Grupo Cibest SA (CIB) 2013 Q1 法說會逐字稿

Good day ladies and gentlemen and welcome to the BanColombia's First Quarter 2013 Earnings Conference Call. My name is [Lorraine] and I will be your coordinator for today's call. 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 uncertainties. 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. Charges in business strategy and various other factors that we described in our reports filed with the SEC.

With us today is Carlos Raul Yepes, Chief Executive Officer, 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. Yepes, Chief Executive Officer of BanColombia. Please proceed, sir.

Thank you very much, Lorraine. Good morning and welcome to our first quarter 2013 results conference call. It's a great pleasure to be with all of you who follow so closely our operations and results. Let's just start with a brief discussion on the main topics that impacted our business in this period.

You can follow the slide presentation available at our investor relations website. First I would like to present the net income for the quarter, COP493 billion which is 5.3% above the net income of the previous quarters and 11% higher than the net income of the first quarter 2012.

This net income represents an annualized ROE of 16.8%. During this quarter we saw a sustained credit demand in Colombia, our loan book grew 3% driven mainly by corporations, individuals, and more specifically mortgages, capped demand in credit. And this impacts specifically our loan growth during the period. The balance sheet remains strong and the capital adequacy is in good shape to allow the local growth that we forecast and to comply with the committed to acquire the banks in Guatemala and Panama.

After the shareholders meeting last month we invested 62% of the net income of 2012 increasing the capital adequacy to 17% with a Tier 1 of 11.6%. We keep our efforts on bringing down the cost to income or efficiency ratio. Salaries and administrative expenses present a year-on-year growth in line with our estimations and below the net interest income growth rates.

Efficiency ratios ended [to] fourth quarter '12 at 53.5% the process of integration of -- and regulatory approval for the acquisition of HSBC Panama operation advances as playing. Our forecast is to have the deal completely closed and operating under our responsibility within the second half of 2013. Currently several teams are working in order to close gapping processes technology and other managerial issues.

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 on this matter. After that, Sergio Restrepo will elaborate more on the banks results, Juan Carlos.

Thank you Carlos Raul. Good morning to everybody. On slide number three in the presentation we can see that inflation for the 12 months ended in April 2013 was 2%. In the very low end of the Central Bank target for inflation. The Colombian Central Bank's repo rate is currently at 3.25% after a period of rate cuts that started in July, 2012.

The Central Bank decided to post in its last meeting in April. They kept the rate unchanged in part because of the forecasted impacts on the Colombian government's plan to [impose] the economy through mortgage interest rates subsidies and more government investment on infrastructure, which should drive up economy activity.

We expect the repo rate to end 2013 at the same level it has now an inflation to be in the low end of the mentioned range of 2% to 4%. Regarding GDP growth in Colombia we are finally starting to see some progress in the infrastructure projects announced by the government sometime ago. But it's still too early to see that impact of the expenditures or create demand in this front.

Consumption remains healthy although the pace of growth has moderated. The 12 -- the 10.2% unemployment rate in March shows that the economy is in a good shape. All these trends lead up to believe that Colombia's GDP will grow between 4% and 4.5% in 2013. During this quarter we continue seeing an appreciation of Colombian treasuries. The rate cuts in the repo rate contributed to this appreciation. During the quarter, the Colombian peso depreciated 3.6% versus the dollar.

The Colombian external sector remains solid and export in particular commodities are performing well, although the pace of expansion is slower than one year ago. To recap, Colombian economy remains strong, the indebtedness of household is in low levels, and has been declining over the last three quarter on the financial system remains strong.

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

Thank you Juan Carlos. And good morning again to every one of you attending this conference call. Let me drive you first through the balance sheet of the bank of the group.

In slide number four we have the loan performance and total assets on loan volumes. Total assets grew 22% over the year in 5% in the quarter. We don't have a significant change on the structure expect that we increase the net investments as you can see 14% net investment and we remain with 67% on loans as part of our asset structure.

In terms of loans, we grew 19.1% in Colombian pesos over the year and 15.1% in U.S. dollars for a total combined growth over the year of 18.9%. The first quarter we saw a mild growth widely spread with emphasis on consumer and mortgages. We expect for 2013 plus 12% growth again across the board. And based on the government emphasis on housing and subsidies in mid to low income housing we could see an increase in mortgages same trend we saw over the first quarter.

Next slide, number five, in terms of the asset quality there's a significant change in new past due loans as you can see in the lower part of the graph. We end up with COP524 billion of new past due loans. Even though the number is high, there's some seasonality on the behavior and we do not -- and this one does not represent a source of warning. While we expect that we will probably behave in line with what happened last year and we will see in the second, third, and fourth quarter a decrease on the new past due loans.

The level of provisions is in line with the expected losses. And as of today we are running a rate of 1.7% as a cost of credit based on an annual rate. As we discussed before, probably we're going to see the number running from 1.5% to 1.7% over the year. And with the numbers that we just showed about the potential after the trend of improvement, that number will be more towards 1.5%.

Slide number six, asset quality and continuing asset quality and coverage ratios. First of all the past due loans rise to a number of 3% coming from 2.6%, again this is in line with the new past due loans. But again it doesn't have a warning signal here. Allowances to past due loans, 156%, certainly is a significant decrease from 177% that we had last quarter. But there's no -- there isn't a level that is below our expectations and long-term budget. I mean, they're still above that number.

And we would like to highlight that those numbers are 30 days past dues. Part of these allowances, COP1.3 trillion, or 33% of them are attributable to fully performing loans, those are based on the regulatory schemes on the provisions where you have to create reserves every time you have a new loan. And out of these COP1.3 trillion, COP800 billion are associated to commercial loans and leases.

Regarding the deterioration over the quarter we saw the biggest change in quality basically in consumer. We don't think to believe that we can turn back the trend. If you look commercial, commercial is kind of the same level that we had last year or a year ago. Mortgages basically over the long-term trend, the 7.3% is kind of middle of what we saw over the last year. And financial leases certainly is a level, the same level we have almost over the year, except for the fourth quarter.

So again, we feel comfortable with the situation and we believe that the things will improve shortly on the year. In terms of consumer it's important to highlight that we gain a significant market share on a business that we were kind of laggard, therefore it's part of the reason why we are seeing this deterioration on the consumer trade quality.

We move to slide number seven, net interest income on margins. The net interest income is significantly high compared to the fourth quarter of last year and compared to last year. Certainly there's an important contribution for investment gains, but still we have a good long-term trend. Cost of funds are under control in the left-hand, the lower left-hand side.

You can see that total cost of deposit is 3.2%. If we add all the long-term debt which are the bonds which are almost at 12.3 -- COP12.4 billion -- COP12.4 trillion bonds. Total cost of funds is [3.65], it's 40 basis points below what we had last quarter. This will have a positive contribution on the NIM. Certainly we had 100 basis points decrease on the reference rate and that had a negative impact on NIM as we're going to see in the next slide.

We believe there's still some room to go down as time deposits still high, therefore we consider we could reduce a few basis further down and probably improve or maintain the NIM over the next course. The funds in this structure remain strong in savings and time deposits as you seem. I mean, 38% in time deposits and 33% in -- sorry, 38% in savings and 33% in times deposits.

That's basically core funding that reflects that strength of our franchise. That's something that we're going to revisit later on in the presentation and it's basically how we manage to grow deposits without putting pressure on the prices.

When you compare -- I mean, some of you have highlighted the increase on the securities portfolio income, but if you just do the math in pure interest income versus pure interest expense it's still a positive margin and then we manage the increase over the quarter, 80 basis points income and we decreased 18 basis points the expenses, therefore it was a positive margin on the pure interest behavior given the fact that we have decreased some rates over the year and basically based on the -- I would say peer pressure and public pressure. Something that we try to go in advance regulation -- a bargain being regulated. We prefer to have these steps ahead.

If we move to slide number eight, we have the NIMs. They're still things to probably highlight here. One of them is again the return of the NIM -- on the securities, certainly with the decrease of 100 basis points on the reference rate and the reduction on the long-term debt for Colombia, Colombia paper. We made a significant gain on what we had in the portfolio.

Our treasury division had a very good stance at the moment when the interest rates were going down. Therefore we collect a significant profit on that. Certainly it won't be sustainable. And for long-term projections we prefer to have, or do the math with the NIM of 2% on securities. But that's probably what we could expect over the next quarters. Certainly with up and downs, but in a normalized way it should be something like 2%.

And secondly the reduction on the loan portfolio NIM from 6.9% to 6.6%. And certainly has to do with the reduction on the reference rate as I mentioned already, 100% basis points. We have significant amount of our loans are related or based on reference rate, therefore we have this reduction. Our goal and our challenge today is to reduce the cost of funds basically as we have them tied to bonds and tied to term deposits. Usually they are kind of laggard. But our projection here is to maintain the total NIM something towards -- sorry -- 6% over the next coming quarters.

If we move into slide number nine, which are net fees and services. Certainly the fee behavior was below our expectations that we had a year ago. But according to some reductions that we bear in order to neutralize potential regulations. You heard over the last presentations that we decide to reduce some of the fees on the ATM withdrawals. We reduce some fees on certain services. But we -- as we said before we considered this is a trade off and is bear to be ahead on regulations instead of being fully or formally regulated further on.

Therefore we believe that fees over the year will be something below 10%. Over the quarter, certainly there's a clear behavior based on seasonality. And in the fourth quarter of the year certainly is much more intensive in credit and debit cards and other banking services. But we feel that still, the fee income for the growth is still quite healthy.

And slide number 10, we have operating expenses. OpEx grew 13% over the year, even though significantly lower than net interest income growth as Carlos Raul pointed on in the introduction. In terms of on the operating expenses, we have the depreciation. And this depreciation is part of our operating leasing business, even though this is an OpEx. It has to be at least highlighted that is COP96 billion out of this COP1,091 billion are related to business that, in our view, is a very profitable business.

If we exclude the depreciation on the calculation, the OpEx will have been 3.2% for the quarter and 11.5% for the year. Personal expenses account for 61% of the total OpEx and the salaries grew over the year just 3.6%. And over the quarter was a slight reduction of 28 basis points. The ones were basically (inaudible) and other indemnities and benefits of people lay-offs that we have to pay. But, I mean, we -- although we are not comfortable with the expenses level, we would like to have it at a lower rate. We are okay with the efficiency ratio which is going down.

Right now it's from 55.2% to 53.5%. We -- again, as we do not expect to remain with the same level of profits coming from securities, but we certainly expect that there will be a reduction on the efficiency ratio for the year. OpEx compared to total assets, 4.5% flat with what we had last year.

Slide number 11, for some of you that follow us quarter after quarter, this is a new graph. And we would like to present here the behavior between loans, deposits, and the loan to deposit ratio. You can see in the upper line, the loan to deposit ratio in '09, we had an 88%. And the top of it was -- but by the end of '11, 2011 more than 100 -- 105. But basically that means that we do not -- I mean, we are not in a run of going way below -- way above 100%.

It's basically when we feel that we can grab deposits without putting pressure on the price. We did it. And we have been doing that recently. And where there is a significant demand on loans, that's the way we use part of the long-term funding in order to keep pace with the growth of loans. Therefore, right now we are running in -- in our calculation we do -- I mean, we take out the deposits and the loans -- sorry, the loans and the funding from the development banks, local development banks.

But the number is 98%, the loan to deposit ratio which is again back in trend with what we consider should be the long-term trend. Basically in terms of shareholders equity, as you can see, I mean, is 11 trillion pesos. And the capital adequacy right now is running at 17% total capital and 11.6% Tier 1. Levels that we consider healthy and levels that we consider enough to cope with the growth that we expect for the year and the payments of the two acquisitions in Guatemala and Panama as Carlos Raul mentioned in the introduction.

Basically this is the presentation of the results. Therefore we will open the floor for questions. Thanks.

Thank you. We will now begin the question and answer session. (Operator Instructions). And please limit yourself to one question. And our first question comes from Thiago Batista from Itau BBA. Please go ahead.

Hi guys. Good morning. I have two questions. My first question is regarding the asset quality. You are very confident that the asset quality will improve going forward. Have you been already adopting any kind of measure to try to improve these asset qualities, or you believe that the economy will improve and as a consequence asset quality will improve? This is my first question.

And my second question is regarding the plan launched by the government last month to try to improve the Colombian economy. Could you comment about the impact of this plan? Of course a better GDP growth is still good for the banks, but I want to know your view on the impact of this plan on the mortgage business.

Thank you Thiago. Let me start with the asset quality. The point is if you think deeply in what happened, basically I would say the biggest deterioration happen in March. There was -- probably if you remember I mean, the end of the month was probably the holiday week and there were like two or three holidays by the end of the month. But again it was kind of a one month shot.

If you look month after month you could really deduct that probably we're going to see some improve. Certainly what we want the full and dramatic change in terms of improvement because as we mentioned we are growing on retail. But again we feel comfortable that the number that we have for the quarter won't be the trend for the year.

Regarding the program that government launched recently in order to improve some esteem on the economy, we tend to believe that there would be some emphasis on mortgages. We will be able to grab part of this growth. We have seen a significant reduction on the interest rates. The government is giving a subsidy of 250 basis points. Banks -- we and all of our peers are reducing the interest for these kind of mortgages.

Basically in mid to low income housing. We don't see any problem basically on that. Basically it has to do with the cash flow of the families and as we believe that there would be more families being able to acquire houses. And again, as those are not low income, or very low income, those are mid-class. Usually those are quite tradable deposits. So we do not believe there will be problems or there will be bubbles on that particular segment.

So certainly there will be room for mortgages and for banking sector. It is competition right now. But again, I think as I stated at the beginning, certainly we believe that mortgages will be part of the growth for this year.

Okay. But is it fair to say that the spreads on mortgages could present some reduction going forward?

Bases on the actual rates, I doubt. Because what we see today is like a 8.5% -- 9% which is way below what we saw before. I mean, never say never, but probably -- I find it hard -- I mean, seeing rates going even further down than that.

Okay. Thank you.

You're welcome.

Thank you. And once again, please limit yourself to one question. And our next question comes from Carlos Macedo from Goldman Sachs. Please go ahead.

Thank you. Good morning gentlemen. Thank you for taking my questions. I actually have a couple of questions, one on the NPLs and the other one on margins. I'll start with the NPL one. Of course there was an increase in NPLs now. The provision expenses were lower because of the countercyclical part of them and that actually led your coverage ratio to decline materially.

Is the coverage ratio that you're operating now this 156%, almost? I realize that the 90-day coverage ratio is over 300 which is very encouraging. But is the 156% for the 30-day coverage ratio is something you're comfortable with and you can see staying at this level going forward, or do you expect this coverage ratio to improve back to the 170 plus levels of prior quarters?

The second question regarding margins, I realize that the lower benchmark rate had a negative impact on your loan yield for the quarter declining by 30 basis points to 6.6%. However, 6.6% on that chart that you showed us, the lowest rate of the last several years. Of course, the benchmark rates are much lower now than they were in the past.

But your portfolio is also much more geared towards consumer loans. What kind of competition are you seeing on this consumer loan side? And what do you really -- I mean, how are spreads in that specific segment working? And do you expect as you move further into this consumer segment that maybe some of that mix effect can push this margin higher?

Carlos, thank you for your question. And I basically will say that, I mean, you already answered your own question. Your -- [development] question was quite exactly. I think the NPLs, 156% still comfortable for our standards.

The point is if the new deposit loans behave as we believe that want the trend -- that number. We maintain the cost of credit and the provisional levels, that level that we had on -- like at 300 -- whatever was the number on the last quarter, 300 -- and that will easily end up in an increase on the ratio.

It would be a more normalized way of seeing the [bulks]. And as the new past due loans -- as they new, the level of reserves that you have made based on that usually are much lower. When they start getting older and older you start to make more and more reserves. Therefore answering your question straightforward I think that probably next quarter this number should go a little bit higher than 156% based on the expectations that we have for the next quarter.

And regarding the margins, as I said you're absolutely right. I mean, 6.6%, we saw that two years ago. And certainly was one of the lowest levels. We tend to believe that there's a mixture of things. I mean, as I said there was a decrease of 100 basis points over the quarter. At the very same time was a kind of rate reduction based on government pressures and peer pressures and community pressures.

And we kind of followed that idea that we preferred to make the reductions ahead instead of being regulated there. And we haven't been able to reduce costs at the same speed. But we expect, as I said, the numbers will easily run around six on the overall, and probably we're going to see something not far than that number. I mean, not far from 6.6% in terms of loan behavior, loan NIM behavior. The mix between consumer lending and corporate lending, certainly we are seeing an emphasis on consumer.

On the other side we are seeing an emphasis on mortgages. And mortgages, the NIM of the mortgages is significantly lower than we see here on 6.6%. So on an overall mix on the consumer side, probably we won't see a significant change. And secondly is I mean, this bank has been very -- the side of our business on the commercial. It's significantly higher than retail.

Any slight movement on demand will outpace the growth on the consumer. But again, we do not expect significant changes on the NIM based on the loan structure.

Okay. Thank you. Just to clarify then. I think that Sergio said going forward the net investment margin should be somewhere -- if I listened correctly -- it was somewhere around two for the remainder of the year down from 8?

Yes. 8 is way below their wildest dreams. And never expect to be recurrent.

Well, you had a good quarter. You can't complain.

Yes. Thank you.

Thank you. And our next question comes from Tito Labarta from Deutsche Bank, please go ahead.

Hi. Good morning. Thanks for the call. My question is in terms of expenses. You said given your margins are probably going to come down from the first quarter, but you could probably compensate that by kind of reducing cost for the rest of the year. So I just want to get a sense in terms of what type of growth you're seeing in expenses?

I mean, they're still growing around 13% year-over-year in the first quarter. So do you think that level will come down? I think you've previously guided to between 10% and 12%. So where do you see that for the rest of the year? And then what kind of efficiency ratio do you think that will lead to for the full year? Thank you.

Good morning Tido. Thank you for your question. As you mentioned, expenses is one of the fronts that we keep an eye on and keep working on. We had a 13% growth on expenses for the quarter. What we are expecting for the year is to be around 10% growth on expenses. And that could lead us to something around between 52% and 53% efficiency ratio. As we mention we have a target of being below 50% or around 50% efficiency ratio. But we have mentioned that that's -- it's our target for the mid-term.

For the year we expect something more to be around 52% on efficiency. We keep working on the expense on IT. As you all know, we had an IT renovation program that we are working. This year is the pick of expenses for that IT project. And we expect in the coming years that the change on expenses on the IT side are going to be very low. But it's not going to pressure the growth of the expenses on the coming years.

Okay. Great. So and then in terms of the growth this year is IT expenses will I guess be relatively stable you're saying? And then the growth will be driven more of I guess maybe expansion of the distribution network for higher employees? Or how do you see that -- what's going to bring it lower from last year's?

Yes. On the IT side, probably we are going to see a little increase on expenses. As I mentioned, this is year is the peak of our program on expenses. So from the IT side we are not going to see a big improvement for this year. That will -- we will see it on the coming years. On the other fronts, it's probably is where we are going to see some improvements from the salaries and number of employees.

It's probably the front that we are going to see improvements and we expect that the number of employees is not going to grow as it was growing in the past. So because control is going to come more from that front.

Okay. Great. And could you just quantify how much the IT expenses are for the year roughly? Or what percentage of expenses are related to IT?

I don't have the figure exactly of the IT expense, but I know that the expenses for the IT renovation which is not the total expenses of IT. Non-recurring expenses related to IT. But what is related to the project, the IT transformation is going to be around COP200 billion, which it's what we are going to take to the P&L during this year.

Okay. Excellent. Thank you very much.

Thank you. And our next question comes from Chris Delgado from JPMorgan. Please go ahead.

Hi. Thank you for taking my call. I just had a quick question again relating to the NIM, just wanted to get a sense of your sensitivity to interest rate changes just given the recent interest changes in Colombia.

Hey, Chris. Basically I think we -- in the past we weren't as sensitive. Basically I think we -- today we are basically neutral. Even though being neutral, there is a lag between the prices on the income versus the prices of the expenses basically because of the creation of new loans fully goes further than the creations of new deposits.

Okay. But on an approximate basis let's say there's another 25 basis point increase or decrease. Do you have an approximate number on what impact that would have?

In the short-term, 25 basis points probably will have an impact on two or three basis points on the NIM. But again, as we said probably we will be able to neutralize that as we already are in trend to reduce the rates.

Okay. Great. Thanks.

Thank you. And once again, please limit yourself to one question. And our next question comes from Jose Barria from Bank of America. Please go ahead.

Yes. Most of my questions have been answered. But maybe if you can just comment quickly on the shelf registration that you did this week for different types of securities and if there's any updates on the timeline for a potential issuance of those both on the debt and equity side?

Yes. We already announced the registration. We hope to -- deposits we take at around three weeks, we are expecting to receive all the [finance] and to convert to registration process. So we are talking around $500 million in these costs.

I'm sorry I can't hear. Repeat the number, $500 million?

Yes. It is around $500 million and we are planning to exchange from the investors and (inaudible).

I see. And in terms of sort of amount for -- this is for all the securities, or is this just the debt portion or the preferred portion?

This is just for the debt portion. That the debt that we issued last year at the second half of this year.

Okay. And with regards to the shareholder approval that you received for a potential issue of up to -- I think it was $2.5 billion. And I know in your previous conference calls we've asked this question with regards to what happens to your capital ratios in September when a couple of factors are going to impact it. Any further color in sort of timing on building back your Tier 1 after that period?

Yes. As we mentioned in the last -- in the previous conference call, we are not expecting to go to the market. We feel comfortable with the level that we will probably get in September once the decree will take place. And ones that the acquisitions also will take place. So we are not expecting again to go back to the market to get Tier 1.

We believe that the 6% level that we will get at the end of this year we believe is a comfortable level because this is (inaudible) regulation Basel III which is a different quality of Tier 1. And again, we are planning to go back to the level of 6.5% to 7% of the first quarter of next year. And this is because on our general stance we were decreasing (inaudible) profits and that will increase our level of Tier 1 at around 7%.

Got it. Thank you very much.

All right.

Thank you. And once again, please limit yourself to one question. Our next question comes from Juan Dominguez from [Credit Corp Capital]. Please go ahead.

Good morning everyone. Thanks for hosting this call. Most of my questions have been already answered. But I have one remaining about the exceptionally high trading best results during the quarter. Could you give us more insight about what happened there if there is a change in the composition of the investments from available for sale to negotiable or did the bank realize some gains on deliverable sales investment?

Juan (inaudible). No. Basically what we had is we in advance we foresee that the change on the prices basically with a change on the fiscal regulation was [20]. There was a withhold in tax for international investors. So we saw that there would be -- that the price on the debt outside the country and the price of the debt inside of the country had a gap. So we saw that with this change in regulation, certainly there will be a convergence on the price of both of them.

So we load our books and we manage to sell at the right time a significant part of this debt. Basically that was the reason where we made the biggest part of the profits. And the other one was basically on the volatility of the exchange rate. When there's volatility you make profits. But, I mean, nothing -- I mean there's no rocket scientists. We've just been on the market.

Okay. Thank you.

You're very welcome.

Thank you. And our next question comes from Nicolas Norena from Serfinco, please go ahead.

Well, basically we'd like to know at Serfinco an additional guidance. I know we've been talking a lot on asset quality. But it would be interesting to know which is your view on the crops development during the recent months.

Nicolas, will you repeat the last part of the question? I kind of missed it?

Basically to know how the crops, the credit crops have been evolving.

We had to address the vintages.

Yes. The vintages of the last quarter -- I mean, the first of 2013 are much better than the ones that we had in the last year. So we expect that the charge ups begin to give a positive trend. And also with the NPLs. So we expect that we are going to have a better vintages in this year. We have tuned some positive in consumer portfolio. So we consider that this is something we had much better.

Thank you very much.

Thank you. And our next question comes from Boris Molina from Santander. Please go ahead.

Yes. I had a question regarding your capital ratios. You saw a readily large jump in your Tier 1 capital in the first quarter related to the fourth quarter. Is this solely to the effect of the capitalized interest, or is this -- is there any non-core capital that is going there, subordinator or some other instrument that went to this capital ratio? Could you explain the breakdown in the rise from the COP9.07 billion to 10.5 -- COP10.4 billion in the first quarter?

Yes. We are expecting only to capitalize only to dividends next year in the first quarter. On this year we will move some reserves from monetary reserves to media reserves in order to increase the level of Tier 1. But again, the only way we are expecting to increase our level of capital, our Tier 1 is through retain profits next year on BanColombia.

And the movement this year in this first quarter was solely through recapitalization of reserves?

Yes. Absolutely. That's the way it is. And we are expecting for the half of this year maybe to take some profits from the subsidiaries in order to increase the number at Tier 1 and to which the 6% as I mentioned before on the third quarter of this year.

Thank you.

Thank you. And at this time I am showing no further questions.

Okay. We would like again to thank you -- all of you and being very consistent on the attendance of the meeting. We hope to see you here in three months time. And we certainly appreciate your analysis and the reports that some of you already put in the press. Thank you very much and have a good day.

Thank you. And thank you ladies and gentlemen. This concludes today's teleconference. Thank you for participating. You may now disconnect.