Bancolombia S.A. (NYSE:CIB) Q3 2018 Earnings Conference Call Transcript

Nov 08, 2018 • 08:00 am ET


Bancolombia S.A. (NYSE:CIB) Q3 2018 Earnings Conference Call Transcript


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Good morning ladies and gentlemen, and welcome to Bancolombia's Third Quarter 2018 Earnings Conference Call. My name is Richard and I'll 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.

(Forward-Looking Cautionary Statements)

With us today is Mr. Juan Carlos Mora, CEO; Mr. Jaime Velasquez, Chief Strategy and Finance Officer; Mr. Jose Humberto Acosta, CFO; Mr. Rodrigo Prieto Uribe, Chief Risk Officer; Mr. Jorge Humberto Hernandez, CAO; Mr. Alejandro Mejia, IR Manager and Mr. Juan Pablo Espinosa, Chief Economist.

I'll now turn the call over to Mr. Juan Carlos Mora, CEO of Bancolombia. Mr. Juan Carlos, you may begin.

Juan Carlos Mora

Good morning, everybody, and welcome to the conference call for the third quarter. Before presenting information about the bank, let me do a quick reference of our view of the current macro situation. In Colombia, we have seen a more dynamic economic growth during the quarter. Through this year, GDP has expanded at a higher rate with respect to those seen in 2017, thanks to a recovery in general demand and a two-digit growth in exports.

For third quarter 2018, our growth estimate is 2.5% and for the whole 2018, it's 2.6%. There is a scope for further acceleration in 2019, which will be driven by investment leading to a growth of 3.2%. Over the past few months, inflation has remained within the central bank's target range. As a result, interest rates had been stable as well. We forecast two hikes towards the second half of 2019, when the economy will be growing closer to its potential. We have seen progress in the government's effort to address the fiscal deficit.

Last week, the administration submitted to the Congress a law proposal to modify the tax code. According to our estimate, this initiative will allow the central government to meet next year's deficit goal. It will also introduce measures that will reduce the tax burden for private companies. The initiative also contemplates adjustments to the VAT, which will exert a temporary pressure on inflation and a sharpened deceleration of private consumption. Despite these effects, this proposal is a necessary step in the process of fiscal consolidation to which Colombian authorities are fully committed.

Finally, in the external front, we have seen a positive evolution in the trade balance. The current account deficit will remain close to 3.4% of GDP and current oil prices are supportive of this trend. Despite recent volatility in financial markets, our analysis show that the Colombian economy can address the further tightening of global financial condition. Having said this, I want to share with you the plans that we have implemented to execute our strategy and improve profitability. We have defined the following pillars, grow faster in consumer loans and new product sales; increase consumer base to generate new revenues and improve profitability, reduce the cost of the bank, especially those related