Moreover, charge-offs for the quarter were COP 1.5 billion, below the charge-off amount on the last two quarters as the stock of past due loans on consumer loans is lower and these typically are written-off faster than commercial loan. In terms of asset quality, past due loans exceeded our quarterly and annual deterioration in terms of 30-day past due loans as per the increase in new past due loans. On the flip side, the 90-day past due loans ratio remained flat quarter-over-quarter, albeit increasing on a yearly basis as the pace of rollover has subsided provided had recollections and refinancing agreements. On the other hand provided the decrease in net provision charges in the quarter both the 30 and 90-day past due loans coverage ratio fell to 111% and 170% respectively, although still proving a strong coverage to the balance sheet.
Now from an expected loss perspective Stage 1 slightly increase provided the growth on loans during the quarter, whereas Stage 2 and Stage 3 remained flat quarter-over-quarter as the net result of less consumer loans reaching 90-day past due and the transition of some commercial loans from Stage 3 into Stage 2 given its better performance. The combined coverage of Stage 2 and 3 loans increased three basis points to a level of 40%. Going forward, we envision a decrease in loan deterioration on the back of interest rate cuts that alleviate pressure on debtor’s cash flows. However, we do expect higher delinquencies on SMEs as construction, manufacturing, and retail continue to perform for poorly. Moving to Slide number 13, I will further discuss on credit quality in Colombia.
As we anticipated, there has been a dividend reduction in loan deterioration in the consumer segment in Colombia provided all the measures taken to increase collections and adjust credit appetite. As shown on the upper left chart, there was indeed a negative past due loans delta quarter-over-quarter as new vintages are performing better. When broken down by product, personal loans which hold a 9.4% share of total loans on Bancolombia’s standalone book and 20% of loans in Stage 2 and 3 reduced the most in terms of new past due loans. On the flip side, auto loans, credit cards, and payroll loans registered a higher past due loans due to a seasonal effect as individuals typically have access to extra cash in year-end allowing them to catch up with their installment.
But most importantly, cost of risk fell across all products, except for creditors given the modern recent interest rate update, which forecast a descending pact that alleviates debt-to-cash flows coupled with the better performance of the BMDs. In the case of credit cards, the increase of cost of risk was attributed to the fact that the quarter end date fell in Holy week and some collections were recorded days after. Based on the adjustments introduced to the consumer risk model that have resulted in better performing new winners in Colombia, we continue to visibly increasing the volume of new originations confident that as rates go down, asset quality metrics will improve. In terms of overall asset quality, we continue performing with the average of 90-day past due loans amongst the largest peers.
Please go to Slide number 14. Operating expenses contracted 8.1% quarter-over-quarter due to a seasonal effect related to a year-end additional expenses in IT, advertisement, and cash transportation and consequently, there was a lower VAT provision. Thus administrative expenses dropped 13% and the personnel expenses that aggregate salaries benefits and the compensation plan remained flat, despite the 12.3% average salary increase for employees in Colombia, which was somehow compensated with lower increase in Central America Bank. Now, from an annual perspective and in line with the lower pace of growth exhibited since the second half of 2023, year-over-year total expenses grew 3.5%, significantly below inflation, driven by part by stringent cost control and second by the 17% peso appreciation during the period.
Administrative expenses grew 5.4%, mainly because of non-income taxes and IT-related services devoted mainly to the journey to the cloud and business transformation, whereas personal expenses grew below 1% despite the annual wage increase in Colombia, what reaffirms the efficiency gains. Consistently, cost-to-income ratio for the period fell to 46.2%. Please go to Slide 15. Net income for the quarter was COP 1.7 trillion, equivalent to a 15% increase quarter over quarter, driven by the 24% drop in net provisions and 8% reduction on operating expenses that more than offset the contraction on the net interest income. On a yearly basis, however, the net income fell 3% year over year on the back of long-ruled contraction, lower income generation, high credit and operating expenses.
Return on equity for the quarter increased to 17.4%, which if adjusted for goodwill, results in a return of tangible equity of 21.8%. That shows a strong profitability of the operation isolated of goodwill-related. Now, please go to Slide 16 to discuss the evolution of capital generation. Shareholders’ equity fell 4.2%, quarter over quarter provided the pesos 3.4 trillion dividend payout approved in our General Assembly in March. Year over year, it contracted 1.2%, driven to some extent by the peso appreciation during the period. On the other hand, core equity tier 1 ratio ended at a level of 10.4%, implying 100 basis point reduction, whereas on a yearly basis, it increased 7 basis points on the back of organic capital generation. Consistently, total capital adequacy ratio was 12.3%, equivalent to 110 basis points, quarter over quarter reduction, and 30 basis points increased year over year.
During the remainder of the year, income generation will offset the dividend payout to reach the CET1 target of 11% area for the year-end. With this, I will hand over the presentation to Juan Carlos for some final remarks. Juan?
Juan Carlos Mora: Thank you, Jose Humberto. Please proceed to slide 17 to review the evolution of our sustainability strategy. In Q1, we increased disbursements under a business with purpose strategy by COP 10.2 trillion, bringing the total to COP 151 trillion since 2020. These loans support small-scale agribusiness ventures, green buildings, and mobility projects, decarbonization plans, and gender-related initiatives. Over the past year, as a part of the Climate Finance Leadership Initiative, we have been actively engaging in meetings with representatives from both the private and public sectors. These discussions have focused on our collective contributions to climate action and clean energy transition strategies. The culmination of this work will be formally presented at the upcoming COP 16 conference.
We are also pleased to announce that we have been voted as the company with the highest ESG responsibility for the fifth consecutive year. This recognition is based on the findings of a survey conducted among 80,000 respondents, encompassing ethical conduct, transparency, corporate governance practice, and environmental commitment. Finally, in the area of social impact, we are pleased to introduce La Casa de la Plata, an innovative online platform designed to foster financial well-being among our valued customers. This comprehensive platform provides a wealth of financial education resources and interactive tools, empowering individuals to make informed and responsible financial decisions. Last, on Slide 18, I will share our guidance for the end of 2024 based on the current data and our updated macroeconomic forecast as shown on the left-hand side, for which I want to highlight the variation in terms of the exchange rate as it imposes changes to dollar-denominated accounts when expressed in pesos.
We expect a total loan growth of 8%, broken down in 4.1% growth on peso-denominated loans and 8.5% in dollar-denominated loans. We keep our 6.8% guidance with regards to net interest margin adjust our cost of risk from 2.4% to 2.6% as Vintages continues performing better, adjusted efficiency ratio to 15% area and maintain our ROE forecast around 14% and core equity Tier 1 ratio of 11% area. With this, we conclude the review of our first quarter results. We will be happy to address now any questions you may have. Thank you.
Operator: Thank you. We will now begin a question-and-answer session. [Operator Instructions] Our first questions come from the line of Ernesto Gabilondo with Bank of America.
Ernesto Gabilondo: Thank you. Hi. Good morning, Juan Carlos and Jose Humberto and good morning everyone. Thanks for the opportunity to ask — to take questions and well, I have 3 from my side. My first one will be on NIMs. So in your presentation, you were saying that you did some adjustments to your balance sheet. So what would be your current sensitivity in Colombian pesos and in basis points for every change of 100 basis points in interest rates and how much NIM pressure can we expect for this year? And what will be the levels that you will see for NIMs on a normalized levels? My second question is on market-related revenues. We saw there was some pressure in this line during the quarter. So I just wanted to see how are you expecting this line to behave in the next quarters?
And the last question is on NEC. We started to see stronger fee income generation. We continue to see a larger number of active clients. So can you please share if you have like some specific targets for NEC in terms of number of clients, revenues or profitability within Bancolombia?
Juan Carlos Mora: Thank you, Ernesto. I am going to start addressing your third question, and I’m going to ask Jose Humberto to give you some color on the first two questions. And also, I am going to ask Laura to give you — to give a color about her view on the — on how the interest rates are going to behave according to our view. So we can have the framework to address your question about the NIM. So let me start with your NEC question. NEC continues to develop its business plan. It’s continued growing in terms of number of clients and number of active customers. We currently have close to 9 million customers, of which around 13.5%, 5 million customers are active, meaning that they interact with NEC at least once a month doing a monetary transaction.
So we have the client base and the activity of those clients continue to increase and fee generation of NEC continues in performing very well. Regarding your question of our targets at the level of customers that we have, we are not expecting to continue the same pace of growth — so we have a target of around 22 million customers in the — for 2025. But with 19 million, we have a big enough base to have those revenues that we are expecting. We continue as I said with new products. We launched this year a platform to receive remittances. So fee generation in Nequi continues to increase. So we are happy with the performance of Nequi how the clients are using the platform. But still we need to wait a little for Nequi to reach the point in which it’s profitable.
So we expect that to be in 2025 by the end of 2025. With this I’m going to ask Laura to give us her view on interest rates and then Jose Hamberto will address your question regarding sensitivity and the market-related revenue. Laura, please?
Laura Clavijo: Thank you, Juan Carlos. Yes, indeed what our — our revised forecast suggests for the Central Bank policy rate, we revised giving an additional space of an additional 50 basis points during this year. We’ve seen how during March and April the Central Bank cut 50 basis points and we expect it may accelerate to the levels of 75 basis points somewhere early in the third quarter. This in line with how we’re seeing inflation coming down. The most recent number and inflation for April shows another decline still a little bit of pressure on food prices but we believe the phenomenon the climate effect of phenomenon El Nino will end to some extent its impact on inflation in April and May. So we are seeing a declining inflation coming to a much more comfortable level that make a way to additional rate cuts.
But I think it’s important to take into consideration the upside risks in inflation. We still have some announcements from government regarding a diesel hike. We see with some uncertainty they’re going to be able to do those much needed price hikes as well as gasoline prices which have been more pressured in terms of kind of international oil prices and how that reflects an additional deficit. So we still see some upside risk and inflation there. And the other thing factor to take into consideration of course is how the Fed is going to move in terms of their own rate reductions if they are to occur in 2024. So it’s something to take into consideration given kind of this outlook on interest rates and we maintain that the Central Bank will have a somewhat cautionary approach which is favored again by repeating inflation.
I think I believe our interest rates have been coming down in the loan portfolio since almost 12 months ago. So that’s something to take into consideration not only kind of the policy rate and how that will have a lag but also how loan portfolio interest rates have been coming down since the peak in March of last year.
Jose Humberto Acosta: Ernesto regarding your first two questions, I would say that the sensitivity right now it between 20 basis points to 30 basis points for every 100 that the Central Bank interest rates move. Remember that our structural balance sheet almost 70% of our loan book is floating. Meanwhile on the deposit base we have more than 50% floating as well. The other point that I have to highlight is the fact that we have been in advance very aggressive reducing interest rate from the time deposits at around 200 basis points in the for three months. Meanwhile interest rates from the central bank reduced 100. So we have been prepared for the second half. What is going to happen at next where are going to feel some pressure for NIM the second half again because our expect — our expectations is through interest rate from Central Bank to be at a level of 8.75 at the end of the year.
Summarizing that means the compression of the NIM of around 20 basis points. Related market what is going with the market especially with our securities portfolio high level of volatility remember that we are forecasting NIM structural NIM of around 2% because of the investment portfolio. So, we are expecting a normalization of that NIM during the second half of the year.
Ernesto Gabilondo: Super helpful. Thank you very much, Juan Carlos, Jose Humberto and Laura.
Operator: Thank you. Our next questions come from the line of Yuri Fernandes with JPMorgan. Please proceed with your question.
Yuri Fernandes: Hi guys. Thank you very much for the opportunity of asking question and congrats on the quarter. I have a follow-up question actually on asset quality and provisions. And I think Jose Hamberto already discussed this in the presentation. But when we look to the provisions, they were much lower because, mostly on updating the expected loss models, right? Like, when we look to the 30 days as the loans, we still see a high new past day formation, even considering that write-offs were lower this quarter like there was a lower signal mark, gain some other lines on the 30 days. So I would like to ask you, if you are seeing this is [indiscernible] first quarter, sometimes there’s seasonality and 30 days will start to improve.
And we are pretty comfortable with this lower coverage ratio that you are seeing on the 30 days. I know your coverage or 90 days is higher than the 30 days, but trying to understand more the short-term delinquency to try to take your lower cost of risk guidance versus our worsening 30-days. That’s my first question. And going to your guidance, I got that your ROEs are unchanged at 14% despite a lower cost of risk. I think, it’s higher efficiency ratio. But can you comment on that? Like, why aren’t ROEs higher for the full year, given you have almost 18% ROE in the first quarter. Cannot we see I don’t know upside risk for these 14% of our guidance we have for the full year. thank you.
