Good morning, ladies and gentlemen, and welcome to Bancolombia’s Fourth Quarter 2019 Earnings Conference Call. My name is Jackie 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. [Operator Instructions] Please note that this conference is being recorded. Please note that this conference 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 the conference call, in future filings, in press releases or verbally addresses matters that involve risks 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 describe in our reports filed with the SEC. With us today is Mr. Juan Carlos Mora, Chief Executive Officer; Mr. Mauricio Rosillo, Chief Corporate Officer; Mr. José Humberto Acosta, Chief Financial 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 Economist. I will now like to turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer of Bancolombia. Mr. Juan Carlos, you may begin.

Good morning, everybody, and welcome to our conference call for the fourth quarter of 2019. The net income to our 2019 was COP$3.1 trillion. This result represents a 17% increase versus 2018. The results of the year were in line with our expectations at the beginning of the year although in the fourth quarter we saw provision charges and expenses growing faster than forecasted. During 2019 we saw how the Colombian economy had signals of recovery and remained resilient against global turbulence. We consolidated Bancolombia's strategy as the leading bank in Colombia, increased the customer base and continued positioning for growing earnings. I would like to elaborate on some key points to understand our business today. First, macroeconomic environment and a poor performance in most Latin America the countries in which Bancolombia operates presented positive trends. Columbia's GDP accelerated from 2.5% in 2018 to 3.3%. This is the highest rate of growth in the past five years and it is well above the average of the region. Activity was driven by internal demand particularly private consumption and investment due to the combination of low and stable interest rates, ample financing conditions, and tax incentives for capital accumulation. Guatemala expanded at an estimated rate of 3.5%. That is 0.4% more than 2018 figure due to the dynamism of services, construction, and retail. Meanwhile economic activity moderated in Panama to an estimate of 3.3%. This is explained by lower performance of sectors such as construction and retail. El Salvador revealed 2.5% which is higher than the average growth of the past decade. Looking ahead, economic perspectives are normally promising. We expect Colombian GDP to keep on growing steadily at 3.3% in 2020 driven by consumption and private investment. We expect manufacturing and construction to recover while retail, the financial sector and infrastructure…

I want to end these remarks telling you that we are happy with the results of the 2019, 17 increase in net income is a good result. Last that fourth quarter we saw some results that were not in line with our expectations as we mentioned particularly provisions and expenses. But although the results, we can affirm that the results of 2019 were good. Related to 2020 we are expecting a growth in the loan portfolio of around 8% to 10%. We will continue undertaking our commercial strategy has been very successful so far, adding new customers will allow us to do additional business with them. Regarding NIMs, we are expecting them to be around 5.7%, fee growth will be between 8% to 10% and we are expecting an improvement on the credit conditions, so we are foreseeing 1.8% cost of risk for 2020. With all of these numbers, we are targeting an ROE for 2020 between 13% and 13.5%. After this information, I would like to open the line for questions.

[Operator Instructions] And our first question comes from Brian Flores with Citibank. Please go ahead.

Hi, thank you for the opportunity. Just a quick question or follow up in the topic of provisions. How recurrent are these or is this more of a front loading of the expected loss models in Guatemala and [indiscernible] that we will see going forward? And just a second question, in terms of net income growth, what are your expectations for 2020? Thank you.

Thank you, Brian. The case is - the second one that you mentioned is just a one-time adjustment to the models in Guatemala due to the behavior of the basically credit cards and consumer loans in that country. So it's more that we are adjusting our models to the behavior of those portfolios in Guatemala. Regarding net income…? José Humberto Acosta: Regarding NII, assuming that as Juan mentioned in his presentation that the loan growth will be 8% to 10%, we are allowing the NII growth of the same level, and the main rationale because - it is because we are not expecting a big change in interest rates. So we are expecting to maintain the NIM. So at the end of the day, NII will grow in line with the loan growth.

Our next question comes from Andres Soto with Santander. Please go ahead. Andrés Soto: Good morning Juan Carlos and José Humberto. Thank you for the presentation. My question is maybe a followup on the topic of cost of risk. I understand that there are like recurring and non-recurring factors in the 2.5% that will be reported in the fourth quarter. So it will be helpful for me to split up between those two and understand what is the recurring cost of risk for the fourth quarter? So I have a key number to compare with 1.6% that you reported last quarter and the 1.8% that you report in 2020. And my second question is regarding your guidance. I'm not sure you provided any guidance in terms of expenses in terms of expense growth of our efficiency. So if you can please give me that number, it will be helpful as well? Thank you. José Humberto Acosta: Regarding cost of risk, yes Andrés our, remember that our new standard in terms of cost of risk for the new – for the 2020 will be 1.8. What happened again, in the fourth quarter is as a result of the change of models in Guatemala you'll see the numbers and the answer of Juan. And what's happening in Banistmo specifically was a couple of corporate cases in which with the level of provisioning that we are registering in this quarter we perceive that we don't need to increase those provisions for the whole year, basically, because the level of warranties that we have with those clients. So again, the big deviation was mainly driven by those geographies. In Colombia, we are having a very, very good performance of the loan portfolio we have some cases that increases the provision, but nothing out of the range. So again, the normal cost of risk will be 1.8. Regarding your second question, our guidance for expenses for next year will be to be at around 6%. Let me elaborate why we are planning to be in the range of 6%, basically, because if you took a check the expenses of the last year, most of them are related to IT, related to new investments in technology to develop new products. So we are continuing and you see that - the answer and the result of that is what Juan mentioned, increasing our customer base, improve implementing more folks, we are investing in our geographies as well. So that's the reason why we have to maintain this path of growth and the main driver will be IT and to develop of new products.

I just want to compliment Andrés of Humberto’s answer. We are seeing a very good commercial dynamic and the transformation of the bank is going ahead with a lot of new developments. So, we will keep our eyes on expenses growth, it’s important and efficiency is important. But we need to balance the growth of the business and how to maintain expenses under control. So, we'll be balancing both. So what we are saying is, we will keep investing and some expenses particularly in IT and business transformation will be there. That is probably the main driver around the expectations of expenses growth around 6%. But we will keep working on expenses. We are not saying that this is not a focus of the management and that we need to keep improving. So, we will be keeping a balance between transformation and expenses.

Thank you. As a reminder before our next question, please limit your questions to one question per person. If you do have a followup question, please queue up again. Once again a reminder, limit yourself to one question. Our next question comes from Ernesto Gabilondo with Bank of America. Please go ahead.

Hi, good morning, Juan Carlos and José Humberto and good morning, everybody. Thanks for the opportunity to my questions. My question is a followup in expenses. I agree OpEx could normalize if we have a more stable FX and if there are no longer expenses related to foreclosed assets. So are you evaluating to negotiate IT or advisory contracts denominated in dollars since the beginning of the year to reduce the FX volatility? I don't know if you have calculated how much is a sensitivity in expenses for a 1% depreciation of the Colombian peso against the dollar, any color will be very helpful. And then, only just one last question, I heard that it's only one, but if loan growth accelerates and if provision charges and OpEx normalize from last quarter, can we continue to see the same pace of net income growth that we saw in 2019? Thank you. José Humberto Acosta: Thank you, Ernesto. Beginning for your last question yes, loan growth and NII as we mentioned in the previous question, it will grow at the same level, meaning 8% to 10% NII. And we are able to sustain them, we will be able to maintain that trend. Regarding the OpEx and the normalization, you were right. We had a spike in terms of certain expenses. We internally in the bank we have our coverage, we have our derivative for the local expenses related to U.S. dollars. So, we are maintaining a strict control in those expenses tied to U.S. dollar. But again, remember that the 30% of our operational has expenses and they have also a natural coverage because of NII as well. So, to give you some idea, inflation is not affecting the performance of the bank because – has increased the expenses also is increasing the net interest income coming from the U.S. dollar operations. So, at the end of the day the impact is flat.

It’s the FX not inflation. José Humberto Acosta: The FX not inflation sorry, the FX I was talking about FX I'm sorry about that. And now our sensitivity for the evaluation obviously is – it is not as important as you probably see, because again we have a natural coverage for the international operation.

Ernesto and I want to elaborate a little bit more on your second question and remark. I think that we have been building a very strong balance sheet. We are having coverage of Basel loans that is very strong. So for us, I think 2020 is a year that we see as a positive year in which we are going to consolidate many of the actions that we took during 2019. Also, remember that during the last two years, we have had a lot of accounting changes related to new accounting rules. And those are going to be – in 2020 we will not have many of them. So, we see 2020 as a positive view.

Thank you. Our next question comes from Thiago Batista with UBS. Please go ahead.

Hi, guys, thanks for the opportunity. I have one question about the Colombia’s - if you can talk a little bit about your strategy to expand the use of the digital platform, especially Nequi and how big it can become looking to the number of clients either achieved more or less, a little bit more than 10% of total Bancolombia's clients. So if you can talk a little bit about your strategy to expand the Nequi? And just a small followup about margins, you already mentioned that in 2020 the most likely scenario is a flattish earnings. But when I look at your loan mix with a much stronger loan growth in consumer segment and also with no pressure from the cost on the funding side, so why not is more especially margins, continue this change of mix and without any kind of funding pressure?

Thank you, Thiago. Related Nequi we are seeing a very positive trend and a very positive growth of all digital perform Nequi. Today we have 2 million customers in that platform. We are growing at a pace of close to 100,000 new customers a month. We are adding new features to the platform. Since last year we are offering credits through this platform, also we are offering different products and services. So the platform is stronger and it's becoming very popular among a segment that uses it on an everyday basis. So we are very positive, we will continue developing the platform and adding new features especially related with credit products and the trend that we are seeing allow us to think that we will continue growing at a very good pace. As I mentioned, we have in total in Bancolombia around 15 million customers. Out of those 15 million, 4 million are in our digital platforms. We have two digital platform; one is Bancolombia La Mano, which is our banking inclusion platform and Nequi, which is more, it is targeting young people that are on their bank basically. So, to just summarize we are very positive we see very good trends and we will continue adding features to the platforms that allow us to think that it will continue growing on a very healthy base. José Humberto Acosta: Thiago, regarding your question of NIM, we have three different forces then at the end of the day, the impact will be almost flat and that’s the reason why we are seeing to maintain the same NIM. The first one is on the upside, the consumer loan growth, yes, we are expecting that loan growth this year 2020 at around 15%, that will give us certain level of increase of the NIM, but we can also be signed up loan growth in commercial for around 6% and you know that these kind of loans have tied it, NIM and tied to the spread. So, combined those effects, I would say that they in terms of income of interest income coming from the loan portfolio, that would be the same. There are another force, which is the funding side. Yes, because we have had a strong coverage of our retail business. We are grabbing the liquidity from the market in terms of checking accounts and savings accounts more than 45% of the liquidity of the country. And we have an additional strong funding base, which is the capital markets. We are very active on the local and the national capital markets, and we are able to grab the liquidity from those markets and have very competitive interest rates. So those are the rationale why we believe that the NIM will be sustainable in our environment about flat rates of the Central Bank.

And related the loan mix that you mentioned, we declared a couple of years ago that we want to add more consumer loans to our books. And that's what we have been doing during these two years. We expect that trend to slow down. We need to take into account market conditions. In 2020 as José Humberto mentioned, consumer loans are going to grow around 15%. That's less than the growth that they had during 2020, but commercial loans are going to grow around 10%. So, still we will add some more consumer loans than commercial loans. But we are feeling now much more comfortable with the loan mix that we have in our books on the relationship between consumer and commercial loans is reaching the point in which we feel comfortable.

Thank you. Our next question comes from Rodrigo Sánchez with Davivienda Corredores. Please go ahead. Rodrigo Sánchez: Yes, good morning, and thank you for taking my questions. The first one is, could you repeat or maybe expand a little bit on the higher provisions incorporating Panama? And is this something that we could expect to see again going forward? And also, could you please give us your guidance on growth for the mortgage portfolio for 2020? Thank you. José Humberto Acosta: Rodrigo, the provision is explained mainly in some corporates in two sectors. The first one is the energy and the second one is the real estate sector. And the level of provisions as we mentioned during this - the level of provision is, we believe that's enough because the level of warranties that those clients have in our loan book, so we don't need space more iteration in the Banistmo operation regarding those specific cases. Regarding your second question, regarding mortgages, the loan growth in mortgages this year 2019 was 5%. Obviously, the key driver here is what happened in Colombia. And for the next year, we are expecting mortgage loan growth at around 8% to 10%, basically, because we are perceiving a rebound in the mortgage business here in Columbia. That's the main driver will be the Colombian operation.

Thank you. Our next question comes from Alonso García with Credit Suisse. Please go ahead. Alonso García: Good morning everyone, and thank you for taking my question. I would like to followup on expenses. So this year 2020, you are expecting 6% growth. So my question is after stage of heavy investments, should we expect a convergence of OpEx levels to inflation levels in the foreseeable future and what is the level of efficiency that you see from here? Thank you.

Thank you, Alonso. Heavy investments, yes, we are investing in improving our - the way we reach the market, and as I mentioned, commercial strategy has been very successful. Our target is to converge to inflation. As I mentioned in one answer before, that is not easy because we need to balance how to grow, how we are more efficient, how we compete in the market with expenses. So we will continue working on that direction. That's what we want. Definitely this year, we don't see that we are going to converge to inflation in terms of how expenses are going to expand, but we will continue in that direction. We will see how the competitive environment develops, but that's our target. Related efficiency ratio, we are targeting to be below 50. It has been difficult to go below 48%, 49% in Bancolombia because of the reasons that I mentioned. So, what I can assure you is that we will continue working on being more efficient, but we need to balance how the banks become competitive in the market and transform itself and add more digital features and expenses. So, we'll continue balancing both aspects, but be sure that expense is a focus of the management and we need to keep working on that direction.

Thank you. Our next question comes from Sebastián Gallego with Credicorp Capital. Please go ahead. Sebastián Gallego: Yes. Hi, bood morning, everyone. Thanks for the presentation. Just have an additional follow up on OpEx. Can you provide some more color about what kind of investments are you doing in IT in terms of the amount and how does that compared to previous years? Thank you.

Sebastián, the investment in this business is not anymore an investment that you do one-time and you wait 10 or 15 years for the next investment, a digital transformation new features it's something that you do on a continuous way. That means how you transform your processes to digital, how you are at robotics, how you are at a cloud features to your IT infrastructure. So I cannot say that we are at the peak of the investments. We will continue investing in the following years, our base similar as the one – at the pace that have invested in the last three or four years. And just to give you an idea in what we call transformation and investments, we are doing around $120 million to $150 million a year in transformation and that will continue because we cannot just say that we are done with a IT investments that will continue because its transformation from legacy systems to new ones and also adding new capabilities and new features to compete in the market.

Our next question comes from Yuri Fernandes with JPMorgan. Please go ahead.

Thank you gentlemen, I have a followup on ROEs. I remember the transformation ROEs this year to be around 14%, 14.5% and maybe moving to 50% to 60% 2021. But now I guess the guidance you provided it’s like around 13% to 13.5%. So I would like to ask what has changed here, it's basically the compound effect from high expenses. Why ROEs shouldn’t do beyond 30% level that the first one? And my second one is regarding G&A. I know many people explored this topic already. But if I look here on – and again I understand the FX effect, I understand the foreclosure and your investments on digital transformation. But the main line that caught my attention here was personnel expenses, it was up like 12% year-over-year in the full year and mainly driven by bonus up like 27%? So my question is, what explains it's like, how is this related to the digital transformation, and how should we expect personnel expenses line to behave in the future, because if I look at the number of employees, it has been mostly flat year-over-year? Thank you. José Humberto Acosta: Okay, Yuri regarding the reason why the return on equity we are moving the guidance is, there is a specific line in our balance sheet that grew more than the other lines which is capital. If you double check our last three years, we have been growing below 10%. And we have been increasing our capital about 13% on average. That means that we are grabbing more capital and that's one of the reasons why the return on equity is coming down because our strong level of capital that we are having today. Remember that every time that we grow more than 12% to 15%, we begin to increase and…

Our next question comes from Gabriel Nobrega with Citi. Please go ahead.

Hi everyone, thank you for the opportunity to ask a question on our side as well. So just say a quick followup on the ROE question. I just wanted to maybe understand what is your sustainable ROE and being that we have already seen levels of around 16% in the past couple of years. So, if you could just maybe elaborate a bit more on whether the main levers that you will be working on to expand ROEs and when do you believe that we could reach maybe levels of 16% again? Thank you. José Humberto Acosta: Regarding ROE we are foreseeing – and how we are going to get the 15% to 16% return on equity. And we see that there, if you design under the numbers of the bank, we have to maintain cost of risk level of 1.8. We have to maintain NIM at around 5.5 area, we have to maintain a loan growth 10% to 15%. We have to maintain expenses in between the expenses growth 4% to 6%. So, those will be the numbers that we are designing for the next coming three years in order to reach that level of 15%. Remember that today, the NIMs has been compressing, interest rates are very low. So there are some macro conditions also that – getting that 16% was very complex. We had the 20%, many, many years ago because inflation at that time was different interest rates was very different. So, if you calculate assuming the macro environment, the 15% will be reachable in two or three years based on the numbers that we told you.

Our next question comes from Carlos Gomez with HSBC. Please go ahead. Carlos Gómez López: Yes, thank you very much. I would like to ask you what your expectation is for the tax rate in 2020 and 2021? And this is not a question, but I think before you were asked several times about your expectations for net income growth for the bottom line, just NII and perhaps you want to elaborate on that? Thank you. José Humberto Acosta: Thank you, Carlos. So regarding your second question, NII growth.

Not NII, net income? José Humberto Acosta: Net income, the net income, we are expecting to get a net income at around in between COP$3.4 billion, COP$3.5 billion at the end of this year and the main driver will be again, loan growth. And assuming name - assuming cost of risk as we decide and most important, assuming an OpEx growth in between 5.5% to 6%. So that will be the number – that we are deciding or really in the middle will be the volatility of FX that this year or last year affected us in a very important way. Regarding taxation, we believe that this year 2020 the tax will be in between 28% to 30%. And remember that the positive numbers comes from the operation that has the highest level of statutory tax which is Colombia. And the numbers of international operation if they are lower than expected, the tax at the end of the day in a consolidated basis will be 28% to 30%.

And very important Tier 1? José Humberto Acosta: And the Tier 1 you asked Carlos, I am sorry? Hello, if you ask for Tier 1, the Tier 1 our range that we design, based on the conditions on loan growth and macro conditions, is to be at the range of 9% to 10%, if that was your Carlos. We couldn't hear you, sorry.

And our next question comes from [indiscernible] with Compass Group. Okay, the line closed there. And at this time we have no further questions.

Thank you everybody for your interest on our conference call. I want to reaffirm that we are happy with the results of 2019. There were two items that were not inline or in the fourth quarter were not in line with our expectation, but for the year we think further than expenses, we were in line with our expectations and guidance. . But for the year, we think other than expenses we were in line with our expectations and guidance. And reassured that we are positive on our views for 2020. We are acquiring new customers, we are adding new products and services to serve those customers, their commercial dynamics is very good. We foresee an economic environment that is going to help our strategy. So we remain positive for 2020. We will consolidate many of the changes that we have been doing for the last three years during this year. So we will expect to deliver the results that we are telling you that we will deliver so. We will be following these during the year. And we hope to see you for the presentations for the results of the first quarter. Thank you very much and have a good day.

Thank you ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may snow disconnect.