Banco Bilbao Vizcaya Argentaria Colombia S.A. (BBVACOL) Earnings Call Transcript & Summary

Hello, everyone. We'll start the BBVA Q1 2026 earnings call right now. Good morning to everyone, and welcome to BBVA Columbia's First Quarter 2026 Earnings Call. My name is Santiago Ramos from ALM and Investor Relations. Joining me today are Alejandro Reyes, Principal Economist from Research; Felipe Vega, Financial Planning and Performance Senior Manager; Nicolas Tripodi, Head of Retail Credit Risk; Yuliana Giron, Profitability and Capital Senior Manager; and Daniel Patron, Head of ALM and Investor Relations. As a reminder for today's presentation will be available for download on our website under the Investor Relations section. Please note that this call is being recorded. [Operator Instructions]. Our agenda for today includes key highlights from the quarter, a brief overview of the economic landscape insights into our financial performance and to recap on our recent achievements. Without further ado, I'll now hand over the call to Daniel Patron.

Thank you, Santiago, and good morning to all. My name is Daniel Patron, and I'm the Head of ALM and Investor Relations at BBVA, Colombia. It's my pleasure to welcome you to our first quarter earnings call, where we will review the main highlights of the quarter. Throughout this session, I will invite members of the panel to share their insights on specific topics. Let's start with the Slide #3, where we will review the key highlights from the first quarter. We will see these topics in more details as we go through the presentation. As March 2026, we posted a net profit of COP 202 billion, which represents a year-over-year increase of 562.7% as a materialization of the efforts made throughout the year to return to profitability. When compared with March 2025, our loan portfolio grew by 6.5%. The efficiency ratio stood at 54.4% below the same figure from March 2025, thanks to the focus on profitability and the quick repricing of our interest-bearing liabilities, our gross margin keeps growing and achieved a 20.2% increase compared to the same period last year. Our capital position remained strong as of March. As our common equity Tier 1 ratio stood 267 basis points above the minimum regulatory level. Capital formation has been favored by the recovery of asset quality to previous levels with cost of risk sitting at 1.9%, which is 0.7% below the numbers seen back in March 2025. With that introduction of the quarter, I will now hand over the call to Alejandro Reyes, Principal Economist from BBVA Research who will provide an economic out outlook. Please, Alejandro, over to you.

Thank you very much. So let me start on Slide #4 and #5. On the economic front, the economy remains resilient with a growth print for the first quarter of '26 of 2.2% based mainly on the internal demand, consumption and investment in machinery and equipment. We expect growth will improve slightly in the remainder of the year, reaching a 2.6% annual growth, similar to that observed in 2025. This result will still be supported by strong public and private consumption, while investment will remain weak, mainly due to construction. For 2027, we expect activity to moderate, mainly due to higher inflation and interest rates which will have a particular effect on durable and semi-durable good consumption and will maintain investment with a moderate expansion. For the public sector, we expect a low fiscal consolidation that in addition to the base effects from the high expenditure related to the election in 2026 will lead to lower public expenditure growth. This scenario implies a 2.1% growth rate for that year. Inflation will continue to be one of the main macroeconomic constraints. After standing at 5.84% year-on-year in May 2026, it will end the year near 7%. In part conditioned by the development of an El Nino phenomenon of strong intensity, reaching a peak in inflation during the first quarter of 2027. We expect a decline to 5.6% in the rest of the year. This price hike is not only driven by the climate disturbance, but rather due to a combination of the increase of the minimum wage well above inflation, high public expenditure strong internal demand and some energy pressures. In this scenario, the Central Bank has recent rates by 275 basis points in the year-to-date, with the latest increase being of 75 basis points in June. The response has been swift and significant in order to counter the minimum wage increase driven inflation expectations and to provide a contractive monetary policy to allow inflation to converge gradually to the target. We expect the policy rate to reach 12.25% at the end of the year of 2026 and should remain at that level for the most part of 2027, with a predomination cycle starting in the last quarter of 2027 to close that year at 11.25%. Finally, the fiscal challenge will remain -- fiscal challenge will remain relevant. We estimate the total deficit of the Central National Government will stand at 6.7% of GDP in 2026 and would fall to 6.2% in 2027. Public debt remains above 60% of GDP. We expect the new government to commit to revenue or spending measures to help with the fiscal consolidation. Despite this, we expect the fiscal balance to improve only gradually with a total deficit print of 6.7% of GDP in '26 and 6.2% of GDP in '27. On the external balance, we expect a gradual widening of the current account deficit, but still at low levels relative to the historical average. This widening of the external balance in hand with still high risk premium and the end of the hiking cycle from [indiscernible] will contribute to a structural rate depreciation of the currency from current levels. Daniel, back to you.

Thank you, Alejandro. Now I will hand over the call to Felipe, so he can walk us through our performance during the quarter.

Thank you, Daniel. Let's turn to business activity. As we close the first quarter of 2026, we maintained a solid momentum across the franchise. The total loan portfolio grew 6.3% year-over-year driven by a steady 8% expansion in the commercial segment, fully aligned with our strategic focus. In consumer, we sustained our momentum growth with the portfolio increasing 4% as asset quality improved and the market share was regained. The mortgage segment also showed steady progress, growing 5% versus the same period in 2025. Overall, these trends confirm the effectiveness of our strategic repositioning, rebalancing toward higher-value commercial lending, while building a more profitable and sustainable growth profile. This shift is clearly reflected in the financial recovery presented on Slide 7. For the first quarter, the key highlight is a significant improvement in profitability, in line with our guidance. The bank reported a net profit of COP 202 billion for the first quarter of 2026, marking a sharp turnaround from the COP 30 billion recorded in the first quarter of 2025. This recovery was primarily driven by a normalization of net provisions, impairments, which declined 22.5% year-over-year, indicating that we have moved beyond the peak of ready deterioration and strengthened our risk management cycle, bringing the cost of risk down to 1.9%. Net interest income also continued to grow, increasing 15.5% year-over-year to COP 939 billion, supported by the commercial portfolio, expansion and discipline in the margin management. which pushed our interest margin up to 39%. On the cost side, while operating expenses increased 8.8% year-over-year to COP 887 million. Our efficiency ratio improved significantly to 54%, resulting in a strong positive operating leverage. In summary, this quarter marks a clear consolidation of our recovery. The bank has solidified its return to sustainable profitability and is well positioned as we progress through 2026. Over to you, Daniel.