Good day, ladies and gentlemen, and welcome to Bancolombia’s Third Quarter 2014 Earnings Conference Call. My name is Lorraine, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator instructions) 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 and future filings and 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 the 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. Jaime Velasquez, Chief of Strategy and Financial Officer; Mr. José Humberto Acosta, Chief Financial Officer; Mr. Juan Carlos Mora, Chief Operating Officer; and Alejandro Mejia, Investor Relations Officer. I would now like to turn the presentation to Mr. Acosta, Chief Financial Officer of Bancolombia. Please proceed, sir. José Humberto Acosta Martin: Thank you. Good morning, and welcome to our third quarter results conference call. It is a pleasure to be with you, who follow so closely our operations and results. Let us start with a brief description of the main topics that impacted our business in this period. You can follow the slide presentation available at our Investor Relations website. First of all, I am glad to share with you good news that we knew this past…

Thank you, José Humberto. For those of you that are following the slide presentation, please go to Slide number 3. Growth of the Colombian economy remains dynamic. In the first half of the year, it grew 5.4% compared to the first half of 2013. Construction and services were the sectors that lead the growth. On the other hand consumption remains dynamic. We estimate that Columbia’s GDP should grow close to 5% in 2014, in line with the expectation of the Colombian Central Bank. On the other hand, unemployment rate continued dropping and ended September at 8.4%, down from 9% one-year ago. This is good news because of the high correlation between loan, employment and credit quality, which remains healthy, not only for Bancolombia but across the financial system. Inflation for the 12 months ended in October was 3.29% and has been increasing in the recent months. The Colombian Central Bank set an inflation target between 2% and 4% for 2014. These trends in inflation, plus stronger economic activity, led the Colombian Central Bank to increase the repo rate in the last four meetings ending in August at 4. 5%. Since then and after two meetings the rate has been stable. We forecast the repo rate to end 2014 at 4.5%. Regarding the FX market, the Colombian peso experienced a depreciation of 7.5% during the third quarter of 2014, and 6% over the last 12 months. The depreciation of the Colombian peso against the US dollar contributes to the faster growth of Bancolombia’s balance sheet because of the dollar denominated loans representing more pesos when converted. Let us remember that Bancolombia’s balance sheet is matched in terms of currency, which reduces impact of FX variations in shareholders equity. On the other hand, we have not seen any abnormal performances on vintages,…

Thank you. We will now begin the Question-and-Answer session. [Operator Instructions] And our first question comes from Tito Labarta of Deutsche Bank. Please go ahead. Tito Labarta – Deutsche Bank: Hi good morning. Thank you for taking the call. My question is if you look it on gross interest rate, just want to understand the dynamics better, you mentioned in the quarter you said from this reduction of this bonds, so that if you scoot that what kind of margin would you have and also kind of going forward with -- to the deposit ratio above 100% can you really see some margins expansion just wanted to understand that little bit better also given loan growth running below 10% even on organic loan growth, even along 5% that we should expect I think you mentioned 10% loan growth for the year but is that too conservative? Do you think you can grow faster than that given the type of growth we are seeing in Columbia just want to get a sense in terms of your net interest outlook given the loan growth you are seeing and if you can really improve the margin. Thank you. José Humberto Acosta Martin: Thank you Tito and regarding your first question it's here in Columbia very common situation that is not increasing at the same speed or same trend that the it's growing the interest rate of the central bank. We are expecting that gain previous to touch the level of parties for 0.7% of the second quarter of next year but assuming that we recall the bond, they need expansion of their name of our name could be between 10 to 15 beeps these quarters we have to pay in advance of $10 billion in interest fund of bond so again we expect our name will increase the next coming quarters at least 20 beeps more because of their procession of the asset. That's we are expecting again. Will go up in the next coming weeks or months. Regarding your second question, growth we decided growth on the control basically on the consumer side for example because we want to experience any kind of deterioration of the loan portfolio and we too expect to do exactly the same next year. So next year we are expecting growth 10% to 15% driven opportunities more on the corporate side to first half of the year and maybe on the second half of the year we will experience an increase of the consumer size. Tito Labarta – Deutsche Bank: Okay great. Excellent. This is very helpful and just maybe a little bit more color in terms of net margin for next year I mean once you get this maybe 20 basis points improvement from the increase in rates we see redemption of the bond no longer impacts the results, do you think you will have further margin expansion into next year or is it 20 basis point improvement and kind of a stable margin going forward.

We have to do the tracks. In terms of local currency, we will experience an increase of 20 or little bit more because the local currency will be impacted by the but in the of our business we are not expecting to increase our name. So as a combination of the two different currencies, local currency 70% of our loan portfolio will increase in the 20-25 bits and US dollar on very stable. We are able to say that 20 bits of increase in will be sustainable at least the first half of the next year. Tito Labarta – Deutsche Bank: Okay. Thank you very much.

Thank you. Our next question comes from (inaudible) from UBS. Please go ahead.

Good morning everyone. Thank you for the conference call. The question which is actually follow-up on the common asset qualities and I wanted to see if you could give us some color on the TDL formation which accelerates in the quarter. So relatively high in the third quarter and if this means the we are seeing in Columbia was one of the best GDP growth in the region, I wanted to see how you reconcile this and maybe get a sense of where will go in the next quarters?

Thank you. Yes, as we mentioned in the presentation we increase our level of provisions and the new are a little bit higher because of unspecific cases on the corporate business in Columbia and Guatemala in some leasing business but that's any kind of trend. We expect under control. We are not expecting any kind of deterioration. We are able to we have remained healthy at a level of 3% and also the 150 so this quarter maybe driven by an unspecific cases with corporate loans but that doesn’t reflect any particular concern regarding any particular segment. Consumers are behaving very well. Corporate loans are also behaving very well. Credit cards are more of same trend. So the Colombian economy as a whole is not reflecting any kind of deterioration probably the possible income -- still are very solid trend.

Okay. That’s good and you think those specific situations will be resolved already in the fourth quarter? José Humberto Acosta Martin: Yes sir. Tito Labarta – Deutsche Bank: Okay. Maybe just the final follow-up considering everything you mentioned on margin and since on what would be your revised or guidance on the ROE for this year and next year? José Humberto Acosta Martin: For next year we are expecting to increase our return on equity between 14% to 15%, because of under IFRS we don't have to considering of the goodwill and also because we are pricing of the assets faster than the liability side so we will be able to say that 14% to 15% is achievable.

That's great. Thank you very much. José Humberto Acosta Martin: Okay.

Thank you. And our next question comes from Philip Finch – UBS. Please go ahead. Philip Finch – UBS: Yes. Good morning everyone and congratulations on your results. The question I want to ask first of all is regarding these big gain you had in your foreign exchange business where you saw I think $127 billion gains which was much higher than you have had in previous quarters. So question here is for over increase the big improvement and going forward what could one assume as a sustainable level and secondly on slide 13, in your presentation, you have a very useful chart there showing ROE and ROA going back a few years and what’s quite striking is Q4 in each year seems to be have particularly good quarter so could you just remind us what the seasonal drivers are for Q4 which may suggest that fourth quarter this year could also be a good quarter for you. Thank you. José Humberto Acosta Martin: Thank you Philip and yes this is a very particular quarter regarding your first question because the was particularly high 7.5% so this is also same on sustainable of course. Rate and since we are buying to maintain between 2000 and 200 and 2000 and 100 basis so that will be only for these specific period because that was very high. So we don't expect to see there again in the next coming quarters. Regarding your second question we expect to close up at the end of this year based on the assumption that we will have the same trend this quarter next quarter our return on equity would be at a level of around 13%, 13 point something percent. And the return on assets will remain almost flat. Philip Finch – UBS: So just clarify fourth quarter should be stronger bottom line. José Humberto Acosta Martin: It could be because usually the last quarter you will increase the volumes of loans so we will be benefited of that. Philip Finch – UBS: Okay. Great. Thank you very much.

Thank you. And our next question comes from (inaudible) from JP Morgan. Please go ahead.

Good morning and thanks for taking my question. My question is related to the tax reforms, the proposed tax reforms in Columbia. I just wanted to get a sense of what your thoughts on and then how do you see it impacting ROE targets for 16% kind of medium to longer term. José Humberto Acosta Martin: Yes, the tax reformation is still in process so we have been discussing with government and the reseller of nice around the final numbers on we are expecting a very long process of approval from the government but if that were the case, now we have the same tax for equity that we had four years ago we will be impacting at least double the size of the tax because we increased our capital twice in the last four years because remember we went to the market twice in our two follow-on operations that the impact will be very important.

Okay great. Thank you.

Thank you. And Our next question comes from Jose Barria from Bank of America Merrill Lynch. Please go ahead. Jose Barria – Bank of America Merrill Lynch: Sure good morning gentlemen. Thanks for the question. Just a follow-up on the previous question on asset quality. Given that you are saying that the deterioration you saw in the quarter was more specific due to some cases, I expect that then maybe we should see provision charges not be as high as what we saw in this quarter. I wanted to get your thoughts on where provision drivers loan should be and then also if you could briefly tell us what your Q1 capital would be if you had allowed to include earnings to this year so far or where it should be at the end of the first quarter when 2014 capital generated. Thank you. José Humberto Acosta Martin: Thank you. Yes regarding Q1, the calculation assuming that we are capturing 60% of the net income that we have today that will increase to 9.2% to 9.3% of Q1 to-date. So that's the math that we are presenting. Regarding provisions, yes we are expecting to reduce the level of provisions maybe at the same level as we had in the second quarter of this year. So that will be between 250 billion to 280 billion. Based on the assumptions that there will not be deterioration of the loan portfolio. Jose Barria – Bank of America Merrill Lynch: Got it. Thank you very much. José Humberto Acosta Martin: My pleasure.

Thank you. And our next question comes from Thiago Bovolenta Batista from Itaú BBA. Please go ahead. Thiago Bovolenta Batista – Itaú BBA: Hi guys this is I think I would like to ask question about your expectation for operations in 2015 and do you expect to see improvement in the profitability and I would also like to confirm the sustainable ratio of 90 days is it 1.4% ? José Humberto Acosta Martin: Okay regarding I mentioned in the beginning the news are – the banks are running in a very good way. We are expecting an increase next year of the loan portfolio at around 10% mostly in line with the rest of the competitors this year 2014 and next year 2015 we will be most focused on more efficient to work under own system. So we don't expect big increase of the loan portfolio growth neither big increase of the liability side. So again, operation will represent an increase in terms of loan portfolio at around 10%, 8% to 9% on the deposit base and then level of profit so about around $100 million at the end of next year but next year we will have a lot of CapEx investing of the replacement of the systems that we are putting place in our operation. Regarding the 90 day loans check the numbers that will be very stable number and we expect to maintain the same level at least for 2015 which means 1.5% of 90 days. Thiago Bovolenta Batista – Itaú BBA: Okay. Perfect. Thank you. José Humberto Acosta Martin: My pleasure.

Thank you. And our next question comes from Boris Molina from Santander Investment Securities. Please go ahead. Boris Molina – Santander Investment Securities: Yes. Thank you. Just wanted to – could you explain a little bit your non-operating income you had a big jump in cost there and non-operating expenses and what is this, is this that is going to be affected by the management and do you have any idea of more or less how are you doing in terms of your execution of your cost for I think you mentioned something around $30 million and if you are in line to meet that target and what is the number that would you expect for next year? José Humberto Acosta Martin: Yes Boris. Thank you very much. Effectively this is the expenses that we are expecting for next year at around say $30 million of OpEx in management. That's the number that we will reflect next year in our P&L. Boris Molina – Santander Investment Securities: And is that going to be reflected in non-operating income in this quarter there was a big jump in that line and if you look at earnings before taxes, there was more or less okay but then you had a big jump in non-operating expenses and this really quarter José Humberto Acosta Martin: Yes, the big jump Boris is as we released in the previous weeks, remember that we had a mistake about our treasure operation in 2012 and 2013 that we have reflected this month at of this jump. That’s the reason why you see an operating expenses these adjustments. Boris Molina – Santander Investment Securities: Okay. Wonderful. Thank you. José Humberto Acosta Martin: My pleasure Boris.

Thank you. And our next question comes from Cristian Hernández from Ultrabursatiles. Please go ahead. Cristian Hernández – Ultrabursatiles: Hey guys. Thank you for taking my call. I have got one question. I would like to know you recently signed collective having increase their salaries next year at around 7%, should we expect efficiency given this or how could you guys work that out? Thank you. José Humberto Acosta Martin: We don't expect operation on these because we again as I mentioned during the speech we are very normal the labor cost. So we are not trying to – we are not expecting to increase the headcount. We want to be more efficient we want to work with the same people. So we don't feel any particular pressure regarding that issue. Remember 7% we applied for or the 6% of the total employees because we are talking about the Colombian operation but outside in our operation in Panama we have a different situation that will be tied to the inflation in those countries. So as a result of that we don't any particular operation of expenses at the labor cost. Cristian Hernández – Ultrabursatiles: Right. Thank you. José Humberto Acosta Martin: My pleasure.

Thank you. And our next question comes from José Restrepo from Serfinco. Please go ahead. José Restrepo – Serfinco: Good morning. Thank you for the conference. I have one question. You have been mentioning direct intersection to electronic channels is the key to improve efficiency. Can you give us an idea how the number of transactions in those electric channels are growing compared with the brand transaction made on branches in terms of volumes and you have guidance coming years. Thank you. José Humberto Acosta Martin: Yes, we have explained efficiency in two different ways. First the increase of the channels right now we are increasing the physical branch 6 to 7 branch per five years ago we grew 6 to 7 branches so that effects on the maintain of the control, the increase of the operating. Today we process around 7 million transaction per day and only 8% of that transaction are processed through the physical branches. The rest, the 92% are processed through different channels such as internet, mobile banking, telephone banking. So this is the new way to distribute products and to use the channels. We are focusing on that effort, trying to move the people outside their offices and try to use different channels.

And José we are not just processing around 91% of the transactions electronically but also the base of the growth that the electronic transactions as much, much faster electronic transactions are growing around 4% monthly all transactions just monetary transaction but only transactions around electronic channels. So the base is very clear to move from the physical branches to the electronic channels. José Humberto Acosta Martin: Right now people are using the physical branch but we are in the second stage and we are trying to promote people not using the ATMs, the use of the debit card really increasing in different ways through gas stations, supermarkets, that's the reason why you see an increase of fees, because people are – right now we are promoting the use of debit cards. José Restrepo – Serfinco: Do you have an idea on how the electronic transaction will grow in the future or do you – you expect to go to 95% or more? José Humberto Acosta Martin: The composition will be the same, 92% to 95% to these channels and the will depend on the economy it depends of how fast the people move to electronic channels. Right now we are promoting that. We have 6 million, 7 million clients and the population right now just to give you an example, the transaction through internet is growing up the pace of 20% per year which is a lot. José Restrepo – Serfinco: Okay. Thank you. José Humberto Acosta Martin: My pleasure.

Thank you. And our next question comes from Marcelo (inaudible) from Goldman Sachs. Please go ahead.

Hello good morning gentlemen. My first question is just the follow-up on the event of this quarter I believe that you had an 89 billion extraordinary loss this quarter related to this correction on your trading portfolio. I just like to make sure that this 89 is pretax and also if we should expect any other adjustments or non-recurring items similar to these in the next quarter and then I will follow-up with my second question. Thank you. José Humberto Acosta Martin: Thank you Marcelo. Effectively it's a pretax the 89 billion pesos. And we make the adjustments – we make the corrections so we are not expecting any other kind of mistakes that we realized on the treasury business. Remember that that was because we implement a new system the system of that time but today the operation is very well established and very well normalized.

Very, very thank you for clarifying and my second question is related to the plan I would just like to hear from you guys what is your expectations regarding any – was there any impact on your growth, maybe next year or 2016 and what we should expect in terms of lending through you guys towards these specific project in the coming years. Thanks. José Humberto Acosta Martin: Thank you Marcelo. We have been talking about infrastructure over the last four years and we definitely we expect that the end of the next year and beginning of 2016 we will experience an increase of these kind of projects and in the same line we will experience an increase of our lending business of that matter. I shall that we prepare and that's the reason why we went to the market to get money for in order to be prepared for lending that business. Is not the risk, it's not the matter of risk project. It's how to financing the better way to offer to the clients and to the projects financing. So we will – you will see the impact of the new business at the end of last year meaning last quarter of 2015 and you will see a very, very important movements during 2016.

Perfect. Okay just to make it clear, so you mentioned that you are expecting your loan growth to accelerate next year so maybe we should expect few stronger growth in 2016, is it fair to assume this kind of pickup in growth in 2016 as well? José Humberto Acosta Martin: We are not expecting any next year we are expecting 10% to 15% which is three times the GDP growth or 3.5 times maybe in 2016 we will experience an important because of that. But next year, we are based on the assumption that we will grow exactly the same as this year. This year we will grow 10%, next year 10% to 15%.

Perfect. Thank you very much. José Humberto Acosta Martin: My pleasure.

Thank you. And our next question comes from (inaudible). Please go ahead.

Hi! Good morning guys. I have question regarding efficiency and CapEx and from the breakup merger business model to alternate channels how important is it going to be the recurrent CapEx in IT going forward and in terms of non-recurring CapEx how much do you need to invest in total for in terms of technology and also if you can provide us some guidance on your income for next year that will be great. José Humberto Acosta Martin: Okay. Based on assumptions the population and our clients maintain the same behavioral we will expect fees again 10% to 13%, 14% next year. In terms of investment we have received an investment of around 30 million to 40 million next and that will be most of them on CapEx and our leader partner in OpEx. So we don't expect and this is discounted. When we talk about to receive $100 million profits from operation that is included. Our guidance for expenses for next year will be 8% to 9%.

Let me explain a little bit on the IT expenses. As you know we have been investing heavily in the past years on IT and we are not expecting to change that level of investments in IT in the future, we are going to maintain the level but we are going to see the results of those investments that we made in the past and that we are going in the future on the expansion of the new – the electronic channel. So you don't see in the future big jump on IT expenses.

Okay thanks. Just to follow-up on the how do you compare your technology with your peers in Columbia and I mean is bank of Columbia prepared for disruptive low cost IT model? José Humberto Acosta Martin: We have been preparing for that model for a couple of years. I think in technology you need to keep investing in banking which is heavily dependent on technology, you need to keep investing. So I think we have been doing that and we will be doing that in the future. As the low cost model I think moving to the electronic transactions that we have been mentioning in this call and of our strategy is going to help us to move to that low cost model. In terms of your other part of your question how our technology compares with our peers in Columbia, I think we are in the same level. We are all investing in channels. We are investing in how to reach in much efficient way to our customers and also we are investing in the process of replacing our core banking systems in order to help to be more efficient. So I think we are all working in the same the page. José Humberto Acosta Martin: Okay. Thanks.

Thank you. I will now turn the call over to Mr. José Humberto Acosta Martin, CFO for closing remarks. José Humberto Acosta Martin: Thank you very much. I hope to see you in the next conference call that will take place in April. Thank you very much.

Thank you and thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.