Grupo Cibest S.A.

Good morning, ladies and gentlemen, and welcome to BAN Colombia's third quarter 2023 earnings conference call. My name is Ryan, 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 1 on your touch-tone 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 described in our report filed with the SEC. With us today is Mr. Juan Carlos Mora, Chief Executive Officer, Mr. Jose Humberto Acosta, Chief Financial Officer, Mr. Rodrigo Preto, Chief Risk Officer, Mrs. Catalina Tobon, Investor Relations and Capital Markets Director, and Mrs. Laura Claude Rio, Chief Economist. I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer. Please go ahead, sir.

Good morning and welcome to Bancolombia's third quarter conference call results. Please go to slide two. 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. The good performance of the investment portfolio and the 23% drop quarter over quarter on net provision chargers helped offset the lower net interest income on loans and higher costs, resulting in a net income of 1.5 trillion pesos, equivalent to a 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, had diluted higher operating expenses that dropped the efficiency ratio to 47.6%. All in all, ROE increased to 16% and Basel III core equity Tier 1 ratio increased to 10.9%, well above the minimum regulatory levels reflecting the capacity to generate organic capital. These results reflect the strengths of the bank in terms of its balance sheet structure, access to low-cost funding, and risk management that allows it to better navigate the current economic and credit cycle and capture tailwinds. Moreover, the latest regional elections in Colombia showed that democracy is effective and allows voters to express their preferences and agendas. As a result, a group of leaders focused on addressing the main local interests, problems, and needs will be leading the principal cities and regions. Issues such as security, mobility, infrastructure, and unemployment are at the top of the agenda for these new administrations. As we are a key player in most regions of Colombia, these government changes always bring new opportunities for local collaborations through strategic projects that promote growth and well-being for the population of each region. Infrastructure, healthcare, housing, entrepreneurship, and financial inclusion are areas where we should be able to provide value. I will also want to share how proud we are as for the ninth year in a row Pancolombia was recognized by Merco as the company with the best reputation in Colombia. This is a comprehensive assessment from different stakeholders on economic, environmental, social, and ethics issues, among others. After these highlights, I turn the presentation to Laura Clavijo, our chief economist. for further detail on the macroeconomic outlook. Laura.

Thank you, Juan Carlos. Now we can please go to slide three. The Colombian economy has been undergoing a significant slowdown throughout the year, expanding just 0.3% year over year during the second quarter of 2023 amidst weakening activity in retail, manufacturing, and construction. Persistent inflation and tighter financial conditions have continued pressure in consumer demand, investments, and exports. Hence, we confirm our GDP growth forecast of 1.2% for 2023 and 0.9% for 2024. Inflation has continued its downward trend, but remains in the double digits, 11% as of September, pressured by high oil prices and other regulated goods. Furthermore, Core inflation has subsided at a far slower pace, falling just 100 basis points between March's peak, reaching 9.5% as of September. As a result, we have revised upward our end-of-year forecast for inflation from 9% to 9.6%, and from 5.3% to 5.9% for 2023 and 2024. Additional pressures to inflation will be closely monitored. First, the drought season resulting from El Nino is expected to intensify in the following months and well into the first quarter of 2024, potentially increasing prices of food and energy. Second, the government has continued hiking gas prices and has announced will continue thereafter with diesel in an effort to curb fiscal spending related to the fuel price stability fund. And finally, minimum wage negotiations for 2024 will begin in the following week and will very likely result in a double-digit increase, thus placing further pressure to inflation expectations for 2024. Given this macro scenario, the central bank maintained its policy rate at 13.25% during October's board meeting, completing seven consecutive months of interest rates at peak level. Furthermore, last month's policy decision was divided between five members choosing to maintain and two in favor of cutting rates by 25 basis points, showing signs that monetary policy stance may begin its cutting cycle before year end or early 2024. Consequently, our policy outlook has been revised upward and considers gradual cuts of interest rates up to 400 basis points during 2024. The fiscal outlook has improved throughout the year due to the less than expected government spending and stability and revenues, mainly coming from taxes and oil. The government has committed to compliance of the fiscal rule, which seems possible for 2023 and the following year. Nonetheless, higher social spending and resources committed to implementing the reform agenda is approved, are sources of fiscal uncertainty in the medium term. We maintain our view that 2024 will be a year of gradual recovery, especially during the second half of the year, when receding inflation and interest rate cuts will pick up the pace. Nonetheless, higher for longer interest rates, both in the international and local scene, will prove challenging for consumer demand, investment prospects, and the overall performance of the financial sector. Now, please let me turn the presentation back to Juan Carlos, who will present Banco Colombia's quarterly performance.