Nicolas Riva: Thanks very much. And first of all, I think it’s important that both equity analysts and fixed income analysts can ask questions during the earnings call. So I hope that going forward, as on the fixed income side, we can also ask questions. So thanks again for the opportunity. Okay. So with that, I have a few questions on your capital. First one, if you can talk a bit about the cool option you can exercise on the 2029 Tier 2 bonds in December. If I look at capital on a consolidated basis, your total capital is at 12.3%. That’s only 80 basis points above the minimum requirements. And given that the 2029, the Tier 2s will start losing capital treatment, if not called, my view is that sooner or later, you will need to raise more Tier 2 capital.
So again, if you can discuss a bit your thoughts regarding the call option that you have on the 2029 T2s in December. And also, if you can confirm that even if you do not exercise the call option and you can only exercise that one, after the call date, you could still do a tender offer for the 2029 or even currently, the 2027’s, assuming that you get approval from the bank regulator to take out some of the 2027’s and/or the 2029’s. And in that case, if you could even think about doing a larger Tier 2 issue and then calling the 29th in December and also doing a tender offer for the ’27’s. And finally, on Clearly, there was a drop of roughly 100 basis points in this quarter. I assume given that you declared the dividend payment this quarter. I want to check if the entire dividend declared in the quarter, the $873 million, if that was fully deducted from your CET1 in this quarter?
Juan Carlos Mora: Thank you, Nicolas. And thank you for your question. I want to pass your question to Jose Hamberto.
Jose Humberto Acosta: Thank you, Nicolas. Regarding your first question, yes, we are looking for the 2027 part of the Tier 2 treatment. And next year, we’ll begin to — at a level of 60% of the 2029 next year we’ll begin to lose 20%. Our calculations based on that is that we are going to close the year at a level of 1.7% this year and maybe next year, the level will be 1.22. And our target for Tier 2 is to maintain a healthy leverage in between 1% to 2% and all depends Nicolas of market conditions. You mentioned that we are having a lowest level of BIS of 12.3% at the end of this quarter, but this is basically because of our dividend payout because of our COP 3.4 billion in dividend, but in our calculations because of the net income because of the loan growth that will be below 10%, we are going to close the year at a level of at least 11% in Tier 1 and at around 13% at the end of the year.
So at the end of the day, this is basically because of our dividend. Your third question, yes, we are able to do a tender offer, but all of that will depend on market conditions, first; second, the level of liquidity of we have in the next coming quarters. And we are — and we talk about it with several investors. We are checking every month, market conditions to see what will be the best opportunity for the bank. If we think about to do something in the market. So that will be very monitoring process, but all depends on market conditions. Again, the market right now is very active. You mentioned that it is true. But again, this is an opportunistic measure that we will take in the next coming months. You asked about dividend. The dividend was fully deducted for the calculation of CET1.
Go ahead.
Nicolas Riva: Thanks very much. I was going to say — so then basically, you are saying that you’re guiding for a CET1 of roughly 11% at the end of this year. And then you are saying we want to have between 100 and 200 basis points in Tier 2 capital. So that means that then your CET1, basically, you’re guiding for 12% to 13% as kind of a sustainable level. That would be only between 50 and 150 basis points over the minimum requirements. Would you feel comfortable with that kind of buffer over the minimum requirements?
Jose Humberto Acosta: The answer is for this period with the contact over there is one main driver why we feel comfortable because of loan growth. We are expecting below two-digit loan growth 2024 and 2025. If you grow less than two-digits less than 10%, 11% to 11.5% Q1 is more turning off to sustain this low growth.
Nicolas Riva: Okay. Understood. Thanks very much, Jose Humberto.
Jose Humberto Acosta: Thank you, Nicolas.
Operator: Thank you. Our next questions come from the line of Carlos Gomez with HSBC. Please proceed with your questions.
Carlos Gomez: Hello. Good morning, and congratulations, and thank you very much for taking the question. I wanted to ask you first about the tax rate? I know that we update this every quarter. I wanted to know where you are now, what do you expect for this year and for the coming year? And second, you mentioned that you have — that Bancolombia represents now so much of the earnings of the Colombian banking system, which is great for Bancolombia. Maybe it’s not that great for Columbia itself. Are you concerned about the situation in which the rest of the system is? Are you perhaps a bit more careful now when you take counterparty risk with any of the other institutions in the system? Thank you so much.
Juan Carlos Mora: Thank you, Carlos. Regarding taxes, income — income tax where we are expecting our effective tax rate on a consolidated basis to be around 26%, 27%. Remember that we have income from different geographies different jurisdictions with different tax treatments. So, on a consolidated basis, we have tax rate — income tax rate in Colombia about 40%, 4-0. But combining the income from the different jurisdictions, our tax rate should be around 26%, 27% as I mentioned. Regarding your second question, I’m going to be very clear, we are not concerned about the situation of the — financial institutions in Colombia. All of them are solid with good level of capital. What we see is more a situation that is particular to conditions regarding interest rates and how the some companies are funding their operations.
But it’s more a situation of a market situation that is currently or happened during last year and the beginning of this year. But we are not concerned at all regarding the systemic risk in Colombia, because all the institutions, as I mentioned, have a good level of capital. They are taking the measure. So we are not concerned at all.
Carlos Gomez: Okay. That’s clear. Thank you so much.
Juan Carlos Mora: Thank you, Carlos.
Operator: Thank you. Our next questions come from the line of Tito Labarta with Goldman Sachs. Please proceed with your questions.
Tito Labarta: Hi. Good morning. Thank you for the call and taking my question. I’m sorry some of this repeat, I joined a little bit late. But just you maintained your ROE guidance of 14% for the year despite a pretty good quarter. And I know there’s still some headwinds going up. But just what do you think is sort of going to drive that ROE lower from here? Is it mostly a function of interest rates and as rates come down? Do you see pressure on margins? Are you concerned about asset quality getting worse? I know provisions were a bit lower but did that increase from here? And also, in terms of loan growth, which is still somewhat muted any concerns on that? And then just thinking a little bit beyond 2024, if the economy is maybe beginning maybe in flex and improves in 2025, do you think that 14% ROE is sustainable beyond 2024?
Or how could it evolve particularly if rates continue to come down in 2025? Just some color on sort of the path from the current ROE, which is very strong to that 14% that you expect for the full year. Thank you.
Juan Carlos Mora: Thank you, Tito. Let me answer your question this way. Very clearly, the variables that you mentioned are going to take or impact our performance and the ROE but for us, the key factor for this year is cost of risk. It’s when we see more uncertainty and when we — and the 40% is achievable, and we think that we can reach that level and probably that’s our base case. At this moment, I could say that we have an upside possibility of getting a better ROE. But the key factor repeating is cost of risk. In terms of NIM, in terms of how the loan book is going to grow. We have those pretty much clear, and we think we have the elements to manage the margin the NIM to be in a level that helped our results. Loan growth is not going to be very healthy.
It’s going to be slow because of the performance of the economy. But we have the tools to manage that. There is much uncertainty is, as I mentioned, on cost of risk and is what we are going to monitor very closely. And when we are working and taking the measures to manage risk. Again, repeating, SMEs is one of our main focus now is where we are and also consumer loans, even though they are performing well, better than expected to be frank. Also, we need to monitor it onto consumer. But our main focus for the next quarter is going to be how SMEs are going to perform. Another factor that to take into account is how fee income is going to behave. Economy is not growing much. So fee income generation is going to be a key part, again, aggregating and to conclude, cost of risk is the key factor to achieve our ROE during 2024.
Operator: Thank you. We have reached the end of our question-and-answer session. I would now like to turn the call back over to Juan Carlos Mora for final remarks.
Juan Carlos Mora: We would like to thank you for attending our first quarter 2024 conference call. As we said during the call, it was a good quarter. We are very happy with the results. Uncertainty remains an important factor to determine our results for 2024. So, we expect to see you on our second quarter conference call to see the development of Bancolombia. Thank you very much, and have a good day.
Operator: Thank you. This does conclude today’s teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.
