Grupo Cibest SA (CIB) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Bancolombia's second-quarter 2012 earnings conference call. My name is Sandra 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 risk 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 we have Mr. Sergio Restrepo, Vice President of Capital Markets; Mr. Jose Humberto Acosta, Vice President of Finance; Mr. Juan Carlos Mora, Vice President of Services; and Mr. Rodrigo Prieto, Vice President of Risk Management.

I will now turn the presentation over to Mr. Restrepo, Vice President of Capital Markets. Please proceed sir.

Thank you. Good morning and welcome to our second-quarter 2012 results conference call. First of all, I will ask Juan Carlos Mora, our Executive Vice President of Corporate Services, to present the macroeconomic trends, and then I will present the specifics of the Bank. Juan Carlos?

Thank you, Sergio. Good morning to everybody and thank you for being with us today. As usual, we have a slide presentation in our Investor Relations website. Let me start with slide number 2. Inflation for the 12 months ended June 2012 was 3.2%, within the Central Bank range of 2% to 4%. Over the last year, the Central Bank raised the repo rate up to 5.25% in response to inflation sparks and to the growth in consumer loans. During several meetings this year, they kept the rate stable. But last Friday, they reduced it 25 basis points to 5%. The more moderate growth in the economy was the main reason for the Central Bank to take this action.

We expect the repo rate to end 2012 between 4.5% and 5% and inflation to be within the mentioned range of 2% to 4%.

Regarding GDP growth in Colombia, the 4.7% year over year achieved during the first-quarter 2012 shows a slowdown in the pace of growth in the economy. Remember, in 2012 it grew 5.9%.

Consumption remains healthy, although the pace of growth is more moderate than one year ago, and indicators like the 10% unemployment rate in June, which is low for Colombian historical standards, show that the economy is in a good shape. During the last 12 months ended in June, the Colombian economy created 1.3 million new jobs.

All these trend -- trends lead us to believe that Colombian's GDP will grow between 4.5% and 5% in 2012.

Regarding the external front, we continue seeing a solid support in the prices of Colombian treasuries, sustained foreign direct investment inflows, and low foreign indebtedness of the government. During the quarter, the Colombian peso remained rather stable versus the dollar.

The Colombian external sector remains solid and exports in particular commodities are performing well although the pace of expansion is slower than one year ago.

Overall, the economy remains strong. The indebtedness of households is still in low levels and although the quality of the loan portfolio in the whole financial system has deteriorated, it is still below levels of 2009 or 2008.

After this quick review of the economy, let me turn back the presentation to Sergio, who will disclose the Bank's results.

Thank you, Juan Carlos. Let me start with some highlights before going into numbers. First of all, we closed the quarter with a net income of COP354 billion. This is a decrease of 8% compared to last year second quarter and a return on equity of 13%. Provision charges reflect the faster than expected deterioration in our loan portfolio, but it is important to say that we expect a faster recovery too.

Secondly, we have a positive growth in the net interest income, 19% higher than the year ago. The growth of the loan portfolio in 2011 and 2012, along with better net interest margins, impacted the top line in a positive way. We believe the NIMs would remain stable the rest of the year.

Regarding efficiency, we had accrued charges related to bonus payment. But the cumulative cost to income ratio for 2012 is lower than the same metric for the first half of 2011.

I would like to highlight that we continue to make progress and our goal is promoting financial inclusion, and coverage in Colombia. Today we have more than 1,200 non-banking correspondents and we keep growing this channel. Expanding the Bank's presence is one of our goals and we remain focused on that. Today, the Bank has 969 branches and more than 3,600 ATMs.

Before going into the numbers, let me tell you that except for provision charges that we will explain in detail, we consider that we are in the right track. Also momentum remains strong and the Bank maintains its leadership and dynamic performance.

Now if we go, we continue with slide presentation, and we turn to slide number 3, we can see the total assets and loan growth. We maintain a healthy demand for consumer loans in Colombia. As you can see, 31% growth year over year and 5.4% during the quarter, and more growth is in the US denominated loans. It accounts for 20% of the book and there is a clear preference for Colombian peso denominated loans. The growth on this side of the loan portfolio is just 2.5% year over year, and a decrease of 2.9% over the quarter.

The retail and SME loans play a key role in the growth of the total portfolio, and will lead the growth in 2012.

Mortgages are still significantly under pressure in Colombia, and we foresee a good growth in that line as well. As you remember, this is a clear emphasis from the central government in terms of housing.

Moving to slide number 4, about the provisions and asset quality, provision charges are ahead annually to the new past due loans. It is a way to maintain a healthy loan book. As we always mentioned, we prefer to make early provisions and maintain our books healthy, as I just mentioned. The deterioration is mainly on consumer loans, basically credit cards, car loans and personal loans, segments where we grew really aggressively over the last two years. There is some deterioration also in commercial loans to small and medium enterprises.

The annualized net provision charges of the quarter were 2% of the average gross loans, higher of our early estimates of 1.4% to 1.7%. We expect the number for the year to be around 2%, approximately the same amount as on the first quarter for the -- sorry, of the first half, same number for the second half of the year.

On slide number 5, asset quality and coverage ratios, just to mention that difference between 4.5%, which is the allowances to total loans, compared to the past due loans to total loans of 3%, this is 38% and is more than COP1 trillion of allowances that Bancolombia has, are related to loans rated A. Those are contra-cyclical provisions that explain the relatively high coverage ratio of 163. The allowances for loan losses as a percentage of C, D and E loans remains healthy on 119%.

In terms of credit quality, we have put a more -- in place a more stringent credit underwriting standards and in particular, a reduction in credit lines, emphasis in early collections, increasing scoring models parameters, target best risk profile clients, and a special attention to segments that could imply higher provision charges. We started some of those actions, even from the late last year and with more emphasis early this year. So this is the reason why we consider that probably this -- we will recover sooner than later on this rate of provisions.

Moving to slide number 6, where we have the net interest income and some of the cost deposits, the net interest income is growing due to a growth in the loan portfolio and growing margins. 2012 is capturing the positive impact of the growth of 2011 and a moderate expansion on the NIM.

The funding strategy remains focused on keeping cost on deposits under control and the value of the franchise is key to grow at a reasonable cost.

As we were expecting early this year, deposits are growing faster than the loan portfolio, which improves the liquidity profile of the Bank.

Moving to slide number 7 where we have the NIM graph, basically we maintained 6.2%, the repricing of loans with higher rates while having a lesser increase in cost of deposits. And a good performance of the investments portfolio due to appreciation of the Colombian government treasuries did a good work on that.

Important to say, as Juan Carlos mentioned, that the decrease of 25 basis points on the Central Bank rate probably had a --also a positive impact during this quarter on our portfolio.

The NIM elasticity today is between 6 bps to 10 bps for a 100 bps change. It is slightly lower than a year ago basically because of a higher proportion of fixed interest rate loans, and this is again because most of the growth over the last two years went to the consumer and most of the loans there are fixed rate.

If we move to page number -- slide number 8, we will have the fees and non-interest income. We would like to mention that we have a healthy year-on-year growth and that Bancolombia maintains or has a 28% share of the billing in label credit cards and 21% share of the number of plastics. Banking brokerage and remittances are growing in line with the economy.

In slide number 9, where we have the operating expenses, I would like to split it basically in two, I mean the annual increase in OpEx as is explained in terms of personnel expenses. Basically salaries increases along with a modest headcount and on the inflation, and the outlier here is the bonus payment provision for the second-quarter '12, which as you can see on the right upper part, it moves from COP40 billion to COP73 billion.

In terms of administrative expenses, we are in line with our forecast for the year and the main drivers were basically advisory fees, maintenance of branches and fixed asset, and higher depreciation expenses related to operating leases in leasing Bancolombia.

If we move to slide number 10 where we have the liquidity and capital base, basically we can highlight that we have a much more strong capital position, thanks to the follow-on offering on February. As you probably remember, it was COP940 million that increased the Tier 1 in 210 basis points.

Loan-to-deposit ratio declined to 103%. Again, this has to do with a clear emphasis on gain in deposits and certainly, which is not sadly on our side, I mean the more slow growth in the loan portfolio which is in line with what is going on in the financial system.

We have not experienced significant pressure on the deposit side and have grown them faster than the loans during the year. We remain committed to keeping funding costs under control in order to defend the NIM.

Given the currently liquidity shortage that we are seeing over these weeks, we believe that the Central Bank would provide enough liquidity to maintain the economy healthy.

On slide number 11 and return on equity, 13% that we already mentioned before. So one of the items of the ratio of course is the net income, but the other one is a great capital base.

The cost of provisions moving from 1.5%, which was about the average we were foreseeing to 2% which is the number right now, [shave] in 5% the return on equity. So as I mentioned before, I mean the fundamentals remain to be able to achieve this 18%, but a higher than expected provision charges are basically the reason to decrease the return on equity.

Then to conclude, we can say that we maintain a solid liquidity position, a moderate funding cost with a direct impact on the NIM and an expansion, a clear expansion in the net interest income and we have clear actions developed to keep the quality of the loan book. Again, the leadership of Bancolombia in the markets where we operate and the strength of its balance sheet put us in a great position to tap the future opportunities.

At this moment, we will be happy to take questions and comments that you may want to present to us. Thank you.

(Operator Instructions). Regina Sanchez, Itau BBA.

I have two questions. The first one is related to the level of provisions for loan losses. You mentioned during the presentation that on an annualized basis, this 2% of average loans that went up from 1.4% in previous periods that we should work, I mean in nominal terms in the second half of 2012, the same amount that we saw in the first half. But what level should we work going forward in 2013, I mean considering that Bancolombia continues to grow faster on consumer and SME loans? Do you think we'll go back to that level of 1.4% to 1.7% or is it too low?

And also regarding the provisions, I mean how much of these high provisions could be related to prudential measures announced by the government? And then I have a second question. Thank you.

Thank you, Regina. The point you mentioned about the 2%, that we start running models with our risk areas and we believe that this deterioration was basically as I said because of the vintages in 2010 and '11. And we consider that that with probably the pace of deterioration over the next two quarters, they are expecting that with the measures that we start taking last year and beginning of this year, probably the 2013 will be a more modest cost of credit.

I won't be able to mention today that we will be able to go back to 1.4%, but certainly we expected next year will be more between 1.7% and probably maximum of 2%.

What portion of these provisions are basically by macroprudential is just a -- like a 25 billion, which is just like a 5% of what we had in the first half, or less than 10% of the quarter.

Okay, thank you. And my second question is regarding a more stable level of profitability, items that we saw this asset quality deterioration in the quarter. We also saw what I consider as a one-off impact related to the bonus payment in this quarter.

I mean taking out these things as maybe one-offs, but it's also recurring things like maybe the change in deposit mix, also the loan growth and the positive performance of fee income. What do you think to be a more reasonable level of -- sustainable level of profitability, even consider that you might capture efficiency gains from the [Nova problem]? If could also give some color related to that, I'd appreciate. Thank you.

Thank you, Regina. Again, what we mention and if we -- if we are able to go back again to 1.5%, 1.6% provisions, we will be able to return to the 18% return on equity. We prefer to maintain our books as clean as possible. So probably over the year, in the second half of the year, we won't be able to make that number. And with the trend that we saw in the second quarter and part of the first quarter, probably the number will be more towards 15%, but by year end.

But again, in our view, we preferred to tap early the problems and be prepared for the next year. So -- and what I meant about be prepared for next year is that with all the macro that Juan Carlos mentioned, we consider that the economy as a whole will return to the growth track that had before.

There's plenty of government expenses that are just on hold and the central government is talking about a more dynamic government expenditures that will have some steam in economy. Therefore, again, probably this year, we will move in a number like 15%, but next year we expect something more towards the 18% again.

Okay, that's perfect. Thank you very much for your answers.

Thank you, Regina.

We want to remind participants to please allow yourself to one question and one follow-up question, so we have time to answer other questions. Thank you.

Chris Delgado, JPMorgan.

I just had two quick questions. One relates to basically the consumer loan book. You kind of seen weakness there, which you guys highlighted. But the consumer loan book still grew 5% this quarter. And I know you guys had mentioned that you had implemented a tightening of underwritings standard. So I kind of wanted to get a sense of why we're still seeing like growth at the 5% level, and kind of what we should expect going forward. And then I'll give you my follow-up question.

Thank you, Chris. Yes, you're right. I mean 5.5% on a [quarter] looks high. But when you look what we had last year, we were growing like a 40%, 44%. We don't want to stop the growth on consumer lending. Same as the Central Bank, I mean the Central Bank was really worried when the overall consumer loans were growing at a rate of like 30% year over year. But even they said that they were comfortable with a rate of 20% on a yearly basis. So the point here is that certainly we are slowing down there, probably not as much as is nearly to zero.

All the measurement that we took in terms of this score and the underwriting certainly are reducing the speed. But we consider that with the fundamentals of economy, there's still room for growth in a more -- probably in a more conservative way.

When you look at the thing -- I'll probably say that the more disappointed portion of the loan portfolio is the commercial loans. Probably, but the beginning of the year we were expecting a growth in between 15% to 20% on the consumer side and between 10% to 15% on the commercial side, but the commercial side right now is almost 0 in terms of growth.

Probably it has to do with what we mentioned before about the government expenditures. There is -- when you look at the newspapers, there is plenty of money lying on the books of the government ready to be used. So, our expectation is that sooner than later that money will flood the economy and the commercial side will start growing, probably not as much as we were expecting but at least moving the books ahead again.

Okay. And then just my follow-up question. Expense growth was still elevated. I know it had to do somewhat with the bonuses, but just kind of wanted to get a gauge of how you see that evolving towards your end, like what your expectations is for year-on-year growth?

Chris, when we mentioned that we were on track with the fundamentals, basically we -- the number we are seeing for the year is like 10%. And if you look at the OpEx and most on the salaries and most of the other expenses are in line with that summation.

The only outliers are these two numbers, which in fact has to do with the performance. Probably if for any particular reason we do not deliver a higher return on equity, certainly the number of provisions for bonus payment will be much lower during the second half of the year.

Okay. So then the -- just one last thing. The expense growth figure then of 10% factors in the bonuses or is that more viewed as a one-off and we should back that number out?

Again, if we manage to prove the net income in the second half, probably the number will be similar to what we saw in the first half. If we do not manage to grow at more than 15%, 16% the return on equity, probably it will be kind of -- not exactly one-off, but a much lower number.

Okay, guys. Thank you.

You're welcome.

Felipe Toro, Interbolsa.

I have a couple of questions actually. The first one is related to the commercial loan growth. You already mentioned that you expect the economy to have a higher activity next year, but I want to get a feeling on how much is -- would come from infrastructure development, if you see that picking up and if that is going to impact the commercial loan growth?

And the other one is regarding the net interest margin growth in -- from the loan portfolio specifically. We've see a higher composition into consumer loans, but I thought it was going to grow faster due to these higher composition, but I see like a lag growth in the name of the portfolio. So I just want to get a little bit of guidance there. Thank you.

Thank you, Felipe. Regarding commercial loan portfolio, we are expecting for the second part of the year and for next year, as you mentioned that, infrastructure development is going to pick up and that is going to give us some fuel to the loan portfolios. So really -- as you mentioned, we are expecting a faster growth on the commercial loan portfolio for the remaining of the year and for next year.

The government, it's really pushing for the infrastructure to start developing and to really move forward. So from that side, we are expecting some businesses, some additional business to come to the Bank.

Regarding the NIM, as you mentioned, the NIM is in 6.2%, stable related to the last quarter, but coming from 5.9% in the first quarter of 2011. So you really see that the composition with more consumer loans is helping the NIM to improve. We are expecting that the composition remains stable, so not expecting additional increases on NIM and to be around 6.2%, 6.3% for coming quarters.

Just a follow-up question, I just want to get a sense on, if you're feeling comfortable with the composition in the consumer loans around 20%, do you expect it to be higher?

In general, we will want a little more composition of consumer loans in our book as a long-term trend, but due to the various economic situation and to the faster growth of the consumer loans in the past quarters, I think it's a moment, as Sergio mentioning in his presentation, to pause a little bit and we are underwriting with more care for consumer loans.

So in the short term, we are not expecting the consumer loan to get more weight on our loan portfolio. And from your question and my answer, consumer -- commercial loans probably are going to grow a little bit faster, again giving more weight to commercial loans in the near future. As a long-term trend, we expect the consumer loans to have a higher weight on our loan books.

Okay, thank you very much.

Tito Labarta, Deutsche Bank.

Just a couple of follow-up questions. First on the asset quality, we saw NPL formation remain pretty high still. It did come down from the first quarter, but it still was around COP360 billion this quarter. So I just want to get a sense on how you think that's going to develop for the rest of the year given that you are still growing faster in the consumer segment. Do you think these new NPLs remain high? So when do you think you can maybe start to see some stabilization of asset quality and when you think that can turn around?

And then just in terms of your total loan growth, maybe if you can give a little bit color on that just in terms what -- do you think you're on 15% just given the trends you're seeing now or could it be even lower than 15% for your total loan growth for the year? Thanks.

Thank you, Tito. As we mentioned before a week or two here that there was a fast evolution on the two sides similar to what happened in 2008 in Colombia. The government has start to not exactly slamming on the brakes but sending clear signals that the economy was growing fast. And at the same time came the Spain situation and really accelerate all the situation with the past due loans. And our numbers and running the models, we consider that the pace of deterioration over the next two quarters will remain in line with what we have here today.

Usually, when you have the vintages probably by year end this year most of the new vintages already will be with the new standards in terms of underwriting. Therefore, we expect that the next year would be a much lower or at least a lower pace of new past due loans. And again the provision charges will be slightly behind in terms of quarter after quarter. Therefore and again, we were expecting certain deterioration when we were growing at 40%, but not as fast as what we saw over the last quarter.

But again because we reacted probably faster than what we are seeing in some of the neighborhood countries, we believe that we will recover in a much shorter period of time here. So to make the answer more short or shorter, the past due loans will remain in the same line that we saw and the provision charges, again, same line over this year. We are seeing a more healthy 2013.

Okay, thanks. And what about just in terms of the total loan growth guidance, given how you're seeing a growth in each of the segments, what do you think the total loan growth will be for the year?

I think, Tito, that the number will be more towards 10% to 15% and probably more on the -- right now on the lower part of this bracket, but again things are moving so fast. And when you read the highlights, the headlines on the newspapers, there is a clear worry on the central government about expenditures and then they -- they haven't been able to execute. And -- I mean, day after day you understand that they have to award contracts in a much faster way than they have done it in the first half of the year.

So our expectation and -- but we don't want to plug it in a numbers yet, is that the commercial loan book will react shortly, but it depends -- again it depends on -- significantly on the government behavior on that side. So in terms of putting numbers on the model, as I said, more 10% to 15% on the lower part of this one.

Great. Thank you, Sergio.

You are welcome, Tito.

We wish to inform parties because of time we will only be permitting one question per person so that we can answer other questions from participants. Thank you.

Fabio Zagatti, Barclays.

I have a follow-up on your expectations for ROEs. I mean given the new guidance for loan loss provisions which implies seeing expenses being more than twofold in 2011, doesn't the 15% ROE for 2012, I mean, look challenging?

And the same for 2013, I mean with loan loss provision equivalent to 1.7% or 2% of average loans, I mean may I ask you for what we should expect from an operating standpoint, so that Bancolombia still manages to deliver the sort of 18% ROEs that you expect next year? Thank you.

Fabio, if you look the first half of the year we are on the 15% return on equity. Again if we maintain this trend on the provision side, certainly we probably will end up in something like 14%, but the upside on this one again will be in the reduction in the interest rates from Central Bank will have a positive impact on the investments, on the securities portfolio that would be positive. As you probably remember, there is an upcoming transaction which is the sale of the insurance company in El Salvador that we haven't put into the numbers yet. We are still waiting for the approval of the authorities in El Salvador and that will have a positive impact on the P&L.

So, all in all with the numbers, we are confident that we can -- we will be able to deliver the 15% this year. And needless to say that if there is a growth in terms of our commercial loans, probably it will be only be higher but we prefer to move more on this number.

Next year, the point is that with the growth that we are experiencing today and with a cost control that we are putting in place, we believe that we will be able to arrive again a number between 15% to 18% over the year.

Except for a -- and on expected further deterioration that we -- again we do not expect because when you look at the economy, all across there is no significant bubbles or -- actually there is no bubbles when you look at the car loans, when you look at the mortgages, when you look at the credit cards.

Basically, I had to say that the Central Bank really step in on the early stages of this one, and they are being very responsible with their long-term growth. Therefore, we believe that we will be able to deliver those two numbers.

Okay, thank you.

You're very welcome.

Carlos Macedo, Goldman Sachs.

Thank you. All my questions have been asked.

Thank you, Carlos.

Jose Barea, Bank of America.

Just very quickly follow-up here on the asset quality, just because I wasn't sure I understood correctly what you said with regards to NPLs for this year. What you meant to say was that the NPL ratio would be at around the same level as in second quarter, or the NPL formation would be more or less around the same level, just a clarification on that line?

And then my real question here is with regards to the deterioration that you are seeing on consumer loans at Bancolombia and for the system, which you've -- you said has been surprising to date, do you think that the government or the Central Bank would step in to maybe tighten regulation even more?

In the past, we've heard a lot of discussions about further macroprudential measures that could impact consumer loans. Given that the segment is deteriorating at a faster pace than expected, wouldn't this be a trigger for them to come in with something else? I just want to know if you have any color on that front. Thank you.

Thank you, Jose, and good questions and probably it would help some of the other colleagues on the line. About the formation of NPLs, we maintain -- basically we maintain the track. We will remain at around 3% and the new NPLs would be in line with what we saw over the first two quarters of the year. The same with the cost of credit -- I mean same with the provision charges. We're expecting provision charges to be around 2% of the average gross loans.

And regarding to the Central Bank, no. On the contrary, with this recent decrease on the rate, it seems that the Central Bank already achieved its goal of reducing the growth of the consumer loans. They expected 20% -- right now, the system is growing like 20% year over year and this is the number that the Central Bank wanted to see, and inflation is under control. So we do not expect any different actions from Central Bank.

The only thing that we are expecting is in a more -- is more liquidity in the market. Today, as I said, there is a -- I would say a short-term shortage of funds in the market as there is a significant amount of money on the Central Bank. The only way to distribute that money is, as I said, the government is starting to running contracts or -- I mean moving the money into the economy. But no, we don't see any other macroprudential measures again. On the contrary, I think all the risks that we had or all the chances that we had about that -- over the last two quarters are already offset right now.

Okay. Thanks for your answers.

Alonso Aramburu, BTG Pactual.

I guess I wanted to follow-up on, first on the name. With Central Bank carrying rates last Friday, you mentioned that you simply mean remain stable for the second half. Are you considering a stable interest rate in the second half, and what would be the effect if we see more cuts there from the Central Bank?

Alonso, right now within the elasticity of the NIM on the changes on interest rates is like 6 to 10 basis points for every 1% change on the Central Bank rate. With a lag on the prices -- on the numbers, if we have this reduction that some of the economists are expecting more -- right now we are at 5%. If the economy remains healthy, probably we will go down more towards 4.5%.

But we do not expect a significant change on the NIM. Again with a mix that we are having and specifically as we are not growing on US dollar lending, which is where we have the lowest NIMs and as we are growing faster in the consumer side, probably that will compensate the reduction of the Central Bank rate with an increase on the NIM, on the other segments we are growing the fastest.

Okay, thank you. And just as a quick follow-up. When you mentioned profitability of 15% for the second half and then 18% for next year but when you look more longer term or medium term, what is the target ROE that the Bank is working with and when do you expect to achieve that?

Alonso, for the long term we have always been talking about 20%. Certainly, this is a number that I don't really know if it is reasonable with all the changes in capital equity, specifically with Basel III and with -- there is a discussion today in Colombia about capital requirements that will have a negative impact in our Tier 1 capital. It will probably move from 12% that we have to date to something like 10%.

There is -- I mean this is not official yet. This is just in discussion. But so far, the numbers runs like that. So that probably will put us in a more difficult path to achieve this 20%. So, we can start talking about something more like 18% to 20% in the long term.

Great. Thank you very much.

You're very welcome.

Jose Restrepo, Interbolsa.

I want to talk about loan growth. You really mentioned a lot about the growth in Colombia related with infrastructure and consumer, but which are the drivers that you can identify for the expansion or our US denominated loan book in the rest of this year and in the near-term future? Thank you.

Thank you, Jose. As we already mentioned, we are thinking that the source of growth is going to come from commercial loans in Colombia particularly those that are related to infrastructure.

In Colombia in general, the government expenditure during these last six to eight months have been very low. The government is not really expending, that's due of -- some processes in the central government is structuring big, big projects, particularly roads and other infrastructure projects, and also its related to the mayors and governors, just taking office this year. So they are not -- they were not willing to or they were not able to expend money during this first semester since they were just preparing the projects and preparing the budgets.

So -- and it's clear, that the government has been willing to expend much more money during this second half of the year and in 2013. So the source of growth is going to come from that expenditure from the government and, as Sergio mentioned, we are expecting the loan portfolio to grow around 10% to 15% more towards the lower part of this range, particularly, that growth coming from commercial loans.

I do -- want to do a follow up. I'm asking about the drivers outside Colombia. Which are the growth drivers? As we are seeing a lot of infrastructure in different countries, for example in Peru, where you have presence with a trust and we saw that trust business has a lot of opportunity to develop. So I clearly understand the Colombian opportunity, but I want to know which are the growth drivers for loans outside Colombia?

Our loan portfolio is basically in Colombia. As you know, we have some operations in Peru. Those are small operations. It's not really going to impact significantly the growth of our loan portfolio. We have some presence in Peru. Our presence is more as an offshore banking. We go with some Colombian companies to Peru to be with them in some infrastructure operations in Peru. But those are really small in terms of Bancolombia's size. So they are not going to have a significant impact on our books.

The other part of our international operations are in El Salvador, and as you know, those are around 10%, 12% of our book, and we are not seeing significant sources of growth from El Salvador. Basically, the loan portfolio in El Salvador is not growing, and we are not expecting something different in the near future. So the source of growth is coming from Colombia basically at this moment.

Okay. Thank you.

(Operator Instructions). At this time, we have no further questions. I will turn it back over to Mr. Sergio Restrepo for closing remarks.

Thank you. And again, we thank you for attending this meeting. As you know, we are open for any further question in our Investor Relations office. All the material that we saw today plus the release that we had yesterday is already on the webpage. And again, we believe that we still have the strength in our books and we are in a great position to keep growing and maintaining the trend that we have had during the last few years. Thank you again, and we expect to hear you in the next quarter conference call. Thanks.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.