Grupo Cibest SA (CIB) 2012 Q4 法說會逐字稿

Good day, ladies and gentlemen and welcome to Bancolombia's Fourth 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 and 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 is Mr. Carlos Raul Yepes, Chief Executive Office, Mr. Sergio Restrepo, Vice President of Capital Markets, Mr. Jose Humberto Acosta, Vice President of Finance and Mr. Juan Carlos Mora, Vice President of Corporate Services.

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

Okay, thank you very much and good morning everyone and welcome to our fourth quarter, 2012 results conference call. It's a great pleasure to be with all of you who followed so closely our operations and results (technical difficulty). Let's start with a brief discussion on the main topics that impacted our business in this period.

First, I would like to present the net income for the quarter, COP468 billion, which represents an annualized ROE of 16.5% for the whole year, 2012 Bancolombia posted a net income of COP1.7 trillion, which represents an ROE of 16% and an increase of 2.8% compared to 2011.

During this quarter, we saw a pick up in credit demand in Colombia. After a slow first half of the year, corporations and individuals started demanding credit again. This impacted positively our long growth during the quarter. Coupled with that growth, it came an improvement in the quality of the loan portfolio. The street debt credit on the right hand standard that we implemented since the beginning of the year are playing off on the proportion of PDLs to total loans declined to 2.6%.

The balance sheet remains strong and the capital adequacy is in a good shape to allow the growth that we forecast for Bancolombia in the near future and the commitments to acquire assets in Central America. We keep our efforts on beginning down the costs to income on efficiency ratio. Salaries and administrative expenses present a year on year growth in line with our estimations and the efficiency ratio ended the fourth quarter '12 at 55%.

I will also like to recall at this time the transactions that we announced two weeks ago regarding the acquisition of HSBC's Panama operation. Certainly, it is a big milestone for Bancolombia's history as we become the largest financial institution in Central America and assets outside Colombia will represent about 30% of total assets. These acquisitions complemented our existing presence in Panama and provides our corporate clients with banking platform to do business in several jurisdictions that have become more integrated. We also intend to serve better our [intent] clients where we operate.

Finally, I would like to mention the outcome of our general shareholders meeting that we hosted yesterday. During that meeting a dividend of COP754 per share per year was approved, which represents an increase of 6.5% compared to the dividend declared one year ago. The total dividend amount will be COP652 billion and will be paid in four installments, beginning on April 1st, 2013.

The portion of the net income that we -- that the bank will reinvest allows to maintain a solid capital position.

Also, the shareholders granted permission to the board of directors for issuing up to about 148 million preferred shares. The purpose of this approval is to advance in any potential follow on process that Bancolombia could start when needed in the future. Nevertheless, we do not plan to issue shares in the near future and do not believe that Bancolombia will need additional capital or liquidity to support the recent acquisition on -- of HSBC Panama.

Having said this, we would like to continue with a brief discussion regarding the macroeconomic environment. Let me turn the presentation to Juan Carlos Mora who will share our views of this matter of the debt, Sergio Restrepo will elaborate more on the bank's results. Juan Carlos?

Thank you, Carlos Raul. As usual, we have a slide presentation in our investor relations website. Let me start with slide number two. Colombia central bank cut in February it's benchmark intervention rate by another 25 basis points to 3.75%. It is its sixth rate cut since July, saying the economy is still growing below potential. Inflation for the last 12 months ended in January is at 2%. This is at the low end of the central bank target range of 2% to 4%.

We expect the repo rate to end 2013 at between 3.5% and 4% and inflation to be within the mentioned range of 2% to 4%. Regarding Colombia's GDP growth, it has lowed to 2.1% year-over-year in the third quarter from 4.9% in the second quarter of 2012 to a large extent, this is due to a drop in construction.

Nevertheless, consumption remains healthy, although it is growing at a lower pace than one year ago. The 9.6% unemployment rate reported in December, which is low for Colombian historical standards, showed the economy is in good shape. We expect that Colombia's GDP to grow between 4% and 4.5% in 2013.

During the -- during the quarter, we continue seeing an appreciation of Colombian treasuries supported but sustained foreign direct investment inflows and low foreign indebtedness of the government. During the quarter, the Colombia peso appreciated 2% versus the dollar. The Colombian external sector remains solid, an expert in particular commodities are performing well. Although it's pace of expansion is slower than one year ago.

To conclude, even though there are some signs showing that the economy is slowing down, we believe that the indebtedness of households still in low levels and the fact that the loan quality for the system is improving, there has to believe that the economy remains strong.

After this quick review of economic environment, let me turn the presentation to Sergio Restrepo who will discuss in detail the bank's results. Sergio?

Thank you Juan Carlos and thank you Carlos Raul and welcome to everyone, to this conference call.

I would like to expand on Mr. Carlos Raul Yepes' highlights and if you let me drive you to slide number three, we will start with total assets and loan volume. As you can see, total assets grew 5% over the quarter and 15% over the year. Loans grew in a very healthy 8% over the quarter, 14% over the year. And when you split it into pesos and dollars, the growth was 20% year-over-year in peso denominated loans and 5% in the US dollar portfolio. When you convert the US dollar into pesos, you end up basically with a 4% decline in terms of US dollar portfolio.

Nevertheless the final outcome was, as I said, 14% growth year-over-year. Out of this portfolio, 76% is Colombian pesos and 24% is US dollar. We're expecting a 14% growth for 2013 and I would say the probably evenly split it as it was during the last year, probably not as dynamic as we saw in '12 in pesos and probably a little bit more dynamic in dollars than what we saw in 2012.

Now, slide number four, net provision chargers, the charges in the quarter are basically explained in a 44% by contra cyclical provisions due to the new loans, as I explained recently, I mean 8% growth had a contra cyclical provision in debit, therefore COP150 billion out of this COP335 billion was basically due to the growth and COP185 billion, which is 56% is based on the deterioration on the loan portfolio.

The past due loans maintains an improvement trend over the year, this is a third quarter in a row with reductions, you can see I mean for the first quarter '12 up to through the fourth quarter -- sorry, for the first quarter '12 up to the fourth quarter '12, there's a clear reduction on the new past due.

The cost of credit over the year was like roughly 1.7% of the gross average loans and we expect the cost of credit for 2013 to be roughly 1.5 [based on] gross average loans.

On slide number five, as a quality and the coverage ratios, out of this 2.6% compared to 4.6% allowances to total loans, 39% of the provisions, which is equal to 1.3 billion pesos are due to full performing loans, rated A, means again, is in line what we saw in the last slide, has to do with this contra cyclical provisions.

Based on the past dues and the coverage per category, so you can see I mean, all the categories improve over the board, probably as couple of you stated on the reports that we saw yesterday night and this morning, the micro lending is the only one that showed a slight deterioration, but micro lending is less than 50 basis points of the total loan portfolio. Therefore, we demonstrated that on that graph. But, as an overall, as I said, there's a clear improvement in the whole categories.

If we move to slide number six, net interest income, it grew just 1% over the quarter, but a very healthy 22% over the year. This is basically due to the growth that we have had over the year and it is a very important supporting -- supporting scenario for what we're going to see in 2013.

There is a -- there's a slight decrease in cost of funds in trend with the central bank approach of decreasing interest rates, since mid year last year, certainly we have been able to decrease the costs, but we're going to see that in the last quarter, last year, we had a slight reduction on the NIM basically again for the compression, or the reduction on the central bank rates, and therefore the compression on the NIM.

Certainly, there's a clear dynamic in the savings deposits. The bank has had a clear strategy of growing their -- our deposits on the lowest cost of fund. You can see, I mean we grew from 38% to 42% saving deposits and we don't -- just a slight decrease in their costs, where as time deposits remain basically flat in terms of costs.

In slide number seven, and NIM, we have a slight change we used to calculate the NIM and it's basically explained, but we are excluding the operating leases and the net income attributable to those leases. The reason for that is that the magnitude of those leases, right now, is 2.24% of the total assets and the treatment of the depreciation was creating a distortion on the pure financial NIM. Therefore, we're going to see this new approach on the -- as I said, on the pure financial.

What happened on the fourth quarter 2012 was a loss of 30 basis points on the NIM from 6.6% to 6.3% and was basically at 20 bps based on the loan NIM and 10 bps on the weighted average NIM, due to securities.

Based on the new calculation, we expect to have a NIM of 6.5% for 20113, which is a [cue all in] to the 6.2% that we had in the old way.

If w e move to the slide number eight and net fees and income from services and the composition of fees is an 8.3% year-over-year and a good and healthy 10% quarter over quarter, today fees accounts for almost 30% of the total income. We believe it is healthy but we've been losing some ground, due to the more aggressive regulatory environment and as we discussed in other conference before, we have to be careful in terms of increasing fees and even, we have to weigh some of them in order not to be -- not to have the regular more aggressively -- treating the fees or intervening the fees.

If we move to slide number nine, operating expenses and efficiency. Basically, the increase in the total OpEx was explained at a low level in the fourth quarter '11 due to lower advisory expenses and some provisions were reinstated as real costs were lower than expected.

In terms of higher OpEx, we're driven basically by depreciation on leases, as we mentioned before, and some other rents and maintenance expenses. One thing that is important to mention is this table, personal expenses, as you can see, basically the third quarter and fourth quarter were basically flat and it was a very slight increase when you compare with last year costs.

In slide number 10, deposits on liquidity, basically we went back again to loan to deposits ratio below 100%. Today, we are running at 99%, which as we said before, this is probably where we would like to be more towards 100%, but it doesn't mean that it has a significant impact when we saw these 104%, 105%.

Capital adequacy ratio today, 15.8%, 10.4% in tier one, and 5.4 %tier two. This capital adequacy probably one you to lead to the next slide when we would like to discuss about the behavior of the ratio and the two most important events that will happen during 2013.

So, if we move to slide number 11, we can see that the first event that we are anticipating is the new regulation on Basel III in Colombia. That we have a -- will imply a decrease in the total ratio from 16.8% to 14.3%. Both of the ratios will decrease, but it's specifically a tier one will go down from 11.8% to 9.4%. Basically, it is due to the way how net profits -- cumulative net profits and profits from past periods -- period are accounted. So, you're going to see this decrease, but we can discuss how it will go back to a little bit higher later on.

And secondly, is the two acquisitions, first of all is the investment in BAM in Guatemala, it will have a negative impact in tier one of 40 basis points. The risk weighted assets from the acquisition in Panama will decrease the tier one in 90 basis points and the tier two in 50 basis points, total 1.4% and the good will from the acquisition in Panama will have a negative impact on 2.3% in tier one.

As of -- in Colombia the new Basel III regulation states that wherever good will that you pay after August 2012, will be deducted. The before 2012 will grandparent the former regulation that will be amortized over 20 years period. That will end up as of September '13, with tier one plus tier two at 10.1%.

Based on this one, this is why we have stated that we do not really need a capital additions in the short term. There are few administrative efforts -- administrative actions that we can take, it could be some movements on the reserves that we have in some of the affiliates, we can move the reserves into capital that will increase tier one.

And secondly, as I mentioned, the ongoing profits do not account for tier one. We could consider having a semiannual closing the books, that way we can use the ongoing profits and we can put it into tier one.

So, again, this is a clear view. I would like to -- I would like to I mean emphasize about the disclosure about future numbers. I mean those are just the idea that we have. Those are not promises and those are not -- I mean there's nothing that we will -- can commit with and specifically because of the dynamics of the economy and how we're going to grow on the bank, but certainly this is how we see it today.

This is -- this is what we discussed two weeks before when we were discussing about the HSBC acquisition in Panama and the BAM acquisition. And again, the reason for that is to explain and to give you the idea that the authorization that the general shareholders meeting gave to the board directors is basically to have -- to have a reserve available for future issuance when the board of directors considers it is suitable for the financials of the bank. And secondly, the amount, it doesn't mean that it has to be that amount, if we decide to go to the market, it doesn't mean that it's exactly the amount that we're going to do.

In the past, we had an authorization of 80 million shares, and we went to the market with just 64 million. Therefore again, this is a way of being more expedited in terms of when we need a new capital issuances and nothing else than that.

Finally, the return equity, we end up as Carlos Raul said, with a return equity of [16] and a better performance in the fourth quarter than in the third quarter. Part of the expected use of the last year's new capital that we issue, I mean this $940 million that we had in February, we have to leverage it in order to return to the high 10s in return equity. So, we considered that this acquisition in Panama is a very good way of growing the assets and leveraging the assets that we already have in our books. Finally, again, I have to emphasize that we have the liquidity and the solvency for this acquisition.

Finally, I would like to go again to -- that we have a very good credit quality in 2.6, the solvency and the liquidity of the bank to start these new acquisitions. It is strong enough and due to the not aggressive growth that we are seeing in 2013, due to macro conditions, that will allow (inaudible) to retain capital and to fund growth.

The payout ratio declared on the -- yesterday's shareholders meeting was 38%. Therefore we can say something like 62% of the profits of the last year.

So, this is basically the presentation of Bancolombia's fourth quarter results. So, we would like to open for questions, thanks.

Thank you. We will now begin the question-and-answer session. (Operator Instructions).

The first question is from Thiago Batista from Itau. Please, go ahead.

Hi, guys. Thanks for the opportunity. I have two questions. First question is regarding loan growth, how much are expecting to spend in portfolio this year and are you expecting any change in the bank's mix portfolio.

And my second question is regarding the efficiency ratio of the bank, are you expecting any improvements in the [fixed] ratio during this year? And if you could give us an update of the Innova project?

Thiago, thank you for your questions. I would say that the loan growth, we are expecting something like 14% for the year. And we believe that the -- that would be probably with more emphasis on retail than on corporate side, kind of in line with what happened in 2012. We don't see a significant change in that. So, if you can use that number, probably you would use something like 16%, 18% in consumer and 10% to 12% in corporate or commercial loans. Efficiency ratio, close of 55%, certainly. We need to decrease, probably --we have to go up to 50%. It would take probably two, three years. So, we are expecting that this year would be something like a 53%, 54%.

Regarding the Innova project. Basically, we are almost -- I would say almost done with most of the software. One of them that is the saving accounts, checking accounts, we would like to spread it over the next years in order to reduce the risks on implementation. Right now, the whole Innova project is working in Panama and in the -- in the offshore companies except in Sao Paulo of course. But I would say that the number of employees devoted right now is like almost 400. But they will be reduced to a number like 250 over the next few months and finally, the credit card business will be in place before year end.

I would like to ask Juan Carlos Mora, who's the person in charge of the project to give just a more color on the project. Juan Carlos?

Thank you, Sergio. I would like to expand a little bit on what Sergio commented. The Innova project, it's a long term product that already has had a lot of achievements in the bank. Sergio mentioned all the treasury business is already running on the new applications. The offshore operations are running completely on the new IT architecture. All the administrative process of the bank are now running on the new ERP, which is SAP. So they are -- there are many achievements of this project.

For the future, as Sergio mentioned, we are planning to go live with the credit card application this year. This is going to be a significant milestone for the project since it is an application that is going to give the bank tools to compete on the market that is very important for us, which is the credit card business.

On the other hand, we continued implementation of the card banking system, all our trade operations on international payments are now running on the new application. For Colombia and Panama and we are reviewing the strategy to continue the implementation of the core banking system in the future. This is an effort that is going to continue for another years in order to complete the modernization of the IT architecture of the bank.

Thanks and perfect for the answers.

(Operator Instructions). And the next question is from Juan Dominguez from Correval. Please, go ahead.

Good morning, thanks for hosting this conference. I have three questions. First, I wonder if you could give us a breakdown of the commercial loan growth in the fourth quarter, was there a large syndicated loan we should know about, or this growth explained by several disbursements.

Secondly, in the estimation of tier one and tier two ratios that you presented, is the legal reserve of broadly $670 million that was approved yesterday in the shareholders meeting is included in this exercises.

And finally, if you could give us a broad estimation of how mucho f the tier one -- or tier two ratios those administrative actions you will take could add to the indicator? Thank you.

Thank you, Juan. Ours is basically -- when you compare the individual numbers with the consolidated numbers, you're probably going to see some shift in growth, basically, we change some of the bookings of some of the Guatemalan loans from Panama to Colombia, was basically for withholding tax we were having in Guatemala basically because we have the loans granted form Panama.

But beyond that was basically across the board growth. Most of the companies and corporations grew and I cannot really recall a significant loan that will make difference in this one.

In regarding the tier one and tier two, probably I will ask Jose Humberto to give more color on this one. And that will probably be what's the significant changes and the potential administrative actions that we can handle.

Thank you. Basically what will happen in September is we will have to remove our profits of this year from the tier one, but that will go back again in March of next year. So you will see a drop in at around 60 bps to 70 bps this year in tier one because of that and you will go back again to the same level, I mean below 6% of March next year.

And the second question is the administrative measures that we are taking right now is removing from some reservice to leader reservice. We are doing that not only by Colombia, also in our subsidiaries, so you'll see, for the next couple of quarters how the numbers that will increase because of that.

Okay, just a follow up on the first question, the change in the composition of loans across -- across country is due to this intra appellate changes from Guatemala to Colombia?

Yes.

I mean we used to see a 45% loans in -- total loans in Colombia, and now with 57% loans in Colombia.

Again, if you look at the individual results you're probably going to see that, but I invite you to look at the consolidated results, there for in -- the consolidated results, you won't see any change at all, because those are internal changes from one company to the other one. So, the important thing here is the consolidated number.

Okay.

And regarding the first question about the -- the second -- sorry, go ahead Juan.

No, you ask in our exercise in the pro forma exercise about capital, if we are included any of the amounts that the shareholders meeting authorized and in particular we say no. This exercise is not taking into account any amount from the authorization that we received -- or that the board of directors receive yesterday from the board of -- from the shareholders meeting. This exercise is running the bank with no issue of new capital.

Okay. So, thank you.

(Operator Instructions). The next question is from Jose Barria from Bank of America. Please, go ahead.

Hi, good morning gentlemen, thank you for taking my question. I just wanted to know if there's any sort of color that you can provide with regards to the expected earnings that you can expect to generate from the HSBC Panama acquisition in the next two years? Anything you could provide would be great.

And my second question would be with regards to asset quality. I just wanted to know what your expectation is for loan loss provisions to average loans running in 2013. Thank you very much.

Thank you, Jose. I will give you some hint about -- also idea of the first question and I will ask you to repeat the second question because I cannot [miss] all of it.

So basically about the Panamanian operation, as you saw in the presentation, we bought this bank with a return equity of 17%, 18%. Probably, what we're going to do is to adjust some of the provisions over the next two to three years to the Colombian standards. Which as you know, are really, really more stringent that almost everywhere else? But we prefer to run the banks this way. Exactly what we did when we went to Sao Paulo, although the credit quality was okay, we adjusted that to the Colombian standards. Beyond that, there would be some IT implementations, but we don't -- we don't expect a significant change in that.

Saying that, if you do the math, based on the 17%, based on 700 tangible equity, that's basically what we expect to put in our books over the next years. Regarding the second question, would you mind repeating that? Cause I cannot (inaudible).

Sure it was in regard -- with regards to asset quality, I just wanted to get an idea of what did the sort of recurring level of loan loss provisions to average loans that you were expecting to run the banking in 2013? I think in the past you had stated somewhere around 1.7%, but in the quarter it was a little bit higher, so I want to know what we should be thinking about in terms of what the recurring level is.

Certainly, we expect to run '13 on 1.5% approx, even though as -- I mean your point is right. About the provisions in the fourth quarter last year, but as I said, fortunately I mean 44% of that was basically due to the really dynamic growth, we grew the books at 8% this quarter, therefore we have this contra cyclical provisions based on new loans. So, all in all, again the number will be more like 1.5% where as in 2012 was at like 1.7.

Okay, thank you very much.

Thank you, Jose.

(Operator Instructions). The next question is from Maria Santiago from HSBC. Please, go ahead.

Hi, thank you for taking my question. Can you repeat what are your expectations for loan growth for this year? And on the -- on asset quality, your ratio right now stands at 2.6% at the end of 2012, could you tell us where do you see this ratio by the end of 2013?

Thank you, Maria. The 14% growth will be the expected growth for '13. This 14% will be probably more towards consumer and consumer would be probably higher, I mean 16%, 17%. Whereas the corporate could be a little lower. But that's basically based on the dynamic that we are seeing on the economy today.

In regarding the credit quality 2.6%, we didn't see any changes on -- over the year. Probably number would be 10 basis points up or down, but basically we prefer to remain on that number, like at 2.6% would be a reasonable number to run the 2013.

Okay, thank you.

Thank you, and the next question is from Chris Delgado from JPMorgan. Please, go ahead.

Hi, good morning, everyone. Just a quick question. I know you guys mentioned a recent rate decreases, I just kind of wanted to get a sense of how you see that impacting your NIMS and your NII growth? I know historically, you guys had mentioned it really didn't have as much of an impact, but it looks like it did have kind of a meaningful impact you know this quarter. So, just kind of want to get a sense of how you see that evolving in 2013?

Thank you, Chris. You barely answered the question, I mean we don't see -- we don't see a significant impact. Certainly part of the discussion with the rating agencies have been about the liquidity and about the solvency for a new acquisition. And the other one was -- the one which was around a month and a half ago was the new [release] model. But no, not in the short term. Probably the only thing that we saw was when we came from investment grade to sub investment grade and we saw a significant sell up in global wide, but immediately it kind of settled down based on the returns on the debt, but no -- certainly no significant impact.

So do you see your net interest margin staying flat for the year from where it is now? Or, where do you see it going?

It -- I would say -- it will -- with expected flat, probably not what we saw in the fourth quarter, because the fourth quarter was negatively impacted by the securities portfolio. But we cannot ignore that the central bank has been very aggressive reducing interest rates. So, right now, we have like 100% down -- 100% basis points down and it seems there is still room to go down. If that's the case, probably we will see a compression on the NIM. We hoped, not significantly, as we have been able to kind of balance our -- asset and liabilities and not been very sensitive to changes right now. But I will suggest to round the numbers with the NIM that we have today.

Okay, great. Thank you.

Thank you, Chris.

(Operator Instructions). And the next question is from Natalia Corfield from Deutsche Bank. Please, go ahead.

Hi, thank you for the question. My question is with regards to your strategy in terms of acquisition. We just saw now your acquisition of HSBC Panama and I'd like to know what are the next steps? Thank you.

Thank you, Natalia. I would say the strategy has to do with our long term view. I mean we -- a few years ago, we decided Central America was the region we would like to be, and part of the strategy is that we would like to have very well managed institutions, significantly relevant for the country and countries that we believe that have potential.

So, say that that's part of the reason meaning Panama, part of the reason meaning Guatemala and all this business of expansion is -- part of it, I mean the most important part is strategy, but the secondly probably is the opportunity and opportunities are not all the times - all the time available. Remember, we have to balance one on the other one.

All right, and -- but do you see more acquisitions going forward?

Yes -- well, who knows. The last we had was five years ago, six years ago and we had these two opportunities recently. I mean the Guatemala and the Panama, they came in a very short period of time.

We think that we would like to digest and really to let them really put to work before doing something new. And certainly, I don't know if we will -- it will take another five years or not, but we prefer to do it -- things carefully and make sure they're executing properly before just buying just for the sake of growth.

Okay, thank you.

Thank you, Natalia.

Thank you. And the next question is from Luis Guzman from Santander. Please, go ahead.

Hello, good morning. Thank you for the call and thank you for taking my question. I've got a couple of questions. First, you mentioned in doing a number of strategies to simply to increase the capital ratios so have you done internal studies about the -- to quantify this impact? Besides the number of strategies, you mentioned -- you also mentioned the coverage ratio. And in the coverage ratio, I wanted to ask you is there a target that you want to point out for the next year or so? Or where should we look in -- as a medium term target?

Second, tier one of 6%, which is what you have in your slide, do you feel comfortable with as tier one? That's my questions. Thank you.

Okay, thank you. I'm going to begin with your second question. If we feel comfortable with the level of 5.6%, 5.8% of tier one. The situation with the new regulation is if you want to understand the performance of the capital of the bank in Colombia, you have to see the first -- you have to see 15 months. You have to see the current year, and you have to see the first quarter of next year. That's what happened with Bancolombia.

Again, our minimal level would be at around 5.6%, but you'll see growth up to the level of 6.6%, 6.5% on March next year, and this is because on this regulation, the profits of this year, you will take account of the capital only for the first quarter of next year. This is what happened right now with the level of Q1. What kind of measures we are taking meanwhile during this first six months of the year, we will move again some reserves from -- to legal reserves.

In these new regulations, the only way to account 100% of (inaudible - foreign language) or tier one is if the account is a legal reserves. So that's the moment that we are doing right now. So, that's the reason why we are explaining to all international community that we are not expecting to go to the markets because between 5.5% and 6.5% of tier one will be a very comfortable number. You have to take consideration as well that today, if we have 7% of tier one under this regulation it's different from the 6% that we will get under the new regulation, because the new regulation is a pure tier one. So, you can compare and you can -- at the end of the day say that we are maintaining the same strong level.

The other number is just the solvency ratio as a whole. We are maintaining in every single quarter two digits of solvency ratio, so our minimal level could be at around 10% but we are expecting to maintain on the level of 11% to 12% on solvency ratio.

Okay, okay. And regarding the coverage ratio?

The coverage, Luis, about the 177% that we have today, probably number will run in -- at a similar level. As we said, that we will expect to have this 2.6% past dues and coverage of 4 -- 4.4%, 4.5%. We tend to believe that the number will be kind of the same. Some quarter could go down or up, but basically it won't change the real trend, that is to have this enough coverage based on the actual regulation.

Okay, very clear. Thank you.

You're welcome.

Thank you, and at this time, we have no further questions. I'll turn the conference back over to our speakers for any closing remarks.

Hey, okay. So, again, we would like to thank you for attending the meeting. We appreciate your questions and your interest in the bank. And again, we believe that -- well, we have emphasized several times today and (technical difficulty) conference calls, we do not really need new capital for these acquisitions. We have the solvency and the liquidity to do it. What we got yesterday on the shareholder's meeting was the authorization to do it when the board of directors consider it appropriate to do it. But in the meantime, we believe that we will be able to maintain the actual capital.

The -- the expected economy is kind of normal, I mean we don't see any significant change on the economy of normal growth of 14% in terms of the loan books, and what we expect this year is to execute these two acquisitions that we announced recently.

Thank you again, and we expect to see you in the first quarter conference results. Thanks.

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