Bancolombia Q1 2025 Earnings Report

Bancolombia EPS Results

• Actual EPS: N/A
• Consensus EPS: $1.62
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Bancolombia Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $7,041.75 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Bancolombia Announcement Details

• Quarter: Q1 2025
• Date: 5/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 9:00AM ET

Bancolombia (NYSE:CIB), together with its subsidiaries, provides banking products and services in Colombia and internationally. The company operates through nine segments: Banking Colombia, Banking Panama, Banking El Salvador, Banking Guatemala, Trust, Investment Banking, Brokerage, International Banking, and All Other. It offers checking and savings accounts, money market accounts, time deposits, fixed term deposits, and investment products; trade financing, loans funded by domestic development banks, working capital loans, credit cards, personal and vehicle loans, payroll loans, and overdrafts; factoring; and financial and operating leasing services. The company provides hedging instruments, including futures, forwards, options, and swaps; and brokerage, investment advisory, and private banking services comprising selling and distributing equities, futures, foreign currencies, fixed income securities, mutual funds, and structured products. In addition, it offers cash management services; foreign currency and trade finance solutions; letters of credit and bills collection; insurance and bancassurance products; telephone and mobile phone banking services; and online and computer banking services. Further, the company provides project and acquisition finance, loan syndication, corporate loans, debt and equity capital markets, principal investments, mergers and acquisition, hedging strategy advisories, restructurings, and structured financing; mutual and pension funds, private equity funds, payment and corporate trust, and custody; internet-based trading platform; inter-bank lending and repurchase agreements; managing escrow accounts, and investment and real estate funds; credit cards; roadside and medical assistance services; and transportation, maintenance and remodeling, and outsourcing services, as well as provides technology services. Bancolombia S.A. was founded in 1875 and is headquartered in Medellín, Colombia.

Bancolombia Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good morning, ladies and gentlemen, and welcome to Bancolombia's First Quarter twenty twenty five Earnings Conference Call. My name is Iko, and I will be your operator for today's call.

[Operator]

At this time, all participants are in a listen only mode. Following the prepared remarks, there will be a question and answer session. Please note that this conference is being recorded. 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.

[Operator]

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 the 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 mister Juan Carlos Mora, chief executive officer, mister Mauricio Bottero Wolfe, chief strategy and financial officer, missus Catalina Torbjorn, investor relations and capital markets director, and missus Laura Clavigio, chief economist. I will now turn the call over to mister Juan Carlos Mora, chief executive officer. Mister Juan Carlos, you may begin.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Good morning. Welcome to Bancolombia's first quarter results call. Please go to Slide two. During the first quarter of the year, the Colombian economy experienced some recovery with an increase in investment and domestic demand despite global trade tensions. Inflation rates remained stable for most of the quarter, resulting in unchanged interest rates.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Additionally, increased public spending paired with decreased tax collection continue to impact on the fiscal situation, which will be discussed further. I would like to bring attention to some key issues of the quarter. The quarterly net income was trillion, reflecting a 4.5% growth both on a quarterly and annual basis. A robust NIM of over 6.4% coupled with strong performance in other income and expenses resulted in an ROE of 16.3%. The loan portfolio decreased slightly this quarter, but grew seven percent annually.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Deposits fell by 1% in the quarter yet increased almost 13% annually, demonstrating our ability to secure funding aimed competition without raising costs. We have achieved positive results in asset quality across the Group due to our effective models, technical expertise and precise credit policy. Due to consistently lower delinquency rates across all banks and positive trends in all segments, the cost of risk for the period was 1.6%. Vanismo saw a significant drop in provision expenses due to measures taken to reduce loan deterioration. Both thirty day and ninety day consolidated NPLs ratios reflect improved performance as we will explain further.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Our capital remains strong with a total solvency ratio of nearly 13% and a core equity Tier one ratio of 11%. Following our recent ordinary dividend distribution. We are pleased with shareholders' approval of our evolution into Grupo Cypest, allowing us to distribute more value, including an extraordinary dividend of $6.24 per share, resulting in a 69 total dividend payout for the year. Since approval, we have been completing legal steps to reorganize the entities under the holding structure, with closing expected on May 16. Changes to Colombian operations will appear in May's financial statements.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

On August 6, we will release Group's CVEs second quarter consolidated results, including a new accounting structure and performance overview of key subsidiaries. This is Bancolombia's last earnings call. Future calls will be focused on Grupo Saipe's financial performance. We are planning a share buyback program for approval at an upcoming extraordinary shareholders meeting. We recently transitioned our banking application to Mibanco Columbia App, enhancing customer experience and saving IT cost.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

To date, 8,500,000 users have migrated with a 93% activity rate over thirty days. I will now hand over to Laura Clavijo, Chief Economist, for a summary of the macroeconomic landscape. Laura?

[Laura Clavijo, Chief Economist at Bancolombia]

Thank you, Juan Carlos. If you could please turn to Slide three. The beginning of 2025 has been characterized by a turbulent international financial context, nonetheless increasing macro strength for the Colombian economy. The environment of global growth uncertainty, tariff led pressure on inflation and monetary policy has triggered high volatility in financial markets and a widespread trend of risk aversion. For Colombia, according to preliminary analysis, the ongoing global trade debate would not pose a significant shock to its external position or the economic recovery.

[Laura Clavijo, Chief Economist at Bancolombia]

In fact, there are potential opportunities to exploit in terms of relative competitiveness in different sectors such as agriculture and manufacturing. In addition to gains from a weakening exchange rate. Thus, we maintain our view that economic growth will continue to gain ground as inflation continues converging towards its target. Consequently, we maintain our expectation of 2.6% GDP growth this year and a slight upsurge to 3% in 2026, but we will continue to monitor closely the economic consequences of lower than expected growth for key trade partners such as The United States. Global risk aversion has impacted investor sentiment towards emerging markets and sets an uncertain financial backdrop, which at the outset of Colombia's fragile fiscal position has led to local assets being more severely impacted the region peers.

[Laura Clavijo, Chief Economist at Bancolombia]

This has been particularly tangible for the exchange rate, which depreciate up to 8% during the March, but is also reflected in higher country risk resulting in a hundred basis point increase in Columbia CDS spread compared to the end of twenty twenty four. Consequently, this volatile scenario brings additional pressure to an already challenging fiscal situation and limits the course of action in terms of monetary policy. Indeed, the Central Bank kept policy rates unaltered during its January and March meetings despite some apparent room to continue easing, at least from an inflation perspective. The disinflationary process continued its course during the first quarter, especially in terms of core inflation, but at a higher than expected minimum wage post pressure on regulated goods, which supports our revision of end year forecast from four to 4.4% inflation. Accordingly, we increased our end of year policy rate forecast from 6.5% to 7.5% in the wake of these developments.

[Laura Clavijo, Chief Economist at Bancolombia]

Finally, it is worth mentioning the recent suspension of access to the IMF flexible credit line, a loan facility that has been available to Columbia since 02/2009 and is conditional on meeting sound max prudential policy targets. Even though recent announcements suggest that this does not imply a total cancellation to the fund's facility, it clearly sets additional pressure for the government to develop a credible and adequate fiscal plan to address prevailing risks to Colombia's fiscal sustainability. Now please let me turn the presentation back to Juan Carlos who will present Bancolombia's quarterly performance.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Laura. Please proceed to slide four. After twelve years of promoting financial inclusion in Colombia, Bancolombia ALA MANO has merged with NEKI. Bancolombia L'Amano provided banking services for adults without access to financial products, while NEKI focused on helping young underbanked individuals manage their money. With 94% of Colombia's population now banked, our new goal is to meet the evolving technological and financial needs of our clients, a challenge Necky is well equipped for.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

After the merger, Necky will add around 2,100,000 users, reaching 23,500,000 to whom it will start offering digital and physical debit cards, consumer credit, a broad portfolio of bill payments and top ups, mobility services among others. Additionally, former ALAMANO customers will now be able to register their keys to move their money instantly and free of charge between participant entities enabled through Redeband. Also by centralizing operations in one single platform, we will capture operational efficiencies in avoiding duplicated efforts and in turn increase NEKI's scalability and revenue generation, contributing to its profitability potential. As a matter of fact, after the merger, NetEase will increase its deposits by nearly 700,000,000,000 pesos and forecasts an incremental credit portfolio of 130,000,000,000 pesos by the end of twenty twenty five. This coupled with an outstanding portfolio that grew over four times in the last year and a low loan to deposits ratio will enable NEKI to threefold its portfolio balance for year end reaching close to 1,500,000,000,000.0 by the end of twenty twenty five.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

This move certainly contributes to achieving NECI's breakeven in the first quarter of twenty twenty six driven by a reduction in the cost of to serve and the increase in ARPAQ on the back of a broader base of users adopting value added services under an enhanced financial inclusion proposal. Now please proceed to slide five. Additionally, I would like to present some market metrics that illustrate the progress of our performance in various business lines with the retail segment following the pandemic. First, regarding deposits, Bancolombia's market share in savings accounts and time deposits has increased by 110 basis points as of February 2025 compared to December 2021, outperforming the growth of our peers, some of whom have lost market share with the entry of new participants. This demonstrates our well defined strategy under a universal banking model to attract and retain granular deposits, which explain our low funding cost and a strong market position.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Also, I would like to highlight that NECIS deposits have also experienced significant growth with a 70% year over year increase contributing to the overall growth. Regarding credit card loans, our market share increased by 20 basis points during a period of high interest rates and competition without compromising portfolio quality, With a 16.5% share of outstanding balances, we represent nearly 30% of the transaction value, which raises to 37.7% when debit card transactions are included as of February 2025. We firmly believe that this well defined strategy combined with our solid market presence equip us to effectively navigate new competitors and regulatory changes. I will now hand over the presentation to Mauricio Bottero, who will provide further insights into twenty twenty five first quarter results. Mauricio?

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Thank you, Juan Carlos. Please go to Slide number six. Let's start with an overview of our Central American operations. Banco Agricola in El Salvador had another strong quarter with increasing profitability. Higher net interest income on the back of a growing loan portfolio, coupled with lower operating expenses compensated for an increase in provisions driven by loan growth in higher risk segments.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Net income for Banismo in Panama increased 11.5% this quarter, highlighting a recovery in asset quality, driving its cost of risk to 0.2%, mainly by an improvement in the performance of its retail portfolio, more effective collection strategies and better risk segmentation. Coming Guatemala, Guatemala's quarterly improvement, despite recording a 12% decrease in provision expenses for the period, deterioration in consumer loans remains a concern. And so the bank is implementing a program focused on improving collections by reinforcing controls in the credit origination process. All in all, Banco Agricola recorded an ROE of almost 23%, Banismo of 7%, and BAM four percent. Let's now proceed to slide seven.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Given a 5% peso appreciation during the quarter, the loan portfolio slightly declined on nominal terms while posting a 7% annual expansion. Net of FX, the loan book grew 1.3% in the quarter and 4.1 annually. Mortgages continued with positive momentum, growing at the fastest pace both quarterly and annually, driven mainly by the operation in Colombia, where more competitive interest rates have stimulated credit demand and helped increase our market share. Commercial loans grew across all geographies at a moderate pace, both quarterly and annually, did once again by Colombia as per an effective commercial strategy focused on corporate clients that boosted demand. On the other hand, the consumer loan book experienced a contraction during the quarter as the pace of originations was offset with maturities given its short term nature.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Please go to Slide eight. Consistent with the loan portfolio performance, deposits slightly decreased in the quarter. Yet year over year, deposits delivered a strong 12% growth, but spacing loan growth, which reflects our ability to attract and retain funding. In breaking down by type of deposit, the aggregate balance of site deposits outpaced time deposits, mainly attributed to the performance across our Central American operations. Whereas in Colombia, online time deposits maintain a solid growth, gradually overcoming institutional deposit taking activity, ensuring a more stable and costly efficient source of funding.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

As a matter of fact, the cost of deposits held 37 basis points during the quarter, a remarkable achievement given that the repo rate remained unchanged during the period, reflecting our effective funding strategy even under a more competitive environment. All in all, savings accounts and time deposits increased the respective share on the funding mix on a quarterly and an annual basis at the expense of interbank loans and long term debt, further contributing to reducing the overall cost of funding as illustrated in the table. Please proceed to slide nine. Interest income fell by almost 3% in the quarter, driven by a combination of lower yielding loans and securities as per the current monetary easing cycle and a smaller investment portfolio. However, this was more than offset with a 7.6% drop on interest expense, such that the lending NIM bounced back to 7% in the quarter, resulting in a 1% net interest income growth.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Consistently, the NIM remained at a solid 6.4%, underscoring our ability to manage margin sensitivity effectively throughout interest rate cycles in market competitive dynamics. Moreover, we continue to adapt our asset and liabilities strategies to mitigate NIM compression on the current easing cycle. As shown on the upper right hand side graph, during the quarter, we further decreased the net sensitivity to interest rates, driven by a reduction in non sensitive interest rate liabilities, in other words, current and savings accounts as previously discussed. Please proceed to Slide 10. Fee income fell almost 8% over the quarter, explained by lower credit and debit card fees as per the seasonal effect related to year end, coupled with a slower pace of originations in consumer loans that led to a drop in back assurance fees.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

However, fee income increased 9.7% on an annual basis, given the positive aggregate performance of fee income sources derived from a higher volume of transactions and digital adoptions. On the other hand, fee expenses decreased almost 10% on the quarter, also explained by seasonality, yet increased by 22% year over year due to higher credit and debit card royalties, third party collections, and increased banking agent costs. Therefore, net fee income was almost flat over the year, accounting for a fee income ratio of 17.1% in the quarter. Please go to slide number 11. On the positive trend from last year, asset quality continued to improve in the quarter as evidenced by the consistent slower pace of past due loan formation and consequently lower expected losses.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

As a matter of fact, the positive performance expected for all segments and the incorporation of improved macroeconomic data into our risk models led to a net provision charge of 1,100,000,000,000.0. This figure represents a 16% year over year drop in an annualized cost of risk of 1.6%. Moreover, delinquency ratios registered declines over the quarter and over the year, both on a 30 and a 90 basis, reflecting the better performance of vintages in an overall healthier loan portfolio. Coverage for thirty day past due loans stayed almost flat at 111%, whereas the coverage for ninety day past due loans increased to 162%. Breakdown by stages confirms the better outlook.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

As you can see, Stage one loans now representing 88.1%. Also the coverage ratio for Stage two and Stage three loans maintained at 41% ensuring adequate loan loss reserves. Our improved results on asset quality reflect our efforts on developing robust credit risk models and predictive capabilities, leveraged on analytics to support decision making throughout the credit cycle. Please go to Slide 12. Operating expenses decreased 7.7% compared to the previous quarter, mainly attributable to a seasonal effect as expense related to business transformation tend to gradually increase towards year end.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Personal expenses on the other hand increased due to the annual wage adjustment in Colombia and inflation index items, whereas variable bonuses declined. Seen from an annual perspective, operating expenses grew 9.8%, partially explained by IT related costs, annual wage increase, and a base effect on bonus plan provision, given the low provision accrued one year ago. When measured in terms of cost to income, the efficiency ratio fell to 49.6%. Please proceed to Slide 13. Net income reached 1,700,000,000,000.0 in the period, marking a quarterly and an annually increase of 4.5%.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

This represents a return on equity for the quarter of 16.3% and a return on tangible equity of 20.4%, demonstrating the robust operational and financial performance in the beginning of the year. Now please proceed to Slide 14. Shareholders' equity fell 6.7% quarter over quarter, provided the COP3.8 trillion dividend payout that was approved at our Annual Shareholders Meeting. Year over year, it grew 11.4%. Consistently, the core equity Tier one ratio ended at 11.2%, a 73 basis point decrease over the quarter given the dividend payout, yet increased 71 basis points during the year on the back of organic capital generation.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

On the other hand, total solvency stood at 12.9%, both ratios well above Basel III total requirements. With this, I will now hand the presentation back to Juan Carlos for the final remarks. Juan Carlos?

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Mauricio. Please proceed to Slide 15. We originated over 13,000,000,000,000 under our business with purpose strategy this quarter, reaching a total of COP $210,000,000,000,000 towards our 02/1930 goal. We financed more than COP5 trillion to support the transition to a low carbon economy through renewable energy and sustainable transport. We were recognized by Merco as Colombia's top ESG company for the sixth consecutive year, reaffirming our leadership in sustainability and corporate governance.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Please refer to slide 16. Finally, I would like to present our revised guidance for 2025, following our latest macroeconomic update for year end, which reflects an increased inflation forecast of 4.4% and Central Bank interest rates of 7.5%, we anticipate a loan growth of approximately 5%. We expect the net interest margin to be around 6.2% with the cost of risk decreasing to a range of 1.8% to 2% attributed to strong loan performance in Colombia. Furthermore, we project the efficiency ratio to be approximately 51 and the return on equity to be between 14.515%. This concludes our presentation of the first quarter results.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

We are now ready to address any questions you may have.

[Operator]

Thank you. We will now begin the question and answer session. If you have a question, please press star then one on a touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers.

[Operator]

Once again, if you have a question, please press star then one on a touch tone phone. Our first question comes from Yuri Fernandes from JPMorgan. Please go ahead.

[Yuri Fernandes, Executive Director at JP Morgan]

Thank you and congrats on the quarter everyone. I have a question regarding your bonus line, cost line. When we go to personal expenses, it is tracking above inflation, well above inflation. But I know bonus can be volatile, right, during the year. So just checking what should we expect in that line?

[Yuri Fernandes, Executive Director at JP Morgan]

Was the first quarter higher because of some reasons? So if you can explain that line, that would be interesting. And then I have a second question regarding margins. I think you have been doing a good job on the funding cost, but I believe there is a limit, right? How much optimization you can have?

[Yuri Fernandes, Executive Director at JP Morgan]

We see a somewhat competitive environment for funding in Colombia. So just trying to understand if your guidance for NIM, this 20 bps decrease that you are forecasting for the year versus the first Q, if this implies that you are calling for funding optimization to be less pronounced going forward? Thank you.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Yuri. I am going to address your second question, and I am going to ask Mauricio to address your first one regarding the cost line. Margins. As you said, we have been working very hard on the cost and the results are there. I mean, the cost of funds due to our diversification, the mix we have among the different instruments, savings accounts, CDs allow us to manage the cost.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So on that front, I think we have been doing a good job and we'll continue even though the space there is limited due to what we can do because of the level of interest rates. On the income side, our expectations were that the Central Bank was going to lower the interest rates faster. And what we are seeing is that the speed in which they are addressing or applying the monetary policy is less than we were expecting. In the last meeting, the Central Bank lowered the repo rate 25 basis points. And our expectations today are that the reference rate will end the year around 7.5.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

But there, we think there is a risk that it's not 7.5%, but could be more 8%, even though even the Central Bank is talking about that right now. If that is the case, it means that we could defend the income the interest income due to what is going to be the interest rate in the economy. So we are confident that the guidance that we are giving around NIM, around 6.2%, is achievable due to what are we seeing is the behavior of the interest rates in the economy and what we are doing in the cost front. Mauricio, about the cost line.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Hi, Judy.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

As you mentioned, we have a significant increase in operating expenses regarding labor expenses, and that's due mainly to bonuses. And that's because at the first quarter of twenty twenty four, our expectations for net income for the year were lower, So the provisions for bonuses were lower. And if you remember, we had a pickup in net income in the fourth quarter of the year. So provisions for bonuses in the fourth quarter of the year were higher. So this year, we're expecting better net income for the year.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Provisions for bonuses started significantly higher from the beginning of the year. So that's a comparison we're going to have throughout the year, and it's only going to match in the fourth quarter.

[Yuri Fernandes, Executive Director at JP Morgan]

Super clear, Maurice. If I may, just a follow-up to Juan Carlos on the NIM. Juan Carlos, can you remind us the sensitivity for rates? I remember it was something closer to 20 bps, but you have been changing your liability sensitive on the funding, NACI health. So what is the current sensitivity for 100 bps change on rates?

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Yuri, our sensitivity is still the same, between twenty and twenty two basis points for every 100 basis points in the central bank rate. But taking into account that that's the average repo rate.

[Yuri Fernandes, Executive Director at JP Morgan]

Perfect. Thank you very much, guys, and congrats again.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Yuri.

[Operator]

Thank you. We have Ernesto Gabilondo with Bank of America on the line for a question.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

Thank you. Hi, good morning, Juan Carlos, Mauricio and Catalina. Thanks for the opportunity to ask questions. I have three from my side. The first one will be on the political and economic outlook.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

We have seen recent polls such as in Bamer, Guarumo, and Eco Analytica showing that Gustavo Bolivar is leading the polls. On the other hand, the recent suspension of the IMF agreement indicates there are some fiscal challenges for the country. So, I would appreciate your thoughts on both topics and if you think the fiscal situation of the country will be the key challenge to be addressed by the new government next year. Then I have a second question related to the subsidiaries. We continue to see El Salvador with very strong ROE levels.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

But on the other hand, Panama, I believe it posted something around 7% and Guatemala around 4% ROE. So, I would like to hear what could be your potential ROE targets among your subsidiaries? And my last question will be on your net income per quarter or what you have said about your guidance. So, this quarter, it came at 1,700,000,000,000.0, as you mentioned, an ROE of 16.5%. And you have guided an ROE of around 14.5, 15 percent for the year.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

So, when making the numbers, would it be reasonable to expect a net income per quarter below the 1,700,000,000,000.0 in the next quarters? Or how should we think about it? Thank you.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Ernesto. Regarding the political environment in Colombia, as you mentioned, are several polls that show Gustavo Bolivar leading the polls, but I think it's too early to have a clear view of what is going to be the situation next year. Remember that in Colombia, we will have elections, Congress election in March and the first round of presidential elections in May. I think that we will start seeing a clearer picture by the end of this year who definitely is going to run. At this moment, there are too many candidates or people with intentions to run, but those are just intentions.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

By the end of the year, I think October, November, we will have a clear picture, as I mentioned, who is going to run for which party, who is going to go as an independent candidate and a clear picture of who is running we will have at the beginning of next year. And at that moment, I think Pulse will give us a good information of who is really having a chance to going into the first round of presidential elections with opportunities to move to the runoff. So it's too early, is my conclusion. In terms of your second question about the fiscal situation in Colombia, Definitely, the fiscal situation is the biggest challenge that the Colombian economy has right now. The deficit the fiscal deficit that the government presented for last year was too high.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So it's something that definitely the government needs to work in. And let me pass Laura Cabijo to give you additional color regarding the SMA line of credit.

[Laura Clavijo, Chief Economist at Bancolombia]

Yes. Thank you. Well, indeed, the fiscal situation is the main weakness in terms of our macro outlook. We revised to 5.9% of GDP expected fiscal deficit for end of this year. And let me say that this is a base case scenario, given also recent international turmoil that has, of course, impacted to some extent the FX rate has expanded kind of the spreads on risk premium.

[Laura Clavijo, Chief Economist at Bancolombia]

And given kind of the levels of oil prices will may impact further some of the fiscal expectations that this government presented back in February. So it's still kind of an uncertain landscape for the fiscal situation. And of course, a significant budget cut is needed somewhere between 30,000,000,000 or or 46,000,000,000, depending on kind of the stress scenario. So definitely something to put our eyes on. And I would just add that we're very expected to see what the government will present in the medium term fiscal outlook, which should be presented somewhere June.

[Laura Clavijo, Chief Economist at Bancolombia]

So our expectations on how budget cuts can be performed, of course, given some inflexibility. On the IMF decision to constraint access to the flexible credit line. This is of course, still in a discussion in terms of kind of the facility as a whole. But as of today, the access has been blocked on account of giving far more reasonable messages on the fiscal outlook. And again, June come June, we should have somewhere a more grounded scenario of how the government expects to address these many challenges.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Lau. Regarding your second question about the subsidiaries ROE, as you mentioned, the performance is not the same in all countries. Banco Agricole and El Salvador is doing very, very well. I mean and this year, what we see is that, that performance will continue and ROEs in El Salvador will be above 20%. In the case of Banitsmo in Panama, it's notable the recovery of the ROE.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Remember that we are coming from an ROE for year end 2024, '4 point '3 percent. Now this first quarter was 7%. And we think that this recovery will continue and we are targeting an ROE above 10% for Vanismo. And in the case of BAM, it's low for the quarter that and also we are expecting the BAM to have a better performance. It's in the middle of recovery and the full potential ROE is not going to be delivered this year.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

We are targeting more 2025 and we are expecting BAM to deliver an ROE close to 14%, fifteen %. So the outlook, I think, is positive in terms of what Banco Agricola is delivering and the trend that the other two operations in Central America are having. Regarding net income, as you mentioned, 1,700,000,000,000.0 for the quarter is the highest figure for the last two years. So the average is more close to EUR 1,500,000,000,000.0. And since there are some still some uncertainties regarding the macro performance of the different countries, what is happening in the global economy.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So we prefer to be cautious and that's why we are talking about an ROE between 14.5% to 15%, even though the ROE for the quarter for the first quarter was 16%, as you mentioned. Is there an upside potential? I think so, but all depends on external factors. I think the performance of the economies in which we are and how the global tensions, the geopolitics and the global economy is going to behave. So we want to remain cautious in terms of our guidance for the full year, Ernesto.

[Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch]

Super helpful. Thank you very much Juan Carlos and Laura.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Ernesto.

[Operator]

Thank you. We have Andres Sodo with Santander on the line with a question.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

Good morning to all and congratulations on another strong set of results. My question is probably more related to macro. First quarter of twenty twenty five was a good quarter for Colombia, but conditions materially deteriorating in the second quarter. What it had been with oil prices at $62 this is 10 lower than what the government expected for the full year. So I would like to understand how these lower oil prices trickle down to your GDP forecast and fiscal forecast.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

And if you expect to make any revisions, any update to your provisioning model considering this new environment?

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Andres, let me pass the your question to Laura. And once she elaborates on the answer, I will take the part of provisions.

[Laura Clavijo, Chief Economist at Bancolombia]

Yes. So indeed, we maintained during our first quarter our 2.6% expectation of GDP growth for this year. This was prior to kind of the whole Trump trade volatility as well as more recent events on the fiscal side. We will have a revision again mid June, where we expect to incorporate whatever the government brings to the table on the fiscal outlook, as well as kind of the settling of some of these international variables, especially considering oil prices, as you mentioned. It will impact revenues expected.

[Laura Clavijo, Chief Economist at Bancolombia]

I believe the fiscal plan as to date looked at prices more in the $65 and $70 per barrel range, whereas we are now closer to $60 So definitely something to look at from that perspective. So the fiscal outlook could impact, especially government expenditure that has been one of the leading factors in the economy. On the flip side, and the reason perhaps why we feel kind of comfortable to this extent on the 2.6% GDP growth end of year, which is also what the Central Bank published yesterday, emphasizing that same estimated growth is the fact that we are seeing far more resilience on internal demand. Consumer households are exhibiting quite a resilience coming from remittances, other types of spending. We are seeing an upswing also in consumption of more durable goods and leading sectors such as entertainment and agriculture are faring relatively well in addition to kind of these new sectors also bringing some dynamics to the table.

[Laura Clavijo, Chief Economist at Bancolombia]

So to kind of counter effects that lead us to some extent to feel comfortable around this 2.6%, nonetheless, a revision will come midyear.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

And regarding the effect of this macroeconomic outlook in our numbers and particularly in the cost of risk, Andres. That's why we are cautious about the guidance of the cost of risk. Even though we we have had two very strong quarters in terms of cost of risk, we remain cautious and that's why our guidance of the cost of risk is between 1.82. Even though the cost of risk for the first quarter this year was 1.6 and the cost of risk for the last quarter of last year even was better. So that's why we remain cautious because there are some risks associated to the macro environment that we are considering in our guidance, Andres.

[Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc]

Thank you so much, Juan Carlos and Laura. If I may follow-up on Laura's answer, what would be the solution for the government to fix, you know, at least temporarily the big budget challenges that they have for this year. Do you see a possibility for some of the measures that have been proposed, such as bringing forward tax payments for companies to be the solution? And what other solutions can the government implement to cut the hold that is being created and is growing as every day passes?

[Laura Clavijo, Chief Economist at Bancolombia]

Well, our base case scenario, 5.9% of GDP fiscal deficit suggests breaking the fiscal rule again this year. So it's already a stress scenario, which kind of incorporates some space to endure expenditure cuts. But of course, we know there's a lack of flexibility and maybe also lack of willingness in a pre electoral year. So I think it would have to be a combination of many things, as you mentioned, kind of delaying some budget execution, in effect, cutting expenditure to some extent, and kind of all these different initiatives that are ongoing. But it is a scenario that in any case, our basic scenario is of not compliance of the fiscal rule and especially given kind of those very high expenditure objects.

[Operator]

Our

[Operator]

next question comes from Brian Flores with Citi. Please go ahead.

[Brian Flores, VP - Equity Research at Citi]

Hi team. Congratulations on the results. Thanks for the opportunity. Two questions here on my side. The first one is, I wanted to understand how should we think of provisions, right, on the relationship with growth.

[Brian Flores, VP - Equity Research at Citi]

You reduced your guidance in terms of both items slightly quarter over quarter. So just wanted to confirm if you are expecting lower growth, particularly in consumer? And also if you could expand your guidance by segments, I think that would be really helpful. And then my second question is you made very interesting comments on Nekia and Bancolombia Lomano. Just wanted to confirm if you said two things.

[Brian Flores, VP - Equity Research at Citi]

One, you're reaching breakeven in the first quarter of twenty twenty six and you will reach $1,500,000,000,000 in loans also by the end of this year. Just wanted to confirm those data points. And then maybe a derivative of this question, right, you're seeing more transactions increasing the LDR. Can you say or quantify if Breve is having an impact or should have an impact on fees and this is already incorporated in your guidance? Thank you very much.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Brian, for your question. Let me address your second question regarding NEKI. As you mentioned, we decided at the beginning of this year to merge Bancolombia, LaMana and NEKI, and that's undergoing. And by the May, we are expecting to finish

[Brian Flores, VP - Equity Research at Citi]

the

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

clients of Bancolombia, Alamano moving to NECI. That will give a NECI a considerable size. We expect NECI to end May with around 24 to 24,500,000 clients. And I would like to highlight that of those, the level of activity is very high. I mean, 78% of the clients of NEKI are active at least once a month moving money.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

That's very, very, very high. That means that NEKI is used on a very or very frequently by NEKI users. And as you mentioned, we are very happy with the development of the loan portfolio. And you said that we were expecting to have COP 1,500,000,000,000.0 in loans by the end of the year. The figure at the April is $500000000000.01200000000000.0 euros So we are in line and our expectation is that we are going to have a better performance in terms of loans for Nike.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

And those are loans of average of $500 So it's small amount credit and the performance, as I said, is very good. And this is to ratify that we are expecting NEKI to reach the breakeven point by the beginning of next year. And that's a very, very important milestone for NIKE. We are very, very happy with performance, the development, how loan portfolio is behaving, not just in terms of volume, but in terms of quality. It's very much in line with our expectations, even better than our expectations.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So we are very positive and very optimistic about the performance of NEKI. Let me pass your first question to Mauricio, the one regarding provisions.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Thanks, Brian. Regarding provisions, as we mentioned before, it was a very positive quarter in terms of cost of risk, 1.6. But the good thing I would like to highlight is how we got there. And it's basically the deterioration of the different segments was better than expected. So if you take a look at the different metrics regarding asset quality, they are looking good.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

We don't have any one offs in the quarter that would explain the $1,600,000,000 So provisions looking good in the quarter, looking good for the year, but we still need to be prudent because of the macro scenario that we have mentioned before. Now, in terms of guidance, the breakdown of the guidance is commercial loans growing at 4%, mortgage loans growing at 4.5%, and consumer loans growing at 8%.

[Brian Flores, VP - Equity Research at Citi]

No, that is very helpful. And then just a quick follow-up on the first answer. I think we did not disclose the impacts of Breve. Do you think Breve could present any downside risk to your maybe your fees in the coming quarters? Thank you.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Brian. I'm sorry that I didn't address that part. Yes. I mean, is going to have an impact in terms of how people are moving money back. Let me say that we are expecting that that impact is going to be mild.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

We, in January, opened the Bancolombia and NEKI platforms to have

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

free

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

immediate transactions among several banks. So today, it is possible to move money among several, I mean, than 10, probably 15 banks in Colombia without fees and costs and immediately, I'm sorry. So there will be some effects definitely, but we are very well prepared to manage that effect. And as I mentioned, we move forward and we didn't wait for Breve to be ready and we make available for our customers the possibility to move money freely among banks. So I think at the end, the effect will be positive in terms of how money is going to move in Colombia.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

And we think we are very well positioned to take advantage of that possibility, Brian.

[Brian Flores, VP - Equity Research at Citi]

No, super clear. Thank you, Tim.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you.

[Operator]

Thank you. Our next question comes from Tito Labarta with Goldman Sachs. Please go ahead.

[Tito Labarta, Vice President at Goldman Sachs]

Hi, good morning. Thanks for the call and taking my question. A couple of follow ups, if I may. First, Juan Carlos, on the margin, because you kept the margin guidance the same and but you also mentioned that you expect the policy rate to be higher than what you were initially expecting at 7.5%. I think you had mentioned initially 6.5 with the risk that it can be even eight percent.

[Tito Labarta, Vice President at Goldman Sachs]

So and you said the sensitivity to rates didn't really change. So just to understand why you kept the NIM guidance the same, even though it looks like rates could be higher than initially expected? Or is there just some conservativeness and potential upside there? And then my second question, following up on the loan growth a little bit, because you did lower the guidance, even though asset quality is doing well, there's still a little bit of uncertainty on the economy. So just to think like, is there some more downside risk to the loan growth?

[Tito Labarta, Vice President at Goldman Sachs]

When can that inflect and maybe see some upside? Just to get a sense because you have some good asset quality trends, but some uncertainty on the economy, just to think about the maybe longer term outlook for loan growth. Thank

[Tito Labarta, Vice President at Goldman Sachs]

you.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

you, Tito. And let me give you some color on the two on your two questions, and I will pass to Mauricio to if he wants to add something. Margin, We were more what we saw at the end of last year and probably before is that this year, 2025, the interest rates will go down faster. And our expectations at that moment was even the NIM was going to be close to 6% or even below 6%.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

With the behavior of the inflation and what the Central Bank, the Banco de la Repubblica is doing regarding that inflation and the speed on which they are applying the monetary policy, that's why we are talking about 6.2% of NIM for the full year. And we ended this quarter in 6.3%. So what we're seeing is a 100 basis points reduction and the rate the reference interest rate at this moment is 9.25%. And we mentioned that could be 7.5%, but with the risk that it could be 8%. So that 125 basis points or 175 basis points reduction.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So that's why in that sensitivity, it's where we are moving regarding the margin. Definitely, what we see is that if there is a risk now, it's a positive risk that we can defend the margin in terms of what the speed of which the interest rate is going down in Colombia. So we are on the conservative side. It is possible, depends on how the interest rates move in the economy, but definitely could be a positive risk in terms of that the interest rates remain higher for longer and that will allow us to maintain the NIM for longer also, increasing the interest income. Loan growth definitely is a challenge.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Let me put it this way. The economy in the what we have seen in the economy is that economy is performing very well. I mean, the asset quality is good. Demand is affected for the political uncertainty and what we see in terms of what is happening globally. So there are some uncertainties, but in terms of consumption, it's strong.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

So what we are seeing is and what we mentioned on the terms of loan growth and divided in the segments is that consumption or consumer loans could grow a little bit faster. What we are seeing is that there are demand and I mentioned NEKI, which is now performing very, very well, even better than what we are expecting. Also disbursements in terms of consumption or consumer loans are improving. Commercial loans, I think, will depend on projects that due to expectations of the new government will start demanding some credit. And the performance on mortgages is very good.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

It's really, really good. So it will depend at the end on macro and expectations regarding political environment. Mauricio, I don't know if you want no? Okay. That's our point of view regarding your questions, Tito.

[Tito Labarta, Vice President at Goldman Sachs]

Okay. No, that's very clear. Thanks, Juan Carlos. So just to be clear, on the NIM guidance, it sounds like there could be maybe some upside risk there, but the trend is still should be coming down as rates come down, but with some potential upside, given the rates may be coming down slower than expected. That's correct.

[Tito Labarta, Vice President at Goldman Sachs]

Okay. Perfect. Thank you, Juan Carlos. Thank you, Tito.

[Operator]

Thank you. Our next question comes from Carlos Combs with HSBC. Please go ahead.

[Carlos Gomez-Lopez, Head of LatAm Financial Institutions at HSBC]

Hello. Thank you for taking my questions. Two brief ones. One, you have modified slightly your guidance. We have gone through different elements.

[Carlos Gomez-Lopez, Head of LatAm Financial Institutions at HSBC]

But I see that the CET1 that you had between 11% to 11.5% is no longer part of the guidance. And I was wondering if you want to have more flexibility as to how much capital you want to hold. Second question is once you have Grupo C Vest set up, is your priority still to do the buyback for EUR 300,000,000? Or what else do you think you can do immediately that you couldn't do at Bancolombia? Thank you,

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Carlos. Let me address your second question, and I will pass your first one to Mauricio. Definitely, are in the way of setting up a group of CIBEST, CIBEST. Our expectation is by the May, we will have everything in place. And we will have CIBEST shareholders meeting in June.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

And our idea is to present to that shareholder meeting the buyback program. And as you mentioned, we are planning to present a $300,000,000 the equivalent in pesos, of course, of $300,000,000 program of buybacks at that first CyBEST shareholder meetings that, as I mentioned, we are expecting to take place in June.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Carlos, Yeah, complementing that, Grupo CS, as we mentioned, give us a lot of options. And that optionality is going to be targeted in parallel ways in the different options, as we say, capital allocation, corporate development, more flexibility and, I guess, the simplicity to understand the operations. So one of them is capital structure, and we already have a distribution of an extraordinary dividend, which is the result of that optimization of the capital structure. So the buyback is another thing, and things will keep going on. Then regarding the guidance for core equity Tier one, the reason why we didn't include it is because the guidance is going to be basically CVES guidance.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

At the end of the year, we're going to be presenting CVES results. And for CVEs, CET1 will not be a metric to take into account. That would be a metric to take into account in the operational companies. So Bancolombia's CET1 will still have a target between 1111.5%, but CVEs will not. So I guess the metric that we will be including would be double leverage starting from second quarter.

[Carlos Gomez-Lopez, Head of LatAm Financial Institutions at HSBC]

That's very clear. Thank you.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Carlos.

[Operator]

Thank you. Our next question comes from Olavo Ortuzo with UBS. Please go ahead.

[Olavo Arthuzo, Equity Research Analyst at UBS Group]

Hi. Good morning, everybody. Thank you for taking my question. Actually, I have just one. It's related to the profitability of the bank.

[Olavo Arthuzo, Equity Research Analyst at UBS Group]

Because I just wanted to understand, what would be the leverage for the ROE to increase again and return to that high teen figures, that we used to see in the past? Because I totally understand the top down elements, which they are key in this process. But what could you share with us in terms of bottle up initiatives? And just for us to understand the focus of the bank on the in house efforts and try to do some analysis here. And also in this context, if possible, of course, could you remind us or update about the long term ROE of the bank, which the bank is targeting for the long term?

[Olavo Arthuzo, Equity Research Analyst at UBS Group]

Thank you very much, guys.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Hi, Olaf. Thanks for the question. I'm going to start from the end. Our long term ROE goal is to reach 16%. Maybe you have ROE figures from a couple of years ago when margins were significantly higher and we reached ROEs of even higher than 20%.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Those are not sustainable, but we do believe we can reach 16% ROE going forward. And the way to think about that in terms of upside would be with the initiation of CVEST, managing the capital structure, taking advantage of the possibilities to give us, along with a transition in terms of macro and economic that allow us to grow the loan book faster than it is growing now. That would push fees also and give us or take us to a more sustainable cost long term cost of risk of around 1.8. If we reach that in the long term, ROE could be higher than 16%, maybe reaching 17% or so. But long term, you should think about 16% in a sustainable way.

[Olavo Arthuzo, Equity Research Analyst at UBS Group]

Okay. That's great. Thank you very much, guys.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, Olav.

[Operator]

Thank you. Our next question comes from Nicolas Riva with Bank of America. Please go ahead.

[Nicolas Riva, Director at Bank of America]

Thanks very much Juan Carlos and Tim for the chancellor's questions. I have two questions. One, it's a follow-up from the question that I think Carlos Gomelopes had asked on capital. But if you can give us your thoughts regarding plans to raise additional capital, basically because I look at the buffer over the minimum requirements for total capital, it looks a bit on the thin for a bank of your size. So I think total capital was 12.9 percent at the March, which is about 140 basis points above the minimum.

[Nicolas Riva, Director at Bank of America]

So if you can give us some thoughts regarding your plans, if any, to raise additional capital. And then second question, also a follow-up regarding the creation of the new holding company of Saibest. If you are thinking of using that new vehicle in a way to raise funding senior debt, but also to raise capital in the sense that you could raise senior debt out of Saibes, the new holding company, and then downstream it as capital to the bank, to the Colombian bank?

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Hi, Nicolas. Thank you for the questions. First, regarding the capital position, we have used in order to distribute dividends, we have used a year end target of 11%. Last year, for example, when we distributed dividends, it dropped to 10.5% as expected and came up above 11% at year end. This year, after distributing dividends, it only went down to 11.2% basic capital.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

So the figures that you mentioned give us comfort. We have run all the stress tests. We have run all the scenarios. We're very conservative. We keep in touch with risk rating agencies, and we feel comfortable with the capital levels we have at this time.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Regarding the

[Nicolas Riva, Director at Bank of America]

Mauricio, if I can do a follow-up there, because I see, as you said, at the CET1 level, you have quite some buffer, I think over 400 basis points. But if I look at total capital, given that the '27 s well, so you are about two years away from maturity and they are losing capital treatment. So that's why I'm thinking more regarding Tier two capital, if there are any plans to replace the capital you're going to be losing with the 27s. And again, given that the buffer on total capital looks a bit thinner.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

Right, right. Yes, that was your second question that I was going to address. And the answer is, Nicolas, in the short term, that means twenty twenty five, we're not planning any capital or any issuances of different instruments. But of course, that's going to be an optionality that CBES will bring us both at the holding company and at the operating company levels. So we might be tapping the market for Tier two instruments in 2026, but we can also do AT1s at the holding company.

[Mauricio Botero Wolff, VP - Finance & CFO at Bancolombia]

We don't know. It's not a short term need, but we do know the options are there and the market is asking about that. Nicolas, let me okay.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Go ahead, Go ahead, Nicolas.

[Nicolas Riva, Director at Bank of America]

No, was going say one last follow-up yes, sorry to interrupt, Juan Carlos. One last follow-up question for Mauricio on that. I would imagine that, as you said, the holding company doesn't have capital requirements other than perhaps like double leverage. So I would assume that you would either issue senior debt at the holding company level at Saipez and then downstream debt as an equity injection to the bank or you could raise AT1 or Tier two capital at the Colombian bank level because that's the entity that has the capital requirements. Is that kind of fair?

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

It is fair enough, Nicolas. And I just want to highlight what you just mentioned. The evolution of our corporate structure will give us flexibility. And as you described, we can look for additional resources at the holding level, at the Cybers level, the level of double leverage that we have at Cybers is very comfortable. So we have a space there.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

But even but also we can look for additional instruments at subsidiaries level. So we have the flexibility to tap the market depending on what are our requirements, the interest. So we have that flexibility. But I want to emphasize what Mauricio said is that this year, we feel comfortable with the level of capital that we have on both levels at the holding company, Cybers, or at the operational banks in the different geographies. But now we have the flexibility, again, to go to the market with any of the operations to go for resources if we need additional capital in any of the operations, Nicolas.

[Nicolas Riva, Director at Bank of America]

Okay. Thanks very much, Juan Carlos and Mauricio.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you.

[Operator]

Thank you. We have no further questions at this time. I would like to hand the conference over to Mr. Juan Carlos for closing remarks.

[Juan Carlos Mora Uribe, President & CEO at Bancolombia]

Thank you, everybody, for attending this conference call. Our next conference call, we will present the results of CyBES. So the results for the second quarter will be cited results due to our corporate evolution, as I mentioned. So again, thank you very much and hope to see you in our next conference call. You very much, everybody, and have a good day.

[Operator]

Thank you. This concludes today's conference. Thank you for participating. You may now disconnect.

Participants

Executives

• Juan Carlos Mora Uribe, President & CEO
• Laura Clavijo, Chief Economist
• Mauricio Botero Wolff, VP - Finance & CFO

Analysts

• Yuri Fernandes, Executive Director at JP Morgan
• Ernesto Gabilondo, Director - LatAm Financials Bank of America at Bank of America Merrill Lynch
• Andres Soto, Executive Director - LatAm Equity Research at Santander Investment Securities Inc
• Brian Flores, VP - Equity Research at Citi
• Tito Labarta, Vice President at Goldman Sachs
• Carlos Gomez-Lopez, Head of LatAm Financial Institutions at HSBC
• Olavo Arthuzo, Equity Research Analyst at UBS Group
• Nicolas Riva, Director at Bank of America