Grupo Cibest SA (CIB) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Bancolombia's First Quarter 2018 Earnings Conference Call. My name is Sylvia, and I will be your coordinator for today. (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 is Mr. Juan Carlos Mora, Chief Executive Officer; Mr. Jaime Velásquez, Chief Strategy and Financial Officer; Mr. José Humberto Acosta, Chief Financial Officer; Mr. Rodrigo Prieto, Chief Risk Officer; Jorge Humberto Hernández, Chief Accounting Officer; Mr. Alejandro Mejia, Investor Relations Manager; and Mr. Juan Pablo Espinosa, Chief Economist.

I would now like to turn the presentation over to Mr. Mora, Chief Executive Officer of Bancolombia. Please proceed, sir.

Good morning, everybody. Welcome to our first quarter conference call. I wish to begin this call giving you an update of some relevant aspects that materialize our strategy.

First, in line with the credit cycle that we are going through, we have done some adjustments and improvements to the collection process. The goal is to avoid loans reaching the state of delinquency and maximize the recovery of past due loans. Also, we continue improving our underwriting standards to assure that we grow the loan portfolio without further deterioration. So far, the vintages show us that we are going on the right direction.

In the digital payments front, we have grown the number of transactions more than 13x, and reached $100 million in contactless purchases over the last 12 months. [arellenormano], our cornerstone channel for operating a simple transaction platform, continues growing exponentially. We already have 100 -- 900,000 active accounts, which performed more than 12 million transactions last year. This is a very efficient tool to allow us to extend the capacity to perform transactions to people who do not have a formal relation with the financial sector. Also, digital sales continue growing. Two of the most relevant products are savings accounts and credit cards.

At this point, I would like to share with you some trends of this beginning of the year. First, let's remember that the next 27th of May, the first round of presidential elections will take place in Colombia. The results will set the mood of private sector investment programs going forward.

On the economic front, I would like to highlight that inflation is converging towards the 3% target set by the Central Bank. During the first months of the year, we have seen some improvements in consumer and private sector confidence. Unemployment rate has been stable and consumption has left behind the negative impact of increase of the VAT. The Central Bank has adopted a more expansive policy. Last April, the repo rate reached 4.25%. This should create conditions for a GDP acceleration in 2018 towards 2.5%.

Credit demand has evolved according to our forecasts. In Colombia, we observed a trend in new originations that led us to reaffirm that we will reach a consolidated growth of around 8%. In Central America, the growth has been in line with our expectations in both corporate and retail banking. The appreciation of the peso during the first quarter caused growth in pesos to be negative during the quarter. Year-over-year, the loan portfolio growth is 4.1%, despite a 3.6% appreciation of the peso over that period.

Credit quality will continue being one of the most relevant topics for 2018, and we have concentrated our efforts on 3 aspects: as I mentioned, origination, increasing coverage for certain corporate clients and the collection process. We believe that we are near the peak of deterioration, and charged COP 875 billion in provisions during the quarter, which represents a 2.2% cost of risk. We expect to have a charge of around COP 3.4 trillion in provisions during the year.

As you may recall, starting January 1, 2018, we must adjust our provisioning models under IFRS 9, which means to use expected loss provisions instead of the current incurred loss approach. As a consequence of this adjustment, we increased allowances by COP 600 billion or around 8%. We also stopped recognizing interest on delinquent loans with very low probability of recovery, those classified as Bucket 3 loans. Later during this call, José Humberto will provide a more detailed explanation on this IFRS 9 implementation.

Finally, I wish to emphasize the efforts that we are putting on cost control, a strategy that put us in a cost to income of 49% last year and we believe to be between 48% and 49% this year. The optimization of the distribution channels, headcount reduction and automation are the elements that will permit us to achieve that goal.

With these elements in mind, I will -- I want to ask Juan Pablo Espinosa, our Chief Economist, to give you an overview of the main macroeconomic topics to consider. Juan Pablo?

Thank you, Juan Carlos. Now I will ask you to go to Slide #3 in the presentation. Recent indicators reveal a gradual pickup in activity and a more balanced macro framework for Colombia this year. During the first quarter of 2018, GDP grew 2.2%. This result was in line with our estimates and is 0.7% higher than 1Q '17's reading. In this period, 9 out of 12 sectors had a positive variation. The most dynamic were financial activities, public administration and retail.

In contracts, there were contractions of 8.2% in construction, 3.6% in mining and 1.2% in manufacturing. We believe that the more sanguine performance of the economy this year is the result of a rebound in private spending, which is due to a positive variation and real disposable income as well as low and stable interest rates.

In addition, more constructive macroeconomic and financial conditions should lead to a recovery of private investment. At the same time, the country is enjoying from global tailwinds such an increasing terms of trade and a higher growth of its trading partners. As a result, we confirm our 2.5% growth forecast for this year. We expect that after elections, the recovery will take full force. Thus, by the end of this year, growth will have accelerated to 3%.

In terms of prices, it is worth noting that headline inflation has moderated sharply from 4.1% last December to 3.1% last month. This correction has been widespread, as both food and core inflation have been trending downwards -- going forward, we expect that in coming months, annual inflation will even fall below 3%. However, an acceleration of food prices will lead to a moderate increase of inflation in the second half of the year. So it will close at around 3.3% this year.

Regarding monetary policy, we anticipate that after the 25 basis points cuts in January and April, the reference rate will remain at 4.25% for the remainder of the year. Only until 1Q '19, economic conditions will lead the Central Bank to start a mild tightening cycle. On the external front, we expect the current account deficit to remain at 3.3% of GDP. This figure implies that the external imbalance is now similar to the level seen before the fall in oil prices.

Finally, we reinforce our view that this year, the central government will meet the deficit target of 3.1%, and that the additional effort required to comply with 2019's new target of 2.4% is now less pronounced. After this overview of the economic environment, let me turn the presentation to José Humberto Acosta, who will discuss the bank's results.

Thank you, Juan Paolo. Before starting the -- with the discussion of the results, I would like to call your attention to the fact that this quarter, Bancolombia started reporting numbers under IFRS 9. On Slide 4, we summarize these impacts. In the balance sheet, there is a reallocation of COP 599 billion from the line of accumulated other comprehensive income in the equity to the line of allowances for loan in the assets side. This is a one-off impact effectively on January 1 of this year.

On the income statement, there is a reduction in net interest income by COP 102 billion due to the now recognition of interest attributable to loans in Bucket 3, which have a very low probability of recovery. Similarly, there is a reduction also by COP 102 billion in the provision charges. The net impact in the net income is 0.

Because of these impacts, some metrics and ratios are affected as well. Reported NIM will be lower as a result of loans in Bucket 3, which will not accrue interest. The efficiency level will be affected due to the reduction of net interest income. Fee income as a percentage of revenue, will increase because of lower NII revenues. It is important to highlight the fact that during 2018, we continue modeling and fine-tuning these impacts during the year. We might have change to the metrics I just mentioned.

Now moving on, I would like to give you a brief overview of the status of our operations across the region. Please go to Slide #5, where we can see the snapshot of our 4 main businesses.

I would like to highlight, in our operation in Panama, Banistmo, a significant improvement of efficiency due to cost controls programs and introduction of new products and services. Also, Banistmo has today the capacity to sell product through our digital channels.

In Banco Agrícola operation, the coverage ratio has increased to 226%, and the NIM has also expanded as a result of better allocation of assets and more efficient strategy in the funding side. Fees have also performed very well for this operation and have grown 13% year-over-year.

In BAM, in Guatemala, the increase in the coverage ratio and NIM expansion are the 2 most important metrics. Nonetheless, efforts in digital banking are also paying off and having a very relevant role. Today, insurance distribution through the online platform is the fastest-growing product.

And finally, in Bancolombia, the efficiency continues improving due to the diversification of channels and cost control. In general terms, the international operations are providing an upside to the consolidated numbers.

Now I would like to move to Slide 6 of the presentation, where we can see the evolution of assets and their composition. The composition of the loan portfolio by type of client remained relatively stable during the first quarter. Nevertheless, the 7% appreciation of the peso against the dollar caused the peso-denominated portfolio to represent a greater proportion than was represented in December. Today, pesos accounts for 68% of the total loans. This appreciation caused by the growth of loans in the original currencies to look smaller when converted to pesos. The year-on-year growth as of March is 4%.

Regarding credit demand, we have seen corporations acting in a cautious way when undertaking new projects and demanding credit. This is the natural outcome of the uncertainty associated with the election -- associated to the election process, and this trend we have forecasted in our budgets. In March, we saw some signals of recovery after a slow start of the year. We anticipate that this sluggish demand and growth will continue until midyear when we finally know the outcome of the elections. We continue seeing a greater growth in consumer loans although at a slower pace. Today, we confirm our estimation of loan growth for 2018 will be at around 8%.

Moving on to Slide 7, we present the situation of the credit quality as of March. In line with our expectations for every first quarter, 30-day past due loans presented an increase due to the higher formation of new past due loans. This is a seasonal effect that we experience every March, and this year in particular, the slow economic growth and the presidential elections accentuated the trend. 90-day past due loans also posted a slight increase due to runoff of already deteriorated vintages. Nevertheless, the coverage ratio for these loans reached a level of 174%, and we intend to keep it at around that level.

As we mentioned earlier, the adoption of IFRS 9 increased the coverage levels because we reclassified COP 599 billion from equity to allowances. This is the main reason for the change in coverage in the first quarter of this year.

Connecting with this, in Slide #8, we present the provision charges for the quarter, which totaled COP 875 billion. In general, provision charges maintain a high level as we continue protecting the balance sheet from the new past due loans. These charge are mainly explained by commercial loans, mainly large corporates, which represent 40% of the new past due loans.

SMEs that are increasing the number of pay in arrears, which represent 23% of the new past due loans. A very important metric in this slide is the new past due loans of the quarter, which reflects the seasonal effect for the first months of this year. Again, we had an impact of IFRS 9. Loans classified in Bucket 3 with a very low probability of recovery do not require provisions. They do not accrue interest either. The new IFRS 9 methodology requires Bancolombia to estimate provision based on expected losses, which tend to be more conservative, reaching a cost of [trade] of -- at around 2% at the end of this year.

Moving on to Slide #9, we see the evolution of net interest income and the funding cost. NII declined 4% compared with the first quarter of last year, impacted by the repricing of the loan portfolio due to lower interest rates of the Central Bank, to some extent, by the appreciation of the Colombian peso against the dollar in the same period.

Additionally, the IFRS 9 adoption impacted NII by COP 102 billion due to the nonaccrual of loans classified in Bucket 3. Our main strategy to defend NIMs and NII is to reduce the funding cost as fast as possible. We have concentrated the efforts on reduce the cost on long-term debt by rolling over the bonds and expiration of approximately COP 300 billion-denominated bonds during the quarter; promote savings accounts, which grew 11.5% versus growth of 2.4% in time deposits; reducing almost 8% the stock of funding with international banks; and finally, the reduction of the duration and cost of the certificates of deposits in Colombia. The Combination of these factors has permitted to maintain the loan-to-deposit ratio at a level of 115%.

For the rest of the year, probably we'll see another reduction of interest rates in case inflation continuous declining. The repricing of the loan portfolio will continue, and the reduction in the funding cost will be marginal.

In the next slide, #10, we present the net interest margin. We estimate the impact of IFRS 9 was the reason for the 10 basis point compression in lending NIM during the quarter. So isolating these effects of this, lending NIM will have been stable during the quarter. So far, we have contained the impact of the interest rate cuts in Colombia on the lending activities of the bank. This have been combined effect of the change in mix towards consumer loans and the reduction of the funding cost.

In the securities front, we experienced more volatility during the quarter. And as a result, NIM came down to 0.5%. We expect the reference rate in Colombia to come down 25 basis points and an improvement in dollar margins due to the higher U.S. rates. As a result of interest rate reduction in Colombia and the impact of IFRS 9 adoption, we estimate the NIM for 2018 to end at around 5.6%. And that is explained basically for 20 bps due to the interest rate cuts and 20 bps due to the IFRS 9.

On Slide 11, we can see the evolution of fees. Fees continue presenting a good evolution, despite the seasonal effect of the first quarter. Comparing them with the first quarter of last year, the 9% growth indicates the good trend. In particular, credit card fee posted a solid performance due to the promotion of plastic as a method of payment and the marketing campaigns for the first months of the year. The workup and the fact that the Bancolombia is a sponsor of Colombian national teams contributed to these strategies.

In Central America, we are also posting positive results in particular, Banco Agrícola in El Salvador, with fees growing at a pace of 13% year-on-year. Bancassurance and asset management are also relevant components of this strategy. Our forecast for fee growth in 2018 is to be around 10% to 12%.

Now moving to Slide 12, we present the evolution of expenses. We must keep in mind that the expenses for the fourth quarter last year were unusually low due to the [certain] adjustments for the full year of 2017. Here, it is important to focus on the year-on-year growth in expenses, which declined 2% as compared to the first quarter of last year.

For 2018, we expect to grow operating expenses between 4% and 5% and the cost-to-income ratio to be at around 49%. Let's remember that this new guidance is a result of lower net interest income due to nonperforming loans classified as a Bucket 3.

In Slide 13, we present the evolution of the main channels. We continue increasing the share of online and mobile transactions as a way to gain efficiencies in distribution. As you can see, at the bottom right pie, the interaction with clients have diversified to several channels. Today, through the app and the online, clients can open savings accounts without needing to go to the branch.

We are launching a specially-designed online platform for SMEs. This platform would allow us to reach more than 1.3 million clients who will benefit from several developments implemented by Bancolombia. Through banking agents, we process more than 0.5 million transactions on a daily basis. We will enhance the offer of digital services to our clients, maintaining a strict cost control, continue rebalancing the existing network and focusing in optimization.

For international operations, for example, we reduced the number of branches in Guatemala, and we are using more of the retail channels. In Banistmo, we launched the mobile platform, which today, processes more than 200,000 transactions on a daily basis. And in Banco Agrícola, the network of agents reached 670 [of them].

Now let's move to Slide 14, where we present the evolution of the capital position of the bank, which ended at a level of 10.2%. As soon as we have more clarity on the Basel III implementation, we'll be providing you with estimations of the additional capital buffers and the treatment of risk-weighted assets that the regulator is contemplated for this year.

Finally, we present the return on equity for the period, which was 9.2% for the first quarter. For the last 12 months, it was 11.4%. Our forecast is to gradually improve return on equity towards the 16% target that we have focused for 2020. In particular, we estimate, on 2018, we should be in the range of 12% to 13%.

In summary, the economic cycle in Colombia suggests low interest rates, inflation under control, stable unemployment levels and the second half of the year will be a faster economy activity. These combination of factors will impact our business with the growth of the loan portfolio according to our expectations. The bank will be focusing maintaining the cost of funding under control in a low-rate environment. We maintain our estimation shared during this call, NIM compression towards 5.6%, cost of rates at around 2%, and return on equity between 12% and 13%.

The main efforts will be concentrated, as Juan Carlos mentioned at the beginning of the presentation, in risk management, basically in origination and enhancing the collection process in order to reduce the stock of past due loans. After presenting these slides and discussion of our first quarter results, I would like to invite you, our audience, to ask any questions.

(Operator Instructions) And our first question comes from Ernesto Gabilondo from Bank of America Merrill Lynch.

A couple of questions from my side. The first one is on the elections. Can you share with us any insight on the candidates leading the polls and if you see it could be a possibility to have only 1 round? Also, if you can share any relevant proposals among the candidates, that will -- my second question is on your NII. As you mentioned, it was affected by the IFRS implementation. So should we continue to see NII affected by COP 100 billion per quarter through the rest of the year?

Thank you, Ernesto. Let me answer first your second question regarding NII. Yes, correct. You have to take in consideration that every quarter, you see a decrease of COP 102 billion on NII. The other side of the story is that we are doing our efforts to reduce, at the same pace, the cost of funding, focusing our efforts on savings accounts and trying to reduce more from the lending business activities for international banks. But yes, you'll see very often COP 102 billion every quarter.

And Ernesto, regarding your question about elections, this has been a very competitive process. Polls at this time shows 1 leading candidate, and others follow by a margin of around 10 points -- percentage points. So with the results of the polls that we have seen in the last years, there is high probability there is going to be a second round that will take place in June.

Our next question comes from Jason Mollin from Scotiabank.

My question is about the profitability outlook, the return on equity outlook in the 12% to 13% range for this year. Maybe you can comment more in the long term. But in -- with this quarter, obviously, there were seasonal weaknesses. I guess if we isolate the impact of IFRS 9, looking at both the net interest income and the provisions, as you suggested, there was no impact on net income. Your book value, however, was negatively impacted from the onetime adjustment. So that actually would help the ROE expectation going forward. So it seems like by maintaining the ROE expectation and having a lower book value, with no impact on net income from IFRS 9 that actually the ROE would -- should look better if we just make the denominator adjustment. But I also wanted to understand better what you just said about net interest income, because yes, it was negatively impacted, you suggested by COP 100 billion and that, that will continue going forward because you won't be accruing interest for the Bucket 3. But should we expect provisions going forward also -- I mean, is this like a recurring event that provisions should also be COP 100 million lower? Or was that just a onetime income statement impact that we saw now? So main question is ROE outlook, 12% to 13% in longer term. And you did have this, I guess, it was COP 500 billion impact on book value.

Thank you, Jason. Yes, let me put it on nominal terms. Originally, our plan were to set COP 3.4 billion total in provisions. As you said, having in consideration IFRS 9, the Bucket 3, we will reduce COP 400 billion at that number. So in regular terms, the final provision that will be COP 3 billion at the end of this year. That is correct, and your appreciation is right. But what happened is, the marginal provisions for the next coming quarters are toughest because the requirements of provisions on their expected losses is higher. So we have to increase another COP 400 billion in provisions on the provisions side. So if you do the math, yes, you have to deduct the COP 400 billion because of IFRS 9. But you have to adapt again, the COP 400 billion because the standard for the next coming quarters will be increasing that number. So that's the reason why, at the end of the day, the cost of credit is the same, 4% because it's a function of the assets of the loan portfolio, but the NII will drop. So as you said, the net income, assuming the next coming quarters, that will be reduced because of that. I don't know if this is clear, Jason. And in this opportunity, I have to permit them to do another question or to see if it is clear for you.

Next question comes from Jorge Kuri from Morgan Stanley.

Jorge Kuri from Morgan Stanley. Can you give us an update on the efficiency program? You delivered very strong year-on-year decline in expenses in nominal, and obviously, in real terms. Where are we in that process? How much more can we see expenses improve over the next 12 months? Are we mostly gone? Are we half the way? Just wanted to get a little bit more clarity on this year, and maybe on a multiyear basis, how much more can efficiency improve?

Thank you, Jorge. Let's allow us 1 minute to answer Jason one topic of the question that he had before we answer your question.

Okay. Jason, just to clarify, we were talking about what happened this year. How we are going to get the 16% that we are planning for the next 3 years? Assume that the real cost of credit of the bank, based on the better economic cycle, will be 1.8%. So if you do the math and you adjust the cost of credit for 2019 and 2020 at around 1.8%, that will be the best way to reach the 16% of return on equity. Thank you.

And Jorge, now going to your question. We keep in our program of efficiency. And the program is based in reducing the costs associated with our distribution channels. So now we have a program of branch reduction in Guatemala. We are consolidating some of the physical branches that we have in Colombia, so we will keep moving on that direction. Also, we will keep the program of efficiency around having the optimal headcount to run our operation. To answer your question directly, we expect this year the expenses to grow around -- between 4% and 5%, which in real terms is around 1% growth. So we will benefit for the actions that we took last year, but also we will have to do some investments on the programs that we are running this year, looking to have the benefits towards -- or in the years '19 and '20, in which we are looking for an efficiency ratio of 47%. So this year, we will expect an improvement on the efficiency ratio and we are targeting 48%. And then the programs will consolidate their effects, and that will lead us to the 46% that we are looking in the midterm.

Complementing Juan Carlos' answer, I have to say, just to give you an example, the corresponding agents, we reached the level of almost 10,000. So that's the best way to reduce our cost of operation and we have replicated the same experience in Panama and in El Salvador, so that will help us a lot. The other good example is how to maintain the headcount under control. We are implementing in the last 2 years more than 200 robots that is helping to work 7/24 and is helping to be more efficient, try to operate in a faster way, in a more efficient way.

Our following question comes from Philip Finch from UBS.

A couple of questions from me. First of all, just in terms of Q1 numbers, I mean, our first take was that it was lower than what we're looking for. Given what you just presented, can we say Q1 was the worst quarter and that it gets better from here, whether it's in loan growth or in terms of provisions as you are alluding to? And the second question is a little bit more specific, and that's the tax rate, still a bit of volatility in the quarter. What should we consider as a more sort of normalized level for tax rate for the quarter this year?

Okay, Philip. I have to say that the -- usually, the first quarter of every year, maintain some weak trending in loan growth. This year will be exactly the same. Our expectations is to have a very solid third and fourth quarter in order to reach the 8% loan growth that we are expecting. So yes, as you mentioned, probably these numbers would be the lowest level of numbers if you compare with the next quarters for this year. Regarding the tax rate, we are -- for the year, the whole year, we maintain the guidance that the tax rate will be between 33% and 34% in total. Remember the statutory tax in Colombia is 37%, but the taxes in El Salvador, Guatemala and Panama is 25%. And the other offshore operations, which is relevant, has 0% of tax. So if you combine those tax effects, the result is 33% to 34% at the end of the year.

Our following question comes from Carlos Macedo from Goldman Sachs.

My question is on your medium-term guidance, 16% target for ROE in 2020. You talked about, responding to Jason's question, the cost of risk improving another 20 basis points from your target this year of 2% to 1.8%. Wouldn't -- is there a risk that maybe your margins also reflect a slightly lower number? I mean, that's really the question. You're targeting 5.6% this year, another 20 basis points down from where you are now. Is that the steady-state margin? Is that what we should expect going forward? Is there a risk that, that could be lower if rates don't go up or if rates come down or if mix changes? How should we think about the evolution of margin within the context of the evolution of the cost of risk?

Thank you, Carlos. There are many forces that helps the return on equity. And yes the cost of credit will be one. The second one will be efficiency level. We are foreseeing the future -- the efficiency level, reaching the level of 46% in 2020. And the third, it is the NIM as you are -- is asking right now. We -- right now, we have a compression. Maybe in 2019 that will be more stable NIM. But again, in the long-term view, because of the competitiveness, because of many banks trying to reach and to gain market share, we expect a compression of the NIM in the long-term view that will be in the range of 5.2% to 5.5% in the next coming 3 years, again, because of the competitive landscape and because -- obviously, the upside is we are moving through consumer loans. That's is helping to support the NIM. So that's the reason why since 2015, we changed and we are trying to change our mix in between corporate and consumer loans. So consumer would be one of the main drivers to sustain the NIM.

Our following question comes from Jorg Friedemann from Citibank.

Actually, I'd like to touch on 2 points. First, coming back to the short-term ROE guidance of 12% to 13%, of course, we also understand that the equity basis Jason mentioned in his question has been coming down because of the IFRS. Just wondering if you believe that additional impacts on the equity basis due to the IFRS 9 could take place during the year or if the COP 600 billion impact was a one-off. And I'm asking that question because if it doesn't have another impact, I see -- I know for you to be able to get into the 12% to 13% target of ROE in 2018, you'd have to see a significant acceleration of earnings throughout the year. So just wondering how comfortable you are with that or if we should expect additional hits on the equity. This was the first question. And my second question is actually with regards to your credit card franchise. I noted in the release that you highlighted Amex losing ground in the period, both in terms of credit card billings and also in terms of credit card issuance. So what is going on, on the Amex? Are you incentivizing the issuance and usage of other labels? Or is this just natural competition?

Okay, Jorg. Yes, regarding the provisioning that is affecting the equity, it is a one-off. And the same happens when we implemented IFRS 5 years ago. It is happening exactly the same. This is a one-off situation, and it's not affecting more the equity level that we are having right now. Regarding how we are going to get the 12% to 13%, yes, one of the main drivers will be a loan growth that will take place, we hope, in the third and the fourth quarter that will help us to increase NII in order to reach that level of 12% to 13%. But again, the COP 600 billion that is affecting equity, it is a one-off situation.

And regarding your question about credit cards. Credit cards is a very important business for us. We keep growing and pushing the business. We are not leaders in number of plastics, but in the -- in any other metric, we are leaders in the usage of the cards. We represent or we sell the 3 main brands of credit cards: VISA, MasterCard and Amex. Where in the past, we had an exclusivity agreement with Amex. And that agreement ended last year. So now we are pushing the 3 brands -- or the 3 main brands in equal terms. So that's why you are seeing a lower growth on Amex. But the credit card business is a very healthy, very dynamic business for us. It's providing very good revenues, fees. And we keep pushing the business at this moment.

(Operator Instructions) Our following question comes from Rodrigo Sánchez from Ultraserfinco.

I just have a question. Could you please provide details and comments about the exposure you have on the Colombian transportation system, including total exposure and coverage you have for the first quarter? And what provisionals level are you expecting to reach by the end of the year? And also if you could please repeat the guidance on efficiency for 2018?

Yes, Rodrigo. The guidance for efficiency is to reach a level of 49%. But remember that we are impacted this year because of NII drop of COP 400 billion because of IFRS 9. Regarding your first question in transportation system, we have an exposure in several companies of transportation. And we have a wide range of provisions in between 20% to 40%. And the reason why we are expecting the cost of credit of 2%, it's assuming that probably in the next coming quarters, we have to increase those provisions basically in some of the companies. But again, today, we have a very orthodox approach in terms of those provisions. They are 20% to 40% range of coverage.

Our next question comes from Carlos Gomez from HSBC.

First, in terms of transportation, I don't think you gave the exposure that you have or you will be going to have. Second, a technical thing, the COP 599 billion charge to equity, that's presumably after-tax. And if you could tell us which tax rate did you use? Was it the corporate tax rate of 37%? Finally, and this is not an anticipated question. Basel III implementation, you said that you are waiting to hear definitions. What exactly are you waiting to hear? And will you be affected by the new regulations on capital for conglomerates -- financial conglomerates?

Okay. There are 3 questions. I'm going to ask -- the second one, very quickly. The definition, why we are saying that the range of the COP 600 billion? Because we are adjusting the models still. We have -- right now, we are having conversation with the auditors trying to receive from them the check in terms of those provisions. We believe that the COP 600 billion that we are adjusting on the provisions and on the equity, it's a 90% approach. We don't believe that there will be a huge impact. Regarding your first question in transportation system, specifically in the company that you mentioned, our exposure. It's around $200 million exposure or even a little bit more, $220 million. And the provisions that we are having there, it is at around 30% of that. Conglomerates?

Regarding the conglomerates regulation, the -- that law was passed through Congress last year, and now it's in the implementation process. The process is going forward well. We are having conversations and some comments on the proposed regulations coming from the government and we don't see any material impacts coming forward for Bancolombia related to that regulation.

Our following question comes from Daniel (sic) [Andres] Duarte from Corficolombiana.

It's Andres Duarte. The significant decrease in the growth of the consumer loan portfolio with respect to 4Q implies the bank has reached its acceptable PDL level for the category? Or is this explained solely by seasonal effects?

Thank you, Andrés. It's the last part that you mentioned. It's just seasonal effects. The consumer loan portfolio is growing 11% year-on-year, so it's healthy growth. The portfolio there is growing faster for us. So it's just seasonal effects.

And remember, that outlook almost 20%, 30% of that consumer loans are represented in U.S. dollar. And because of the appreciation, it is reducing to the level of 11%.

Our following question comes from Sebastián Gallego from Credicorp Capital.

Just a quick question on Electricaribe. Could you comment on the total coverage that you reached in first quarter '18?

Thank you, Sebastián. We reached a coverage of 63% on Electricaribe during the quarter.

Our following question is from Alonso Aramburú from BTG Pactual.

A follow-up on Electricaribe. Can you tell us how much of the provisions this quarter were related to Electricaribe or Ruta del Sol or these specific credits? And second, when you look at your ROE guidance for this year, can you just let us know how you look at these by country? First quarter, you had single-digit ROE in every country, except El Salvador. Do you expect that recovery in -- also in Panama and in Guatemala? Or the recovery should be mostly in Colombia?

The key driver of the recovery of the return on equity, as we mentioned, perfectly, will be Colombia. And that will be focused on basically because of efficiency and the loan growth. And the second one recovery of return on equity will be Banistmo. Because in Banistmo, the loan growth is showing a strong path. So we believe that we will be able to sustain the return on equity on 2 digits in Banistmo. In the case of Banco Agrícola, there will be a slight recovery of the return on equity. And they will be basically driver -- or the main driver will be the efficiency. But again, Colombia will be the main driver and the second one will be Banistmo.

Regarding the provisions and how much we that was represented the total provisions we did during the quarter, these big corporates, especially Electricaribe, were around COP 150 billion on provisions. That's what they mean on the total of provisions we did during the quarter.

We have no further questions at this time. I would now like to turn the call over to Mr. Mora, Chief Executive Officer of Bancolombia, for final remarks.

Thank you, everybody for your interest in this conference call. We definitely think that Colombia, especially, will improve their economic performance through the year. And that the second semester is going to be better for the economy, and that will allow us to take advantage of that better economic environment. So we will expect the Bancolombia results to grow gradually during the year. Again, thank you for your interest and see you in our next conference call for the second quarter 2019. Thank you very much.

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