Bancolombia SA (NYSE:CIB) Q3 2023 Earnings Conference Call November 9, 2023 9:00 AM ET

Company Participants

Juan Carlos Mora - President & CEO

Laura Clavijo - Chief Economist

José Humberto - CFO

Conference Call Participants

Beatriz Abreu - Goldman Sachs Group

Jitendra Singh - HSBC,

Andres Soto - Santander

Operator

Good morning, ladies and gentlemen, and welcome to Bancolombia's Third Quarter 2023 Earnings Conference Call. My name is Ryan, and I will be your operator for today's call. [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. José Humberto Acosta, Chief Financial Officer; Mr. Rodrigo Prieto, Chief Risk Officer; Ms. Catalina Tobon, Investor Relations and Capital Markets Director; and Mrs. Laura Clavijo, Chief Economist.

I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer. Please go ahead, sir.

Juan Carlos Mora

Good morning, and welcome to Bancolombia's Third Quarter Conference Call Results. Please go to Slide 2. The results for the third quarter reflect the progressive slowdown in the economies in which the Bancolombia operates, particularly in Colombia, where the prevailing high interest rates and inflation kept credit origination weak, compressed net interest income, impaired loans and maintained operating costs elevated. However, the good performance of the investment portfolio and the 23% drop quarter-over-quarter on net provision charges helped offset the lower net interest income on loans and higher costs, resulting in a net income of COP 1.5 trillion, equivalent to 2.1% growth quarter-over-quarter.

The loan book contracted near 1% on a quarterly and annual basis as a result of lower demand and a lower credit appetite, as well as more prepayments. The cost of risk for the period reduced to 2.5%, a 60 basis points drop driven in part by the lower pace of past due loans formation on consumer loans, as we will further elaborate. NIM increased to 6.8%, even as interest expense kept growing on this, coupled with lower provision charges, have diluted higher operating expenses that drove the efficiency ratio to 47.6%. All in all, ROE increased to 16%, and Basel III Core Equity Tier I ratio increased to 10.9%, well above the minimum regulatory levels reflecting the capacity to generate organic capital.