Grupo Cibest S.A.

Good morning, ladies and gentlemen, and welcome to Bancolombia Second Quarter 2020 Earnings Conference Call. My name is Jenny. I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session. During the question and answer session, if you have a question, please press 1 on your touchtone phone. 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. Consequently, these 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 report filed with the SEC. With us today is Mr. Juan Carlos Mora, Chief Executive Officer of Mr. Mauricio Rocio, Chief Corporate Officer, Mr. Jose Humberto Acosta, Chief Financial Officer, Mr. Rodrigo Prieto, Chief Risk Officer, Mr. Jorge Humberto Hernandez, Chief Accounting Officer, Mr. Carlos Brad, Investor Relations Director, and Mr. Juan Pablo Espinosa, Chief Economist. I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer of Bancolombia. Mr. Juan Carlos, you may begin.

Good morning and welcome to our conference call for the second quarter of 2020. I hope all of you and your families are safe and healthy. The second quarter of the year observed in a significant way the impact of the pandemic, not only in Colombia, but also on a global scale. We are living under a new challenging environment. which has led us to quickly adapt as a bank and as individuals to face this new reality. In Bancolombia, we are fully committed to support our clients and take care of our employees. The net income for the first half of 2020 was 263 billion pesos. mainly because of a net loss of 73 billion pesos for the second quarter. I want to start by giving you an overview of four key points. The first is about our solid liquidity position and the robust capitalization levels. We have diversified funding sources with a resilient deposit base. Since the first quarter, we have experienced a material increase in our deposits that have remained throughout this quarter. And this has allowed us to sustain high-quality liquid assets. On the capital front, our Tier 1 ratio reported for the first quarter is 9.3%. and will increase after the extraordinary shareholders meeting approval by which we reclassified 4.12 trillion pesos from vocational reserves to legal reserve in a consolidated basis. The second point is that we have increased our provisions by 76% compared to the first quarter of this year. as a reflection of weaker economic outlook related with the pandemic. This provisioning level results in a coverage ratio of 208% for the quarter. The third point is regarding our digital strategy. We have been a leading bank in Colombia supporting the government with the distribution of subsidies. We rapidly implemented an operating model that allowed us to distribute more than 442 billion pesos throughout our digital platforms, Bancolombia La Mano and Neki, successfully adding over 2 million new clients. And finally, the last point is about the macroeconomic environment. Since the gradual reopening of the economic activity in April, we have seen a slow recovery, but the uncertainty around the impact of COVID-19 and the overall performance of the economy in the second half remains significant. At this point, I want to turn the presentation to Juan Pablo Espinosa, who will further elaborate on the performance of the Colombian economy.

Thank you, Juan Carlos. Let me start by saying that following a trend seen in many countries as a result of the lockdown measures taken to contain the advance of the pandemic during the second quarter of 2020, the Colombian economy experienced the largest contraction in several decades. According to our estimates, year-on-year variation of GDP in this period was around 16%. which is close to the upper bound of our forecast range. The decision of Colombian authorities to gradually restart activities in key sectors, such as manufacturing, construction, and retail, has led to a correction in the pace of contraction. As a result, monthly figures of economic activity moved from 20.5% in April to 16.6% in May and 11.3% in June. Despite this mild improvement, we think that for the second half of 2020, the risks to growth are biased to the downside. In fact, as containment measures keep limiting the operation of several industries, an uncertainty regarding the advance of COVID-19 remains activity will be affected. This perspective is incorporated in our view of GDP contracting between 6% and 9% for full year 2020. It is also important to mention that the negative effects of the pandemic have also translated to the labor market, as unemployment rate has soared to the highest levels since the recession of 1999. We foresee that in the short term, urban unemployment rate will continue to increase, albeit at a slower pace than that seen in April and May. Regarding prices, during the past few months, consumer inflation has moderated markedly thanks to several actions taken by the government aimed at reducing the burden of utility payments to households, as well as a better performance of food prices and low pass-through of depreciation. Going forward, we anticipate that inflation will further correct due to lower pressures on the main components of the CPI. Hence, year-on-year variation will likely close the year below the floor of the central bank target range, which is 2%. In terms of monetary policy, Colombian Central Bank has reacted proactively to the challenges arising from the pandemic and the reduction in oil prices. In addition to the increase in liquidity provision and asset purchases, it has cut its benchmark rate to 2.25%, the minimum level since the introduction of the inflation targeting regime. Due to the risk to growth, employment and deceleration of prices for other costs are likely. However, future decisions will be contingent on new data, and we think that Banrep will continue to act cautiously. Finally, it is worth mentioning that over the past few months, conditions in global financial markets have improved. As a consequence, oil prices have recovered faster than initially expected. and the Colombian peso has gained ground beyond our previous expectations. Moreover, given that we expect an additional inflow of dollars due to foreign debt disbursements, the local currency can sustain its recent gains. I want to turn the presentation back to Juan Carlos.