the trend for that.

Banks are prepared for that. Most of them, probably they don't have as much coverage in terms of the past views as we have. But as a whole, the financial sector in Columbia is really, really well reserved in terms of provisions. Therefore, there's no ties that really drag us down of growing faster.

Nevertheless, growth, as we have discussed, will be around [15%]; a couple of percent up or down, so we are optimistic for this year.

All right. Thank you very much.

Saul Martinez, JPMorgan.

You guys have recently had some technological issues with your platform that has caused a lot of disruption, has gotten a lot of noise in the local press. I'm curious if you can give us some background on that. And I think there has been some talk about compensating the -- some sort of compensation towards those who may have been affected. And are you worried at all that this might have some sort of reputational issues or may have an impact on the competitive dynamics?

That's my first question.

Secondly, on expenses, it seems like your expenses rose mainly because of the COP57 billion charge that you took to be in compliance with IFRS related to salaries and benefits. I'm curious, what --? How should we think of that specific item going forward? I think you may have some additional charges this year, but will they be lower than what you had in the fourth quarter? And when do these charges go away?

Thank you, Saul. This is Juan Mora. Regarding the issues that we have had in the past month about technology, we have been working very hard with our vendors to solve the issues that we have had. And we have a main focus on giving the service that our customers need and deserve, even though that we have some issues a couple of days, February 16 and February 17, and after that at the end of the month.

So we think that the issue is solved now where we have been working, as I mentioned, very hard with our vendors, which is our support on this technology platform, and we are confident that we can give the service that we are promising to our customers in the future.

Regarding the issue that you mentioned that we are going to compensate the effects of those technological issues to our customers, we have in place a plan that we tend to -- that we want to receive any comments or any issues that we have caused to the customers, we are going to analyze them, and we are going to compensate if the customers were really affected.

We don't expect that to be material at all. We have analyzed the effects, and we don't think that is any -- that is not material at all. We processed all payments that our customers sent to us during those days that we have some technological issues, so we don't expect any liability on that side.

And regarding the issues that our name is affected, we have been working on a plan with customers, very close to them; our sales force is very close to the customers, hearing their complaints; and we think that we have in place a very good strategy to solve that issues with our customers.

Regarding the expenses question, I would like to pass that question to Sergio.

Saul, regarding these IFRS personnel expenses provisions, the numbers will run for another COP70 billion for the next two years. That will be COP35 billion each year. So so far, we have done most of it right now; we have done around COP100 billion of that, so there is another COP70 billion, as I said, for the next two years.

So this was an exceptionally big quarter in terms of the impact of that, of COP57 billion?

Yes.

The run rate will obviously be much lower going forward.

Much lower, yes. You're right.

Okay.

Yes, IFRS for Columbia will be compulsory on 2014.

In 2014, okay. Great. And just on the reputation, so just in terms of the competitive dynamics related to the technological issues, are any other competitors trying to take advantage of that? Or do you see any sorts of issues evolving from a competitive standpoint because of that?

Saul, as Juan said, there was a very disappointing event on this one. But secondly, we are moving faster in terms of what we are doing in terms of giving services to our customers. And we have implemented a lot of security issues within the year. We have now the credit and debit cards with the chips. We have put in place that whenever you use your debit or credit card, you will receive an immediate instant message to your cell phone, and there are plenty of things that we are working in.

And secondly, we expect that, that will offset any minor problem that we had in this -- during these days.

So again, the idea is to keep on being ahead of the competition. You probably learned about the zero costs for the debit on our ATMs. Those were really, really headlines recently, and that won't make a significant impact on our income; but on the other side, it has a really, really significant impact on the image and on the public itself.

Great, thanks a lot.

Thank you.

Victor Galliano, HSBC.

If I could just follow up on the guidance that was given for credit charge, 1% to 1.2% of portfolio. Has this changed since the last time you gave this guidance, or is this -- have you maintained this? And can we see this as a conservative guidance here, or do you really expect that there could be a worsening of the underlying NPL formation? Because we've seen it consistently improve, and clearly, NPL formation continues to improve.

Victor, this is Sergio again. Certainly, as you know, Bancolombia, we try to be conservative on that. You probably remember 2008 and '09, that number run at a rate of 2.8%/2.7%. Last year, we were significantly decreasing that number, and by year end, probably the number was even below 1%. On the long term, that number should be between 1.5%/1.7%, meaning in a 10-year term.

Probably, if we maintain the trend that we have seen in the recent two quarters, probably that number will be even lower. And just to give an idea, this is the gross number. But when you take into consideration the recoveries, the number could be even lower than that. And it has been the case in the past, probably year 2005/'06, when the net number was even negative. But as a discipline, we prefer to run that number, as I mentioned, 1% and 1.2%, and the other ones will be positive surprises coming from the recoveries.

Okay, thank you. And just a quick follow-up on margins. How do you see that going forward? It seems to me like there is -- even though you've managed to lower your cost of funding and you're now at 100% loan to deposit ratio, it seems to me like growing your loan portfolio, especially if you're going to grow that faster than your deposit base, that there's going to continue to be margin pressure. And is that -- have you noticed any change in terms of the competitive environment? Have things heated up a bit on the consumer or the SME side, or the corporate side? Can you give us some color on that?

Thank you.

Absolutely. Let me break down the question in two or three different topics. As you learned from Carlos Raul's presentation, Central Bank increased 25 basis points. And certainly that won't be the only increase. Our chief economist is expecting something between 100 basis points and 150 basis points increase. And when you run the numbers, that should mean an increase in the NIM of something like 12 basis points to 15 basis points, so that will be on the positive side.

On the other hand, we think that the retail loan portfolio will grow healthy. That will make significant effects -- it will have significant effects on the NIM as certainly we can charge more. The NIM on the consumer side is higher than the NIM on the corporate side.

As you saw in the presentation, or the numbers, corporate really grew fast during the last quarter. I don't know if that will be the trend for this year and the next one. Therefore, we think that the mix of the portfolio probably would be a little bit healthier, meaning a higher NIM.

But as we have had the opportunity to discuss, we prefer you to run the numbers between 6.2%, and probably recovering from this 5.9% that we had in the last quarter, so around 6% will be what we are running for this 2011.

Okay, great. Thank you.

Juan Dauder, Celfin.

Congratulations for fourth quarter results. They were very positive. I actually have two to three questions. The first one is regarding deposits, because I saw [a great decouple], between the growth of loan portfolio and overall deposits. I want some color about that dynamic and an explanation of why it's happened.

Another question is regarding insolvency. And I saw that insolvency is in the right levels right now, but it is quite tight regarding the regulation. Do you expect to have an aggressive or something, other strategy to make a better use of the capital?

And the last one is regarding bankarization strategies. We have heard that other competitors in Columbia have started to implement some alternatives and good strategies to catch more people and stop the deal with the Government, as the Government has been very punitive, asking the banking sector about bankarization. What can you tell me about these questions?

Okay; thank you, Juan. Let me just -- your first question about deposit and loan portfolio. And to go back again to Victor's question, which I didn't develop 100%, regarding -- our loan to deposit ratio is in 100%; certainly, it could have a negative impact on the NIM. But on the other side, we really rely on our branch network and our capabilities to keep on growing on deposit gathering. So probably that would have, as I said, a negative impact on NIM if we tried to push the deposits more towards savings or CDs. But again, at the same time, we will benefit from the increase from Central Bank.

What's our view that with 15%, something around 15%/14%, there won't be significant pressures on that. I think that as far as the Central Bank maintains the liquidity that we have seen on the market, we won't have any problems with that regard. But certainly, we are conscious that there is something that we have to bear in mind.

Second question regarding the solvency ratio, you're right when you compare with what we had in the past. Certainly, Colombia had 9% minimum requirement, but as we said around two years ago, we prefer to be a little bit above the numbers. And when we were running the Bank at 12%/12.5% in the past, with the new regulations global-wide, we prefer to be a little bit above of that.

Our promise and our -- not the promise, I mean our long-term goal is to return to this 20% long term on equity. So that's a challenge for we, the managers, to be able to return this 20%, even though we have a higher equity on our books.

On the other side, when you look, and when you split it in Tier 1 and Tier 2, it's 10.3% Tier 1 and 4.4% in Tier 2. And when you talk to the rating agencies, they really feel comfortable having something more near 9% to 10% in Tier 1. They kind of disregard Tier 2. I understand that when you do the numbers, and that's the regulation, but you have -- you're allowed to use Tier 2, but the rating agencies tend to be more stringent than that.

So we feel more comfortable today running at that number, and probably in the future we will use it, either with growth -- I mean, if we manage to grow 15% this year, we will use a portion of it.

And finally, regarding bankarization strategies, I have to say, yes, you're going to see different things. As we already mentioned, zero costs for withdrawing and transfers is one of our strategies in terms of bankarization.

The other one is the bank agencies, what we call the -- sorry, agents, what we call the non-banking correspondents. Today, we have more than 600, and the plans are to keep on growing that number. Same on the ATMs, [same] on the credit cards, debit cards.

So there's -- you can see different strategies, but certainly, this is some of the signals that the Government has sent to the bank sector; and certainly, we are reading it carefully and understanding that that's a challenge, and it's something that we took the challenge to do it.

Okay. Thank you very much.

(Operator Instructions). Felipe Toro, Interbolsa.

Well, I just wanted to follow up on how you see -- if you see a reverse trend in net interest margin. I'm just wondering if you are willing to take higher positions in loans rather than investments; and if that is correct, if you are willing to take a higher exposure on consumer loans, taking advantage of the good, currently great quality numbers.

Thank you.

Let me start answering your question by the last statement you made. Certainly, with the environment that we are seeing today, we certainly are willing to increase our risk, specifically on the consumer segment. You probably remember that around three years ago when the Central Bank started increasing interest rates, we understood that things were about to become tougher. Therefore, we increased our scoring, and we put a more [tightened] scoring, credit scoring. Today, with the environment that we are seeing, we certainly can lose a little bit on that, and we can take some risks on that side.

And specifically because, as I mentioned before, we don't have anything that really drags us down or prevents us from doing that, as we have more than 100% provisions. Therefore, we don't have to pay anything on the legacy. So certainly, there is a very good opportunity and a good chance to profit from that.

Alonso Aramburu, BTG Pactual.

A couple of questions. The first one is on the tax rate. The last couple of quarters, you've had an effective tax rate between 22% and 25%, and I was wondering if that is the level that we should expect going forward.

And my second question is on El Salvador. I think the pick-up in activities is evident in Colombia, but it looks like El Salvador continues to be struggling a little bit. Can you give us some color on what's going on in El Salvador, please?

Alonso, would you mind repeating the question, please? I didn't get it all.

Yes, no problem. My first question was on the effective tax rate. The fourth quarter tax rate was around 22%. 3Q was also around 25%. I was wondering if you can give us some guidance about your tax rate going forward; whether we should expect it to be around those levels.

And my second question was on El Salvador, if you can give us some color on the outlook there.

Okay. Regarding tax rate, certainly, we had two good quarters. We take benefit from a couple of benefits that we had regarding the operational leases, and that really had a positive impact on the tax rate.

For this year, we are running a rate of 28% for the whole year, even though we will -- the average, or the legal tax rate today is 33%. So we still have some benefits on our books. But it won't be as low as 22%, so 28% will be probably the number that we will be aiming for.

And secondly, El Salvador, you probably saw the numbers of Banco Agricola, Banagricola; or Banagricola, the conglomerate there made more than $84 million. Return on equity there was a little bit above 16%.

Things are -- politics are running kind of status quo. We have the actual [president] running in a smoothly way. We don't see the country really moving fast because they are struggling, the two parties, where to go.

But on the other side, we have seen that there has been an increase on the exports to US. We start seeing some increase on the remittances. And one thing that we follow closely is number of jobs. And right now, we are back to the number that we had in 2008.

So it seems the economy is picking up in a slow mood, but on a positive field, but that's basically it what I can say about it El Salvador, Alonso.

Just to follow up a little bit there, do you think that level of ROE of around 16% is a level we'll see in 2011?

Probably it would be higher. Probably it would be a little bit higher, because what we have done in El Salvador in the last two years is adjusting the provisions to the levels that we have in Colombia, so that has been expensive. But the good news is that we already had 100% coverage at 30 days, and something like 144% coverage at 90 days, which is the legal coverage in El Salvador.

Therefore, as we already said here in Colombia, probably trend in provisions this year will be lower. The growth will be something like 5% in terms of the loan portfolio. Therefore, we can expect higher or better numbers this year. And then this is -- as I said, that's the expectation (inaudible), but we are confident that El Salvador will start picking up again.

Great. Thank you, Sergio.

[Luis Gutman], Santander.

I have two questions. First, the level of recovery for the quarter was relatively high. What do you think is your outlook for 2011 regarding recoveries, knowing that there's more improvements in asset quality?

And the second question is that the -- could you give more color on the expansion on the US denominated portfolio, especially in Corporate Loans? There was an increase in the quarter, and I would like to know if it comes more from the Colombia side or from El Salvador, or from other countries.

Thank you, Luis. This is Juan Mora. As you mentioned, recoveries has been high in the past quarters, and that's due to the period that we have pressure on the loan portfolio. So now that the economy is improving, we are seeing high recovery rate, and we expect that recoveries to continue on those levels in the near future; so that is going to help our results in these following quarters.

Asset quality continued to be in a good condition, and we also expect that trend to continue. So we think that recoveries, as I mentioned, are going to be around the same level that we have seen in the last quarters.

The portfolio in dollars, I would like to pass that question to Sergio.

Certainly, Luis, your remark about the last quarter in US dollars, there's certainly heavy demand in Colombia. By year end, there were some tax benefits that will finish December 31. And secondly, there were a momentum for arbitrage between pesos and US dollars. Therefore, some of the companies really took the opportunity to borrow in dollars, hedge the debt, and have a lower interest rate as a whole.

So basically, it was, as I said, a very unique situation. We don't see that that expansion will continue as strong as it was in the last quarter.

Okay. Thank you.

Ladies and gentlemen, this concludes the question and answer session. I will now hand the call to Mr. Carlos Raul Yepes for closing remarks.

Thank you very much, and thank you, Sergio, Juan and Jaime. Finally, I want to thank all of you for attending this conference call.

Actually, we are very, very optimistic for the coming future; and let me conclude, telling you again, as I mentioned at the beginning, that we are going to be mainly focused on internal topics of service, efficiency and synergies, to maintain growth and profitability. Please keep in mind with this strategy.

Thank you so much for attending this conference call. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.