Grupo Cibest S.A.

Good morning, ladies and gentlemen, and welcome to Bancolombia's fourth quarter 2020 earnings conference call. My name is Hector, and I will 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 star, then one 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, 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. Mauricio Rosillo, Chief Corporate Officer, Mr. Jose Humberto Acosta, Chief Financial Officer, Mr. Rodrigo Prieto, Chief Risk Officer, Mr. Carlos Radd, 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. Mr. Juan Carlos, you may begin.

Good morning and welcome to our conference call for the fourth quarter of 2020. I hope all of you and your families are safe and healthy. The fourth quarter confirmed that the Colombian economy is moving forward. It has rebounded from the lows observed in April and May of 2020. The fourth quarter GDP posted an annual negative variation of 3.6% and a full year contraction of 6.8%. This result shows that economic activity underwent a process of clear improvement with better than expected results. As we look at 2021, these results confirm that the worst of the impact generated by COVID-19 has been overcome, but also reveal that the recovery is very sensitive to the evolution of the pandemic. After a very challenging year, the net income for 2020 was 276 billion pesos. Before getting to the details of the results, I want to highlight some key topics. During 2020, Bancolombia became stronger. We remained closer to our clients during the pandemic, offering them better, safer, and more reliable digital solutions. We improved our transactional portfolio with new digital services tailored to our clients' needs, leveraging in self-managed options. We have a strong balance sheet with a diversified funding base driven by the growth of retail deposits. Allowances for loans for the year end were 16.6 trillion pesos, growing 52% when compared to 2019, representing 8.1% of total loans. We made an early adoption of a full Basel III capital standards, reporting a Tier 1 level of 1124% that represents an increase of 167 basic points when compared with the Tier 1 reported at the end of 2019. This is aligned with the guidance we have been given in the last couple of years. Finally, despite high provision charges during the year due to COVID-19, Bancolombia continues to have resilient results. The provisioning level takes the bank to a coverage ratio of 213% for the quarter. We expect cost of risks to slow down in 2021, but returning to normalized levels shouldn't only take place in the upcoming years. At this point, I want to turn the presentation to Juan Pablo Espinoza, who will further elaborate on the performance of the Colombian economy. Juan Pablo.

Thank you, Juan Carlos. Now, please go to slide number three in the presentation. At the end of 2020, the Colombian economy continued to rebound. In fact, in year-on-year terms, GDP decreased from minus 15.8% in the second quarter to minus 8.5% in the third quarter and minus 3.6% in the fourth quarter. As a result, full-year GDP variation was minus 6.8%. These results not only beat our expectations, but also implies that almost 8% of the decrease in economic activity that took place during the lockdown was reversed in the second half of the year. Despite this positive trend, at the start of 2021, the economy took a hit as a result of the second wave of COVID contagions and the restrictions that local authorities imposed. Consistent with this, Our real-time data point to a 5% year-on-year decrease in economic activity in January. However, this negative trend has receded quickly in the first weeks of February. Taking this into account, we estimate that during the first quarter, year-on-year GDP variation will be around minus 3%. For the remainder of the year, there is still risks regarding the evolution of the pandemic and the effectiveness of the vaccination plan. However, we expect GDP to grow 4.7% in 2021 due to the combination of several factors. Globally, we expect higher oil prices and terms of trade, as well as a stronger recovery of experts' demand. Locally, low interest rates will combine with the stimulus program executed by the government in sectors such as infrastructure, and housing. Regarding inflation, after an historic low print of 1.6% in December 2020, we anticipate that in the short term, 12-month CPI change will remain below 2%. These expectations rely on the fact that the economy is still running well below potential and risks arising from supply shocks are contained. The end of temporary relief measures taking at the start of the pandemic and the mild increase in the core component will take overall inflation to close 2021 around 2.5%. Against this backdrop, we continue to predict a prolonged period of low and unstable interest rates. We anticipate that reference rate in Colombia will be at its current level of 1.5%, and three quarters at least until the second half of 2021, when the central bank will do some upward fine-tuning in order to keep inflation expectations in check. Finally, it is important to mention that in 2021, the implementation of initiatives related to fiscal adjustment will be key to rating agencies' decisions regarding Colombia. Officials have stated recently that this semester the government will submit to Congress a tax with extra revenues of around 1.5% of GDP starting in 2022. In addition, legal amendments to allow spending reductions could also be proposed. In our opinion, adjustments to the fiscal rules are also necessary to allow its reinstatement next year. After this economic overview, I will turn the presentation to Juan Carlos and Jose Humberto Acosta.