Grupo Cibest S.A. Q1 FY2026 earnings call

Good morning and welcome to Grupo CIVEST's first quarter's conference call. The Colombian economy continues to expand at a moderate pace despite complex backdrop. Net income was 1.5 trillion pesos, down 16% from last year due to wealth tax. Higher net interest margin and net fee income partially offset the drop. Deposits outpaced loan growth. Digital businesses grow share of fee income. NECI's spinoff from Bancolombia progressing well. Banismo sale advancing for second quarter close. Complementary businesses like Wampy, Wenya, Neki showing progress. NECI delivering solid operating momentum with growth in users, transactionality, balance sheet expansion

Net income was 1.5 trillion pesos, down 16% from last year mainly due to the wealth tax. Higher net interest margin and net fee income partially offset the drop. Deposits kept outpacing loan growth during the quarter. Quarterly annualized cost of risk stood at 1.9%. Digital businesses continue to grow their share of total fee income. Gross loan portfolio increased 2.1% over the quarter, deposits posted a nominal growth of 2.8% in the quarter. Time deposits led quarterly growth with a 6.5% expansion

Maintain previous loan growth guidance of seven to eight percent. Adjusted NIM range upwards to seven and seven point two percent. Maintain cost of risk range 1.6 to 1.8%. Efficiency remains at 49%. ROE guidance increases to range between 19.5 to 20%

Continued deterioration in fiscal conditions in Colombia. Inflation pressures. Increased uncertainty surrounding economic emergency measures. Escalation of Middle East conflict adding volatility to macroeconomic environment. Tighter global financial conditions constraining external financing. Fiscal deficit projected to exceed 7% of GDP raising concerns about debt sustainability

Q: Good morning, Juan Carlos, Mauricio, and Catalina. Congrats on your results, and thanks for the opportunity to ask questions. My first question will be on the political outlook, so you can provide the latest update on the presidential elections, on the latest polls, and what would be the key dates to follow.

A: Regarding the political outlook, let me remind you the date. We will have the first round May 31st, so that's in three weeks. The runoff will be middle of June. And to remind you that if any candidate don't get at least 50%, there will be a runoff. Regarding polls, there have been several in the last two or three weeks with some results that vary on the numbers, but not on the essential of who is leading. And the candidate from the left is leading in all those polls with a range between 34% to 42%.

Q: My second question will be on your NIMS trends, especially for 2027. As you pointed out, we should expect a wider NIMS expansion this year because of higher rates. But just wondering, how should we think about interest rates next year? And also, how should we think about an in-trend in next year?

A: Regarding NIEM, as you mentioned, Ernesto, we updated our NIEM guidance to be between 7 and 7.2. That's because interest rates are going up in Colombia. And that will have an effect on our NIM. Regarding interest rates and next year interest rates, we are expecting the rates to remain high next year. As you know, we are expecting inflation to continue raising, and our guidance on inflation is to be 6.4% at the end of the year. And 2027 also will have an inflation that is going to be out of the range of the central bank, which is between 2% and 4%. So we think that the The interest rates will remain high during 2027 as the central bank will try to move the inflation into their target range.

Q: My last question will be on your sustainable ROE. For this year, you have said ROE could be between 19.5%, 20%. But how should we think about your sustainable ROE?

A: Regarding ROE, we also updated our ROE for 2026. as you mentioned, to be between 19.5 and 20. And your question regarding our sustainable ROE in the future, we think it's going to be between 18 and 20%. I don't know, Mauricio, if you want to complement something on these topics. Ernesto, due to the interest rate landscape that Juan Carlos just described, we might be in the upper part of the range in 2027 also, but maybe looking at 2028 and going forward, it may go down to 18, to the lower part of that range as the margin becomes more in the long-term view that we have.

Q: If I may, just a last question on NECI. We have seen the great evolution of this business. You are already providing data on total income, financial income, fee income, cost to serve. So how much was NECI's net profit in Colombian pesos in this first quarter? And how much could it be contributing this year? And I don't know if you have, like, targets of how much could be contributing in the future. And also related to this one is on the NECI's ROE. for this quarter, if you can provide a little bit of how was it, and also if you have a target for the next years.

A: Ernesto, regarding NECI, let me remind you that NECI is in Bancolombia's book. It's not a separate entity. What we do is we have some administrative numbers of NECI. As we announced, we are in the process of separating NECI as a different entity from Bancolombia, and that will be concluded by the third quarter of this year. So the numbers that we have regarding NECI are administrative numbers, and we will have separate numbers by the end of the year once NECI is a separate legal entity. With that, we are very happy with the NECI results. The dynamics are very positive. The development of NECI in terms of deposits, in terms of loans, in terms of usage, it's really, really positive. And we are disclosing part of that information So you have a sense. NECI, as we announced at the end of last year, it's now profitable and it's on the way of continuing that trend. So let me pass to Mauricio to give you additional information about NECI numbers. Yeah, Ernesto, the administrative net income that we have for NECI during the first quarter is around $7 million. It should be around $30 million for the whole year. But it will start having a separate accounting from the moment it's separated. And we will be able to disclose more complete numbers from the third quarter of this year going forward.

Q: Hi, Brian. Yes, indeed, we made a provision in the fourth quarter of last year of $150 billion because of the deferred tax recognizing the extra tax rate. since the court rejected the extra tax rate on April, that's going to be reversed during the second quarter of the year. So in the first quarter, you don't see anything of that, but you will see it in the second quarter. And remember that we were having two different decrees. That one was with the extra tax rate, and with no cash effect, as you mentioned. And the other one was the equity tax. The wealth tax. That one has already been accrued in the first quarter and paid in two installments. So we're done with that. And what's important to take into account was that the first decree was included in our guidance. Our second decree wasn't. But in net terms, we have a positive result because the first decree was going to account to 800 billion, whereas the second decree accounted for 374 billion pesos.

Q: Mauricio, just a quick follow-up. So you mentioned it should flow or should be recognized in the second quarter. Is it expected to be in the same magnitude? What I mean is the $150 billion, or could it be different as you obviously update your assumptions here on the valuation of the asset?

A: It will be a little lower because we have already recognized month after month during the year. So it could be around 120. And the other 30 are already in the first quarter results.

Q: Brian, so we have two different effects. We have the impairment from the sale of Banismo in the fourth quarter, And then we have the effect in the first quarter of the dividends declared. So both of them need to be accounted for at Grupo CIVES level. Now, at the operating level, all the banks have very ample capital ratios. And just to give you an idea, Bancolombia, it's... 13.1%, which is a very comfortable capital level, taken into account that is the first quarter after the dividends have been declared. So at the holding level, I would go back to the double leverage ratio in which we are accounting for 95% for the quarter, very low. because of the effects that i just mentioned of vanismo and the dividends no perfect very good Q: Hi, Yuri. Regarding your first question, the first quarter, we need to divide the numbers in different aspects to understand the behavior. First, you are right, there is some contamination of the panismo numbers. Just to remind you that the cost of releasing panismo was low, so when we take out the numbers of panismo, the effect is that for the remaining of the companies on aggregate, go up. So there is an effect of retiring banismo from the numbers. In terms of behavior, what we are seeing is not a deterioration. The results of the first quarter are in line with our expectations. And just to remind you that we also included in the provisions some macro adjustments for the year. We did that in the last quarter of last year, and also we had some additional charges during the quarter that are in some form extraordinary. So as a conclusion, the behavior, it's in line with our expectations. We are cautious and we are accounting for some additional reserves that we started last quarter, last year, but we are not expecting a big additional deterioration. But good to notice that we, our guidance of the cost of risk was between 1.6 and 1.8. We expect 2026 to be, by the end of 2026, the cost of risk to be on the upper part of the range, meaning they will be closer to 1.8. And let me pass your second question to Mauricio. Juri, in fact, the results of the deposits are very, very positive. Net of ethics we have a deposit growth of 14% over the year, 19%, only 19% for savings accounts. So basically, that's the result of a strategy based on transactionality, on the ecosystem, on investment, on our digital ecosystem. businesses in order to complement the value proposition. So we haven't gotten into a price strategy in terms of deposits in order to be able to maintain, retain, or attract deposits. Other than that, we have kept on investing on the value proposition. So what you're seeing there is basically the result of having more transactions, more customers using more our physical and digital channels. And at the end of the day, all those transactional deposits are giving us a very stable and low cost of funding.

Q: Yuri. If you look at the cost of deposits, it only increased six basis points. We have to recognize the rate scenario more in the time deposit product, both the physical time deposit and the online time deposit. But in savings accounts, we keep on having almost half of our deposits on savings accounts. They amounted to 47% out of all the deposit base. And the cost of those savings accounts is only 2.3%, with an overall cost of deposits of 397. So we have been able to reprice our asset side without having to pay extra cost or significant extra cost for our deposits. That way being able to expand our margin. Super clear. Thank you very much Mauricio and Juan Carlos. Thank you, Yuri.

Q: Hi, Lindsay. Yes, in fact, I would say that some of that commercial loan growth was explained because of what you said. We saw some projects that needed to have the financial closing and because of the rate scenario, needed that closing to happen in the first quarter. But I would say those were just a few projects. So我会检查发现之前的回答中question_and_answer部分的内容需要完整准确地按照对话内容填充，上面的填充有些部分不完整，现在重新准确填充：{