Grupo Cibest SA (CIB) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Bancolombia's first-quarter 2011 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, 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 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, Vice President of Technology and Innova.

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

Thank you and good morning to everyone. I want also to thank each of you for your interest and attendance to the first quarter results call. As usual we would like to begin with a brief discussion regarding the macroeconomic environment. At this time, I would like to ask Sergio Restrepo to present to you our thoughts of this matter.

Thank you Carlos. As usual we have a slide presentation in our Investor Relations website. This time for those are following it, I would like to call your attention on slide number 2. Inflation ended March at 3.19% for the last 12 months. April numbers will be on the market today and there shouldn't be surprises. We expect inflation to finish the year within the range of 2% to 4% established by the Central Bank.

Needless to say that there has been pressure on this front because of the flood damages to crops and infrastructure across the country, probably as you have seen in the news recently. During 2011, Central Bank has raised the repo rate 75 basis points to 3.75%. That 25 bps increase was in April 29th and we expect the repo rate to end 2011 at 4.75%.

Support this trend and we believe it will help to keep inflation under control with no need of macro prudential measures in the near future. Regarding GDP growth, we are expecting a 4.8% in 2011. Gross capital formation represented 26% of GDP. Consumers' confidence remains healthy and an unemployment of 10.8%, which is 100 basis points lower than a year ago, sent signals that the economy is likely to remain in good shape in the close future.

After this review, let me turn the presentation back to Mr. Yepes, who will report the bank's results.

Okay, thank you, thank you very much. Regarding Bancolombia's results for the first-quarter 2011, we generated earnings of COP350 billion, a decrease of 18% compared with the fourth-quarter 2010 and an increase of 3% compared with the first-quarter 2010. This result in line with our expectations will take a lower level of provisions and good performance of net interest income and a growth on operating expenditures.

Also it's important to note that during the first quarter, Bancolombia did not receive revenues for the pension plan administration business because we entered into an agreement to sell AFP Crecer, the pension fund manager in El Salvador. Those revenues were COP24 billion in fourth-quarter 2010. During the quarter, we did not have gains on investment and with this in the first-quarter 2010 when we sold our stake in Metrotel and IVL for a pre-tax profit of COP34 billion.

Also during this quarter and we need to give a sense of reflected charges that we did not have before, namely COP17 billion due to tax on financial operations and wealth tax. Finally it's important to stress the growth of our loan portfolio, the improving quality of our assets, and the low cost of funds that resulted from our funding strategy.

Now, let us see slide number 3. Bancolombia's growth loans increased 4.51% during the quarter and reached COP50.8 trillion. Of the total portfolio, 77 were US dollar loans that is $7.3 billion. These dollar-denominated loans grew $700 million or 11% compared to the fourth-quarter 2010 and $2.2 billion or 44% compared to first-quarter '10.

Expressed in Colombian pesos, the growth appears of 8% for the quarter and [40%] for the last 12 months. The 2% depreciation of the US dollar versus the peso during the quarter affected the comparison of currencies. The remaining 73% of gross loans denominated in Colombian pesos totaled COP37 trillion at the end of first-quarter '11, increasing 3% with respect to fourth-quarter '10 and 15% with respect of first-quarter '10.

When analyzing the total loans by the category that Bancolombia uses, it's clear that retail and SME loans played a key role in the growth with a portfolio as they increased 5% in respect to fourth-quarter '10. This growth is explained by greater demand of consumer loans driven by a more dynamic economic environment.

Corporate loans increased 3% in the same period due to the greater demand of working capital and capital expenditures by turns.

Mortgages reached COP3.8 billion and continued being a very dynamic in line in our loan book.

If we take into account securitized mortgages, we see a growth of 3% quarter over quarter and 15% 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, there is a clear appetite derived from the optimism with respect to the economic performance.

Mortgages are still significantly under-penetrated in Colombia and we foresee a good growth in that line as well.

Next slide number 4. On asset quality, we have information in this slide where we can see net provision charges, loan deterioration and allowances for loan losses remain in a good trend at the end of the year. During this period, net provisions charges totaled COP80 billion. This represented a similar amount to the charges of the fourth quarter of 2010 which totaled COP81 billion.

It is worth mentioning the low level of deterioration during the quarter. It was COP139 billion which is less, 51% less than the corresponding figure of the first quarter of 2010. This is a clear sign of improving health of our loan portfolio.

Additionally, recoveries of charge-off loans and foreclosed assets increased 19% during the year. This is positive, since it reflects that the better economic conditions are actually having a positive impact on the bank's loan performance.

As you can see on this slide number 5, past due loans, those overdue more than 30 days, were COP1.5 trillion at the end of the quarter. This amount represents 2.9% of total loans, and is similar to what we have in the fourth quarter of 2010, and lower than the 4.2% we had at the end of first-quarter '10.

Bancolombia continued with a significant level of allowances of loan losses, which represented 5% of gross loans as of March. These allowances represented 175% of past due loans, a ratio lower than the 180% presented in the fourth quarter.

On the other hand, the allowance for loan losses as a percentage of C, D and E loans was 114%. 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.

Slide number 6. Net interest income in the first-quarter '11 amounted to COP894 billion. It was 4% greater than that on fourth-quarter '10, and 9% greater than the figure presented in first-quarter '10. The low interest rate in Colombia has 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 cost of deposits was 2.2% in first-quarter '11, lower than 2.4% of the fourth quarter, and then 2.7% of the first-quarter '10.

The decline in the proportion of time deposit of -- out of total deposits have been in line with the funding strategy implemented by the bank. This effort aims to take advantage of the local liquidity and the low interest rate, while increasing deposits in savings and checking accounts, and reducing the time and the cost of the time deposits.

As a result, the fund remixing paid off in checking and saving accounts went from representing 58% at the end of first-quarter '10 to representing 64% at the end of first-quarter '11. The bank's large distribution network and its strong franchise have made this strategy possible. On the other hand, the securities portfolio generated 22% more returns than it did during the fourth quarter. This performance was mainly explained by the increase in price of Colombian treasuries and bonds, presumably due to the investment grade by Standard and Poor's. Deposits reached COP45.5 trillion, 72% of liabilities at the end of first-quarter '11, and increased 5% during the quarter.

Now the slide 7 shows the evolution of margins in the last quarters. The annualized net interest margin was 5.9% in first-quarter '11, lower than the annualized margin of 6% in fourth-quarter '10. This decrease is mainly explained by the lower margin of the loan portfolio. During the last quarter, higher growth in dollar-denominated loans where margins are lower, has contributed to the margin compression. Nevertheless, the funding strategy is focused in keeping lower funding costs in order to defend the margin.

Slide 8. During first-quarter '11, net fees and income from services totaled COP385 billion, 6% lower than those presented in the previous quarter, and 4% greater than those presented in first-quarter '10.

Credit and debit card fees for first-quarter '11 increased 6% versus the previous quarter, and also 6% versus the first-quarter '10. These represent one-third of total fees. Fees from fiduciary and asset management activities increased 15% during the quarter and during the last 12 months, due to a growth of the value of portfolios under management. Brokerage fees presented a 7% decrease versus the previous quarter, but increased by 36% during the last 12 months.

It's worth mentioning that the year-over-year growth of fees from banking services and other services, which includes investment banking fees, they were 27% greater than the fees generated in the first quarter of 2010. Pension from fees were not accounted due to the contract to sell AFP Crecer, the pension fund manager in El Salvador.

Slide number 9. During first-quarter '11, operating expenses totaled COP843 billion. This figure represents an increase of 12% as compared to first -- to fourth-quarter '10, and 15% as compared to first-quarter '10.

Personnel expenses, which includes salaries and benefits to employees, bonus payments, and compensations, totaled COP345 billion in first-quarter '11, decreased 1% as compared to fourth-quarter '10, and increased 9% compared to those of first-quarter '10.

The larger personnel expenses are mostly explained by the annual increase in wages 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.

Administrative and other expenses were COP425 billion. This represents an increase of 10% in first-quarter '11 as compared to fourth-quarter '10, and 23% as compared to first-quarter '10. This is mainly explained by three factors. First, the tax on financial operations that Bancolombia has to pay on some transactions that used to be exempt until the end 2010 and the wealth tax. For the quarter, the charges for these two taxes that was reflected in the statement of income, was COP17 billion.

Second, greater expenditures in rent and technology leasing, for the quarter, because of these lines was COP27 billion. And third, expenses related to the IT renovation project. With some modules of our net IT platform already working, we have started amortizing capitalized expenses and that has impacted the income statement. For the quarter, the charges related to the project totaled COP54 billion. General, these three items behaved as we were expecting.

As a result of the evolution of administrative expenses and revenues, the efficiency ratio of the bank ended first-quarter '11 at 62%.

Now slide number 10. Our liquidity position continues to be solid. Our ratio of net loans to deposits, including borrowings from domestic development banks, was 100% at the end of the quarter. With regard to the shareholders' equity, it ended the first-quarter '11 at COP7.7 trillion, decreasing 3% compared to the previous quarter and increasing 13% compared to the same period of the last year. The reason for the decrease of shareholder's equity during the quarter was the distribution of dividends in March. Bancolombia's capital adequacy ratio ended the quarter at 14.2%, which is well above the 9% legal minimum in Colombia.

In slide 11, the annualized return on equity was 17.6% for the first quarter of the year. On the other hand, ROA of the same period was 2%.

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

At this moment, we will take your questions and comments that you may want to present to us. Thank you very much.

(Operator Instructions). Saul Martinez, JPMorgan.

Couple of questions. First, it does seem like you've had some issues in terms of the IT renovation project and some problems there in the past quarters. Can you give us an update where that stands and whether you think that may have a -- may be an issue in terms of the impact it might have on the -- on your competitive position and reputation in the marketplace?

Also in terms of your ROE guidance, I think in the past you said 20% is really where you want to be. You started the year at 17.8%. Obviously, you need to do in the coming quarter something above 20% to hit those numbers, to hit your full-year target. How confident are you that you'll be able to do that and reach a 20% return on equity this year?

Thank you, Saul. This is Juan Mora. Related to your question about the IT renovation, I will -- like to be very clear that we had some issues at the beginning of the quarter related to our legacy platform. It's not related with our IT renovation project.

Our IT renovation project, it had some targets and we are meeting them. We have some issues on the stability on our legacy platform at the beginning of the quarter as I mentioned, January especially February and some in March.

Our indicators shows that April has been pretty stable. We had a team working very hard on stabilizing our platform. We are very happy with the results that we are achieving. So we think that we still need to work very hard, as you mentioned, this is an issue of reputational risk that we need to address. We have been doing that, we have been working very hard with our IT partners.

And we are happy with the results. And the results that we are achieving, April was pretty stable and we think we are going to continue to improve in that front.

Hi, this is Sergio. And regarding the return on equity, you probably remember that we always said -- I mean, we have been saying that 20% is our long-term goal. It doesn't mean that one year or the other one we couldn't be below the number.

Even though we feel very confident that with the increase in the interest rates, you probably know that we are asset sensitive, so that will have a positive impact on NIM. Probably we won't [crop] all of it shortly mainly because of competition.

But we tend to believe that we are probably one of the lowest ranges of the NIM and if we manage to increase it a little bit, it would be significantly positive.

On the other side, as you have seen regarding the recoveries and the provisions, the behavior it's quite healthy. I mean, the cost of credit that we are -- the gross cost of credit right now is 1.2, but recovery are showing a very, very positive trend and that could be maintained during the year.

Do you think provisions at the current level should be -- are sustainable during the course of the year?

I guess so because when you look at the gross number, it's 1.2.

Yes.

Which is probably even higher than the actual deterioration of the loan portfolio. On the other side, there is the -- a good trend on the recoveries.

Okay. Okay, all right. Thanks a lot, Sergio. I appreciate it.

Okay.

Tito Labarta, Deutsche Bank.

Just a couple of questions. First of, just following up on Saul's question regarding the IT renovation. Maybe you can give us some color in terms of how you see that expenses will be impacted for the year. They grew around 15% in the first quarter.

So do you expect that level to remain for the full year and when could you start to see some benefits to your efficiency ratio?

And then in a second question in terms of fee income, those are a bit seasonally weaker. You also mentioned there was an impact from the pension business in El Salvador. If you can maybe quantify what that impact was and also maybe just some guidance on what you expect the full-year growth for fee income. Thank you.

Okay, Tito, good morning. Well, regarding the IT, probably we will see a significant amount on the P&L regarding the expenses. As we have mentioned before, we do not intend to accrue or to spread the expenses throughout the year, but -- throughout the years, but as soon as we can sent to the P&L we will do it.

This year's number will be probably COP250 billion, the number that we will send to the P&L. And that will be probably the number for the next three years. Therefore we could expect a significant improvement in -- on the efficiency ratio [becomes] the IT towards 2014-15.

But the good point here is that the biggest amount of cash flow has been already deployed. Some of the software is already working. And we feel comfortable with the outlook of the project. Probably as we have discussed, it will last probably few months more than was expected at the beginning which is something most of the time on the IT projects.

Regarding the fee income, as we said, as we enter into these agreements to sell the pension fund and the insurance company and you can see in the P&L that this was with the press release, we account for zero.

Even though we haven't transferred the shares yet and we cannot -- that means that we cannot reflect the net profits that we could have on that transaction, but at the same time we have been very conservative not putting on the P&L the income.

So in this two -- that's the two impacts on the P&L, I mean, not having the income, but at the same time having the -- or not having -- sorry, not having both.

I mean, not having the income from the fees and at the same time not having the income from the net profit on the sale. What's the amount? These two companies made around $15 million, so that's probably the number that we will see as an impact compared to last year.

Sorry, just to clarify that. So you are saying the fee income was included last year, but you are saying it's not included this year? I just want to -- I wasn't clear on that.

Yes, but if you go to the P&L, which was with the press release, you can see the fees on the pension funds and last year -- let me see the number here -- last year was COP24 billion -- this is last quarter and the first quarter was zero.

Okay, great. And then maybe can you give us some guidance in terms of what you are expecting for fees and expenses overall for this year?

Fees should be more towards 5% probably because of the impact that we've mentioned on the pension fund. And secondly, because we are having same pressure as every where else, global wide. So we prefer to be cautious on managing debt. And probably you remember that last quarter results when Carlos Raul mentioned that we decided to not charging for certain services in order to kind of calm some of the other public pressures. The impact on those two things again will have less than a line with the loan growth in fee income. And again we could grow something like 5%.

In terms of expenses, it would be more towards 15% and is basically again because one of them is IT, the second is those taxes that we're going to pay, basically the wealth tax that we already discussed, and the other one is the tax to the financial transactions. So those are extra compared to last year, but those are here to stay. So we have to manage that and we have to deal with that in the coming years and we have to figure out how to keep on working really, really hard on maintaining the NIM in order to have a final return on equity, the 20% that we already said.

All right, thank you very much.

(Operator Instructions). Victor Galliano, HSBC.

I mean my main questions have been answered, but -- I mean, maybe we can talk a little bit more about the credit quality which remains obviously extremely good. Are you seeing any sort of initial signs of stress when you look at arrears? I don't know if you look at 15- to 30-day delinquencies or delays in payments. Is there anything there that suggests that maybe delinquencies could pick up later on in the year? And do you target any long-term level of coverage and any kind of -- do you have any kind of NPL ratio forecast maybe for year-end 2011?

Thank you Victor. Let me give you an economic view of what we are expecting on the credit quality. First of all, with unemployment going down transformation, I mean from 11.8 to 10.8 in March, with the Central Bank being cautious about interest rates even though they have increased from 3% to 3.75% and we're expecting something like 4.75%.

And with the consumers' confidence that we are seeing today specifically when you look at the car sales and new homes, we tend to believe that the quality of the credit will behave really good. Of course, in this growth period it tend to be more aggressive. Probably you can decrease a little bit the (inaudible), but at the end we're really confident that this is one of the times when things really go smooth in terms of provisions.

And it's good in two different senses. One of them is if the cost of credit debts we mentioned today is 1.2, it could be even lower than that. And on the other side is the recoveries, which we have seen them dynamic, so at certain points today when you analyze the net provision charges they are running at a rate of 66 basis points, which is really good. This is the fundamentals of what we are seeing.

You ask us what we see for a year and the forthcoming years, we can tell that that's certainly a trend. Good news here is that the bank was really, really cautious or conservative piling up reserves over the years. But right now we are running at a rate of 175% which is high.

Yes

Certainly the long-term ratio should be something more towards 120% and 130%. It doesn't mean that we will return except today, but it tells you that we have ammunition to go over this year and for the next year without significant changes in the P&L and not stressing the P&L if we need in order to have good results.

Okay. So what you are saying basically is you don't see much --- you don't expect much deterioration anytime soon this year. But at the same time, it sounds to me like you are saying this is about as good as its going to get. Is that fair?

It's -- I think it's not fair, but probably you're going to see the PDL even lower than 2.9%

Right, okay.

Certainly yes, probably that -- my point here is that provision charges could be even lower than the number that we are having. We probably will want is to raise that in order to have results. We prefer to keep on our conservative side.

Yes.

And maintain over this year and probably next year this 170% something and probably in the long term going back again to 120%.

And those are -- sorry those are net provisions you were referring to? Net of recoveries, is that right?

Net of recoveries is 66 basis points, gross is 1.2.

1.2, so its 1.2 you are referring to, okay. All right, thank you very much.

You're welcome.

Felipe Toro, Interbolsa.

We expected an impact in net interest margin of about 6.1% after the increases we are seeing from the Central Bank, but it came up 5.9% in line with the previous quarter. What is the guidance or (inaudible) looking forward can we see an impact as soon as the second quarter? And following on the same question, do you think that a defensive funding strategy can be maintained keeping the low cost of deposits? Thank you.

Morning Felipe, you're right about the 6.1. When you look at the behavior of the loan portfolio in the first quarter, you can see that the most dynamic of all was basically the dollar portfolio and short-term dollars basically because of the withholding tax that the Company had to pay or have to pay if they get [interest] with banks different from Colombian banks. That change dramatically the demand of dollars from international banks into Colombian banks. And as you saw, I mean, we grew $2.2 billion. And those loans certainly had a much lower NIM. That -- I mean this is part of the reason why the NIM is not 6%, but 5.9%.

And secondly, as the Central Bank has started to increase the rates from 3% to 3.75%, I mean, the last 50 basis points were in April, so therefore there have been a short figure of time in order to crop the benefits.

We've seen that probably we're going to start seeing real benefits. By what I mean real is, it's more in the second half of the year. When we -- what numbers that we have, 100 basis points increase on the Central Bank interest rates could have a positive impact on the NIM of around 10 to 15 basis points. But this is when they are already in place, meaning at least three months after the decrease.

So, running the number again, 6% across the year, we are confident with that number.

I just wanted to follow up a little bit on the growth dynamic you've seen outside the Colombian country. We see that the growth dynamic in El Salvador is not as strong as we would expect. Do you expect a pick up in El Salvador because we've seen that the growth is mainly, as you mentioned, by credit difference than El Salvador's? So, thank you.

Felipe, you're right. El Salvador has been two years with no growth. In fact, there has been a compression in the loan portfolio in El Salvador. We're expecting a 5% growth this year in El Salvador. But at the same time, you have to take into consideration that with the appreciation of the peso or the devaluation of the dollar, even though you grow 5%, it would be offset by that. So the US portfolio with the appreciation of the peso has a double negative impact.

On the contrary, Colombia we have seen a positive trend and we saw a very healthy quarter. We haven't changed our expectations yet. But certainly we see clear consumer confidence and we think that the year will be probably more dynamic that what we saw at the beginning of the year. And you probably have seen that even the Central Bank and the National Planning Department is moving the projections higher than that they had at the beginning of the year.

And let me just -- I forgot the funding strategy you mentioned at in the first question. Certainly we will. One of our strengths is our franchise of branches. And as you can see -- I mean, our cost of funds today is running at 2.2%, which is significant lower compared to the Central Bank interest rates. We certainly will profit from that when competitors, which are more tight to short-term funding or wholesale funding, their funds will increase much quicker than ours, and but certainly we would profit on an upward market, we would profit on the funding -- on our funding strengths.

Thank you very much.

Jose Restrepo, Interbolsa.

I would just want to do a follow-up of one of the previous questions regarding that you have very large coverage ratio. And I want to know what kind of growth are you expecting to use this ammunition that you have right now. Because you have higher coverage -- very large coverage, excuse me, you have very large capital equity ratio, so what kind of growth are you expecting to put that capital to work?

And I have a second question related with strategy, because we are seeing like, Colombia's very interesting points are national banks. Today in the press it is saying that Itau is ready to open their operation in Colombia and what you think about like a consolidation of the local market. And regarding the strategy also, which will be the strategy of the bank to compete with Grupo Aval in Central America after the acquisition of BAC?

Hi, Jose. Those are good questions and probably would take a couple of hours to answer them. But, well, first of all, coverage ratio. As you know that, because of regulation, every time you have a new loan you have to have provisions on the new loan. Even though it is fully performing, you have to have provisions on that. So, a more dynamic growth will use all the provisions that we already have there, or at least will decrease the coverage. It will decrease the coverage in normal way probably towards the 120, 130 that we already mentioned.

Regarding the capital, it's -- that will be great if you talk to the rating agencies. They always push us to keep on increasing our capital. And if you look at the Basel III, I think that we feel okay, we feel confident, comfortable with the ratio that we are running -- that we run today. Things would change in terms of goodwill. If you look at the tangible equity, our tangible net equity is like 10 -- 10.4. So we do not consider that we have a high capital today. We -- I think we are running at a comfortable capital.

Regarding international banks, you're right. Itau announced, JP Morgan did it last year, and BNP Paribas is doing exactly the same. So we will -- this is a good country today, there's plenty of activity. That's good -- that's good for our business and well, certainly, they would bring competition but we're (inaudible).

And Central America, I won't say that we will compete with Aval, I mean we already were competing with eCapital. BAC, exactly the same institution that it was and we were there four years ago. We still compete as we did before. So we don't see any changes on that scenario.

Okay. Then another question is that, you recently announced the issuance of $1 billion in bonds, that bonds will fund these international loan segment that is growing so dynamically -- that grew dynamically during the first quarter of this year. It's like you are preparing to have more international loans in your books.

Those are, as I said before, those are -- part of them are international loans, part of them are local loans, US dollar denominated. And I think that in the quarter we grew more than $700 million, and in the year we grew more than $2.2 billion.

It probably is the most dynamic. If you look at it as an overall, the banking sector in Colombia is more than twice the amount of dollars that the companies are borrowing from banks. So the idea is not to be a side of that business and we prepare to keep on with the pace of that.

Okay. Thank you very much.

Welcome.

Blake Schmidt, Bloomberg.

Just a quick question. I was wondering how the strength of the peso impacted the first quarter results and how you expect that to affect the Company. Moving forward, I saw a report today by RBS that said the peso may soon strength in the 1,700. And then also if you could just clarify so the (inaudible) where and when will that occur?

Well, first of all, one of the strength of the peso, Bancolombia runs a fully much in pesos and in dollars. So any change on the exchange rate will have a neutral behavior on our P&L and on our balance sheet. Secondly, it will have impacts in different sectors of the economy. Some of them will be positive, some of them will be negative.

But as a whole we have been able to sort of change from 2.7 to 1.8 over the last three, four years or even more. I would say that for the bank it will not have an impact. And regarding the bonds what we have today is an authorization from the Board of Directors, more than a clear issued decision I mean we in a recurrently way, we have this authorizations both in pesos and in dollars in order to be prepared if we need the funds clearly and shortly use the window in the market.

It doesn't mean that we will issue a billion shortly, I mean it depends on what our (inaudible) committee will decide. But the idea is to have the authorization in place to move it when we need it. And by the time that we take this decision we will -- and then as it is usual we will disclose the information.

Okay thanks, I appreciate it.

Victor Galliano, HSBC.

Just a quick follow up if I may on coming back towards El Salvador. Can you give us some sort of indication of or maybe you don't want to go into this level of detail, but I mean do you expect the ROE from that operation to improve? Where are we now in terms of ROE and where do you think it could get to and is this more of a cost driven thing or a top line driven thing, if you do expect to I mean (inaudible) improvement in ROE? Thank you.

Victor, some of the numbers are public as the Company is listed in El Salvador. And the return on equity last year went around 16%-17% in the bank, a little bit lower in the Group in the holding Company. The efficiency ratio in El Salvador is below 40%, something like 38%. So the point here is basically on the top line, I think if we manage to keep on growing 5%, its way below our expectation in growth for El Salvador but at the same time we prefer to be conservative.

We prefer -- this is a country that is going into a stress in economy, so we prefer to be cautious. I mean, they are negatively affected by US export and exchange. They are negatively impacted because of the cost of energy and they are negatively impacted by the cost of food, mainly grain. So we'd rather wait and see, I mean wave along -- surf along the wave and once the economy starts picking up we will be ready to do it.

The bank as you said as you saw had a $70 million-$75 million as net profits for last year. So we are very optimistic in the short term the economy will start picking up and the bank will grow again with the returns in equity in line with the Group.

Okay, thank you.

Ladies and gentlemen, this concludes the question-and-answer session. I would now like to turn the conference over to Mr. Yepes for closing remarks.

Okay. Thank you every one for attendance to this conference call and see you in the next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.