Good day, ladies and gentlemen. And welcome to Bancolombia’s Fourth 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 call and the 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 Velásquez, Chief Strategy and Financial Officer; Mr. José Humberto Acosta, Chief Financial Officer; Mr. Juan Carlos Mora, Chief Operating Officer; Mr. Rodrigo Prieto, Chief Risk Officer; Mr. Jorge Humberto Hernández, Chief Accounting Officer; Mr. Alejandro Mejia, Investor Relations Manager; and Mr. Juan Pablo Espinosa, Chief Economic. I’d now like to turn the presentation over to Mr. Acosta, Chief Financial Officer of Bancolombia. Please proceed, sir. José Humberto Acosta: Thank you. Good morning. And welcome to our fourth quarter 2004 (sic) [2014] 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…

Thank you, José. Now I will ask you to go through slide #3 in the presentation. As you can notice in 2014, Colombia grew at an estimated rate of 4.7% well above the average of 0.2% for Latin America but the pace of growth has moderated recently reflecting a slower expansion of consumption and a more pronounced negative contribution from net experts. We expect that these moderations will intensify this year because the lumping commodity prices will translate into lower national income and a slowdown of investments. However, the diversification of the Colombian economy, the resilience of internal demand and the execution of infrastructure project will serve as buffers against the shock. Hence we forecast the growth rate of 3.4% in 2015 and 3.7% in 2016. Lower oil prices will of course affect the country’s external position given that it accounts for more than half of Colombian exports. We anticipate that the current account deficit will widen from 5% of GDP last year to 6.1% in 2015. Going forward, a real depreciation of 13% this year reduce demand for imports and an eventual change in the trends of oil prices could lead to a correction of this deficit to 4% of GDP in 2016. In terms of the exchange rate, we expect an average of 2,400 for this year. Public finances are also quite sensitive to the reduction of oil prices because almost 20% of Central Government revenues are related to our activity. We estimate that the decrease in public revenues will be greater next year, leading total Central Government deficit to 3.3% of GDP, 1% higher than the structural deficit path set in the fiscal rule. Regarding prices, we expect that the acceleration of inflation that we’ve seen in the past few months will start to lose ground in…

[Operator Instructions] And our first question comes from Philip Finch from UBS. Please go ahead.

Good morning, everyone. Thank you for the presentation. My question is related to the goodwill amortization that you’ve fastened. You broke how -- broke down just about when you’re saying your guidance for 2014 was that you expect it to come down to -- and related to that -- so could you repeat that please? And related to that, the tax rate, corporate income tax rate obviously was very low in the fourth quarter. I assume that’s related to this. Could you confirm that? And going forward, what you think is the sustainable level? Thank you. José Humberto Acosta: Thank you, Philip. Yes, the level of taxation that you see which is 8%, is basically the result of that that include that an increase of the goodwill amortization to 10 years that was the reason one the level of taxation is very low. And other point is again we want to align the treatment of financial account with tax accounting and remember that the taxation in Colombia that will take us a big -- take base numbers at the end of 2014. They are not taking into consideration for the next four years the numbers on their IFRS. That’s the reason why we decided to do that, to align that.

Thank you. That’s very helpful. So in terms of the -- my first question, the goodwill amortization charge outlook for 2015, should we assume that to be closer to zero? José Humberto Acosta: That will not be reflected in our financial statements, because it not takes into consideration under IFRS. Remember that goodwill amortization only were under Colombian GAAP. So that means that the next coming years under the financial accounting system you will not see it reflected the amortization of the goodwill.

Understood. Thank you. And in terms of the effective tax rate going forward, please? José Humberto Acosta: Yes. Based on the new regulation of the new taxation in Colombia, we are expecting an increase of our tax from 27% that around to 32%, 33% in 2015.

Thank you very much indeed.

Thank you. And our next question comes from Thiago Batista from ITAÚ BBA. Please go ahead.

Yes. Hi, guys. Thanks for the opportunity. I have one question regarding the ROE. Last year in 2014, your ROE was 12.5% and you had commented that the focus of the banks from now is on the profitability. So my question is what is the level of profitability you believe is feasible for the next two or three years and what will be main lines that would lead to this better profitability? José Humberto Acosta: Thank you, Thiago. Yes, the reason why return on equity this year or last year was 12.5% is because again we increased the level of capital at the beginning of this year, but this is relevant because this is one of the use in which the NII increased a lot. So we expect to go back the levels in the next coming years at around 14% to 14.5% in the next coming two, three years using the total capacity of capital that we raise in last year will reduce the next coming two years basically [2017] [ph].

Okay. If I could ask the second question about asset quality, could you comment about your expectation on delinquency ratio and also the level of loan provision expenses in ‘15? José Humberto Acosta: Yes. Thiago, in terms of cost of credit, we are not expecting a big change because as we mentioned during the presentation, we don’t foresee any specific concern regarding the [indiscernible] or regarding the corporate clients. So we -- our guidance is to maintain cost of credit 1.4% to 1.6%. And again, we will talk about past due loans at a level of 3%, at around 3% area, meaning that the 30-day past due loans.

Okay. Thank you. Thank for the answers. José Humberto Acosta: Yes, Thiago.

Thank you. And our next question comes from Carlos Macedo from Goldman Sachs. Please go ahead. Pardon me, Carlos, your line is now open. We’re going to go to the next question. Sorry, the next question from Tito Labarta from Deutsche Bank. Please go ahead.

Hi. Good morning. José Humberto, thank you for the call. My question is in terms of your net interest margin. We saw a good expansion in the quarter mainly due to the securities portfolio and you mentioned partially due to the devaluation of the currency in a quarter? But could you quantify how much of that was due because of the currency depreciated and you also mentioned that you expect margins to remain around current levels? Is that including near the spike we saw in the securities margin or how should we think about the total net interest margin and the securities margins going forward as the currency kind of stabilizes? Thank you. José Humberto Acosta: Thank you, Tito. Basically, yes, last quarter, the NIM of the securities portfolio went up and because of the volatility of the market. But, again, 70% of our assets are non-portfolio now that was mainly the reason why NIM increased and they were focused last year on producing funding costs. What we expect this year regarding the loan portfolio, we expect that at least to sustain the NIM based on the assumptions that the DTF will increase and as you know very well we are asset sensitive, so we probably will assume a little bit increase of the NIM on the loan portfolio basis. On the securities portfolio we don’t expect need of big changes for the first quarter of this year, depends on the level of volatility. But again, the NIM impact was mainly reflected because of the loan portfolio, because of the reducing of funding costs and because of the high level of quality of the loan portfolio.

But so just to follow up, if you look at the loan net interest margins was actually flat in the quarter and you saw a big spike in the securities margin? So just trying to understand little bit more kind of what drove that in the quarter, because I know the number can be volatile a bit, but it's been close to zero, some of the last few quarters? Yeah, so I'm not sure I understand why you're saying that the loans drove the increase in margin this quarter? José Humberto Acosta: Loan sustained the same level. The NIM of the loan portfolio today is 6.2%. What we expect in the next coming quarters, an increase of the funding costs, because the interest rate of the Central Bank has increased. But on the other side, we also expect an appreciation of the DTF, so that will be also reflected in the better NIMs. So at the end of the day, if the loan portfolio, we don't expect a big change. So we expect to maintain the level of 6% to 6.2%. We expect maybe as you said, the volatility of the securities portfolio, but that would be 2% to 4%. But we are not sure about what will happen with that and that is only 9% of the total assets.

Okay. So the securities margin should be between 2% and 4% you are saying? José Humberto Acosta: Yes.

All right. Thanks, José Humberto.

Thank you. And our next question comes from José Barria from Bank of America. Please go ahead. José Barria: Hi. José Humberto and team, thanks for taking my question. Just a follow-up on operating expenses, the line was disconnected when you were talking about the guidance for 2015, so if you repeat that, that would be great? And then on the expenses, what was the main driver, I mean, I am looking at the fourth quarter is a big jump in operating expenses, obviously, a lot of that had to do with the currency? But I wanted to try to strip that out and understand what is driving such a big increase other than seasonality in operating expenses, when I look at the bonus provisions and when I look at administrative expenses, the growth in the fourth quarter was very high? So can you just comment on that and then also on the guidance? José Humberto Acosta: Thank you, José. Yes. I have to say that we feel so proud about the performance of operating expenses in Bancolombia, because if you don’t agree with 4%, that means we are doing our job in terms to maintain under controlled expenses. But remember in our previous conference, we change the way we reduce total expenses. In the previous years, we maintain a kind of provision for expenses every month, based on the assumptions that it has some seasonality. But last year we decided to align with the IFRS standards, which means now we reduce the real expenses that we are doing. And if you check the numbers, there is a clear seasonality in the last quarter of that year, because all the stakeholders of the bank tend to increase the level of expenses at the end of the year and that is…

Thank you. [Operator Instructions] And our next question will come from Saúl Martínez from J.P. Morgan. Please go ahead. Saúl Martínez: Hi, guys. My question is on capital, 7.7% Tier 1, I understood this quarter you had to move, you also had a bit of an impact of the currency inflating up the risk-weighted asset growth and obviously, more than capital grew and you have the absence of capitalized earnings? Can you just give us a sense or if adjusting for the capitalization of earnings, where you're Tier 1 stands at, by my rough calculation, it should be about 8.5%, is that right? And is that a level that you feel comfortable with right now because on the surface of Core Tier 1 of 8.5% to a lot of folks in the investment community does not seem to be excessively comfortable? José Humberto Acosta: Thank you Saúl. Yes, as you remember our guidance to be comfortable in terms of Tier 1 is 8% to 9%. As you can see, we have the lowest level in past due loans in 90 days and the lowest level in 30 days. So we have a very strong coverage in terms of provisions that help us a lot for difficult times. And you are right, probably on March our level of Tier 1 could be at the highest eight, which mean 8.8% to 9%. So that’s the number that we have been discussing with you guys with the rating agencies. And again based on the assumptions that we are maintaining a very strong level of past due loans, very well capitalized because our dividend payout is -- that would be one third of our net profit. We are able to sustain the growth. And the other thing is we are expecting to grow only 2 or 2.5 times the GDP growth. So you saw the numbers this year, we only grew 13% on that yield [indiscernible] effects. But we are expecting to grow this year 12% in line with our expectations as same as we did last year, Saúl. Saúl Martínez: Okay. Thank you so much.

Thank you. And our next question comes from José Restrepo from Serfinco. Please go ahead. José Restrepo: Hi. Good morning. Congratulations on the results. I want to know if you can give us like a broad view which will be the bigger effects of the adoption of IFRS in the coming quarters? José Humberto Acosta: Yes we are -- of course, we are right now running and trying to release the first among -- under our IFRS. We did the calculations last year. And we have to say that we don’t have a major impact under IFRS. Obviously we are shaking the leasing business, we are shaking on a specific profits now we are having but at the end of the day based on the numbers that we were around last year. On the pervious quarter, we are not expecting a big change in our disruptor of our balance sheet. May be the big one change will be the amortization of goodwill and that will be reflected in our numbers this year because the profits come from the operation we go directly to our P&L José Restrepo: All right. Thank you.

Thank you. And our next question comes from David Santos from Compass Group. Please go ahead.

Yes. Thank you. I want to ask about the wealth tax and the impact it might have on the results for -- results in ‘15 and how it will be treated under IFRS? José Humberto Acosta: Yes. The impact will be relevant because that will be an increase of 9% of the total tax -- taxation. And obviously we will let you know in the next coming quarter how the things are going but obviously that would be -- that would be an impact on the P&L and that is because of the marginal taxation. It’s around 9% in terms of our taxes. You know very well, it’s 1.15 that obviously -- that would be impacted in our financial statements under IFRS, you have to register in the month of January.

Okay. Thank you. Perfect.

Thank you. And our next question comes from Boris Molina from Santander. Please go ahead.

Yes, I wanted to elaborate a little bit more on the wealth tax. There was a debate about where the wealth tax would be charged as a one charge at the beginning or was it going to be phased in over time? And do you need to record the first tax assets to record the full amount of the tax given that’s it’s calculated on the basis of the year-end equity? And we say this because at the end of the day, the charge is going to be pretty big. And you already have a substantial impact on your capital ratios and under Colombia regulation, your base of fee is not fully implement, so you still have to do charges for operating risks for instance. So, we would like to see, kind of like the fully loaded base of free capital for Bancolombia is going to look like once everything is fully applied in that sense. We think it’s pretty weak. So could you repeat again what is the specific treatment of the wealth tax under IFRS? Is it going to go through the income statement or charge versus equity and do you need to create a deferred tax asset? José Humberto Acosta: Okay, Boris. Thank you. Yes, we have to do it every year in the month of January and we have the possibility to do it through P&L or to do it through a balance sheet. So, I mean, we are double checking the possibility to go directly to our P&L. But that would be reflected in the month of January and depend on the condition of each bank.

So, it could be the month of January. You have to reflect the full impact of the one-time charge for 2015? José Humberto Acosta: Yes, Boris. Under IFRS, base fees taxation goes directly to our P&L. Under the Colombian regulation, we’ll have the possibility to go to the P&L or to go directly to the balance sheet. So, we have to align both under P&L at the first quarter of this year under IFRS treatment.

Okay. Wonderful. Thank you.

Thank you. And our next question comes from Carlos Macedo from Goldman Sachs. Please go ahead.

Good morning, gentlemen. Hopefully, you can hear me now. A lot of the questions have been answered. I have a question on -- sorry, on Panama and Banistmo. You gave us a little bit of insight, when you expect to roll out the platform, the IT. Can you talk a little bit about the profitability of the bank, how it’s coming long, if you are seeing integration work out, what are your targets or profitability there in the short to medium-term? Thank you. José Humberto Acosta: Thank you, Carlos. Yes, as we mentioned during the presentation that Banistmo operation is running very well. We are increasing the assets at a base of 10%. We are expected to close the IT platform at the end of this year. We expect to go back to the level of return equity in that operation at around 12%. So, again, the business in Banistmo is going back growing, return equity 12%, past due loans under control. On their operating point of view, the things are running as expected and the most relevant point is the profits that have from Banistmo that would be reflected directly on the P&L of the Bancolombia.

Okay. So just to get it right directly in the sense that they will not incur additional taxes in Colombia? José Humberto Acosta: No, the taxation is basically -- we are paying the tax based on the resource of the banks. So that will be paid here in Colombia, once you incorporate the numbers of Banistmo operation.

Okay. And so through the end of the third quarter, you’ll be running the integration of systems. How will profitability be affected once that comes off? José Humberto Acosta: The idea is -- the IT platform will be reflected in the performance of the bank in 2016 and ’17, mostly on the retail business, mostly on the liability side. Today, Banistmo operation is growing at a very healthy pace on the asset side because we are focusing on corporate and the way we are funding that is through international bank and through international markets. The next coming two years because of the IT platform will be implemented and the customer service will be a very good opportunity to increase the customer base. We will do see an increase of the liability side funding the growth of the business in Banistmo. So that’s what we are expecting in the Banistmo operation. The first two years focus on oriented on asset growth under our standards and the next coming years focus on oriented on the liability side in order to provide funding for this growth.

Okay. Perfect. Thank you so much.

Thank you. And our next question comes from Edgar Romero from [EBUBA] [ph]. Please go ahead.

Hi. Good morning. And thanks for the call. I have two quick questions. The first one is a -- I don’t know, if you can give us a little more color on the Banistmo’s ROE in 2014 and maybe you can give us some guidance for this year? And the second question is, do you have guidelines for the efficiency ratio for this year? Thanks. José Humberto Acosta: Yes. Again, going back to Banistmo, we expect this year 2015 at around 12%, last year it was below 10%, because as you already know, this is grand operation for us so we are just making the adjustments. We are spending a lot of money on IT platform. And regarding your second question, our efficiency is improving a lot, so we expect to go -- go back to the level of 15% in the next coming two years, because you saw the performance and it’s growing at a half base of the NII growth, which means that we are in the right direction and this is one of our main focus in the next coming two years, again to go back to the level of -- efficiency level of at around 50%.

Okay. Thanks.

Thank you. And our next question comes from Saúl Martínez from J.P. Morgan. Please go ahead. Saúl Martínez: Hi. Just a very quick follow-up, guys. The IFRS, obviously you’re not going to take goodwill amortization on an ongoing basis but rather take have an annual impairment test for your goodwill. You have about $4 billion of goodwill, most of which is for Banistmo, but you still have about -- I forget maybe 500 billion or 600 billion pesos from prior acquisition -- the Guatemalan acquisition as well. Is there any concern there that you will have to take impairment charges on any of those given what were somewhat lofty valuations on some of the acquisitions paid, obviously the El Salvador has struggled as a country? Can you just comment on how your level of comfort on whether there would need to be any sort of annual -- whether as of this stage you would need to see or expect that to take any impairment charges on your intangibles because of IFRS? José Humberto Acosta: Okay. Saúl, no, we don’t have any specific concern regarding the Banistmo operation. We know that under IFRS that will not affect the goodwill and we have to check the performance of the bank today based on the assumption that the things are running as we designed. We don’t have any specific concerns of change in valuation of the Banistmo operation. Saúl Martínez: What about Banagricola? José Humberto Acosta: Banagricola is one of our most profitable operation that we’re having with the highest level of return on equity on the base and the optimum level of past due loans. So we don’t have any specific concern with the Banagricola operation. Saúl Martínez: Okay. Great. Thanks so much.

Thank you. At this time we have no further questions. I would now like to turn the call over to Mr. José Humberto Acosta for closing remarks. Please go ahead. José Humberto Acosta: Okay. Thank you very much for your time. Hope to see you in the next conference call. Thank you again for your questions and hope to see you soon. Thanks.

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