Banco Davivienda S.A. (PFDAVVNDA) Earnings Call Transcript & Summary

Welcome to Davivienda Third Quarter of 2022 Earnings Conference Call. My name is Jenny, I'll be your operator for today's call. Today's presentation is for investors and analysts only therefore, questions from the media will not be taken. Today, joining us from Bogota, Colombia is Mr. Javier Suarez, Chief Executive Officer; and Mr. Ricardo Leon Otero, Chief Risk Officer. During the call, they will be discussing in depths the quarterly results released. If you have not yet received a copy of the earnings report and presentation, please visit our investor kit or the Financial Information section at ir.davivienda.com. [Operator Instructions] Please note that this conference is being recorded. [Operator Instructions] Before proceeding, let me mention that any forward-looking statements are being made under the safe harbor provided by the Securities Litigation Reform Act of 1995. Actual performance could differ materially from that anticipated in any forward-looking statements due to macroeconomic conditions, market risks and other factors beyond our control. It is now my pleasure to turn the call over to Mr. Javier Suarez, Chief Executive Officer.

Good morning, and welcome to the Davivienda's Third Quarter of 2022 Earnings Conference Call. Thank you very much for joining us today. Before we start with Colombia's macroeconomics on Slide 3, I would like to highlight that the global and local macroeconomic conditions have posted a challenging second half of the year for our business with complex conditions on inflation, interest and exchange rates. Colombia's GDP for the third quarter closed at 7%, decreasing from the 12.8% growth of the second quarter of 2022 as we were foreseen. The economic activity was impacted by factors such as global deceleration, market volatility and Colombia's contractionary monetize policy. Production and sales decreased mainly in July as companies reduced purchases and labor amidst increasing costs despite the recovery of the industrial sector during August and September, Davivienda PMI quarterly average has been the lowest in the last 12 months. The Colombian Central Bank continued to increase the monotype policy rate to 11% by the end of October, which represents a 925 basis points increase in 13 months. Despite these hikes, annual inflation reached 12.2% in October, still impacted by agricultural input prices and El Nino phenomenon. Additionally, lower food prices and the exchange rate devaluation have increased the cost of imported goods, generating more pressure on local prices. The Colombian peso continued to depreciate over the quarter and the year and has reached new peaks explained by the appreciation of the dollar worldwide uncertainty about the local medical environment and an increase in the current account deficit. Depreciation of 11% over the quarter and 12% on an annual basis has impacted our financial results, as we will see later in the presentation. Taking all of this into account, we have updated our expectations for Colombia's main macro variables. For 2022, we are expecting Colombia's GDP to grow at around 8%. Annual inflation will remain high at approximately 12.5%, and we expect another 100 basis points increase in the intervention rate, closing at 12%. We remain cautious about 2023 and the global impact on our economy. We expect a GDP growth of around 1% next year. The monetary policy rate should stay at 12% during the first part of the year and decreased to 8% by the end of the year. Finally, we expect inflation to close at around 10%. Moving on to Central America on Slide 4. We can see that the region's economy continued to decelerate, mainly explained by lower activity in construction, transportation, lodging and food services as well as lower growth of Central America's main trading partners. In this sense, GDP for the second quarter reached 2.8% for El Salvador, 3.8% for Honduras and 9.8% for Panama and the most recent figures for July and August show an ongoing activity slowdown. In the case of Costa Rica, GDP growth was 5.6% and 3.3% for the second and third quarters, respectively. In terms of monetized policy, Costa Rica Central Bank continued increasing the intervention rate to 9%. In comparison of Honduras rate remains at 3%. Price increases have been showing some signs of control with annual inflation decreasing over the big percent in previous months. However, it is important to mention that this behavior is highly influenced by subsidies granted to fields, food, medicine and electricity in the different countries. The Costa Rican Colon has continued its appreciation trend, supported by a lower fiscal deficit among other improvements in local conditions. On the other hand, the Honduran lempira depreciation remains due to an increase in the balance of trade supported by higher oil prices. We expect the region's GDP to grow around 5% in 2022 and inflation to keep decreasing in the different countries. For 2023, we expect the region to decelerate with a 3% GDP growth. Moving on to the main results of our business on Slide 5. Davivienda reached accumulated profits of COP 1.57 trillion, a 68.9% increase over the year. Our loan portfolio grew around 7% in the quarter and close to 23% annually, mainly due to increased demand from corporate retail and the FX impact. Our capital management has enabled us to grow with [indiscernible] space over the regulatory meetings. During the quarter, our capital levels remained relatively stable, closing with a CET1 of 11.03%. Regarding margins, we have been able to preserve our NIM despite the higher-than-expected increase in interest rates on our liability-sensitive structure. Regarding asset quality, we observed a continued downward trend on past due loans after the pandemic, supported by better payment behavior, loan growth and some write-offs. However, this year, we've been working to strengthen our coverage ratios as the environment has rapidly changed. We are anticipating at turning the credit cycle with challenging conditions for the coming quarters, which may put some pressure on PDLs, cost of risk and write-offs. In terms of ESG efforts and results, we continue working to allocate resources, both for social and environmental purposes, in line with our goal to increase our sustainable portfolio. In this sense, we recently acquired a $275 million credit with the IFC, aimed at financing women, the LGTVI community and green projects. We are pleased to share our recent adherence to the United Nations principles for responsible investment. We're aware that ESG issues have an impact on our investment portfolios and shareholders and thereby, we reaffirm our commitment to integrate this criteria into our investment decisions. This adherence includes our asset management subsidiaries in Colombia, Corredores and Fiduciaria, where we've been offering sustainable investment alternatives to our customers. We also believe that our capabilities to mobilize resources will be joined by actions to improve financial leadership and promote good financial habits. As a result of this commitment, the Colombian regulator branded our financial literacy program, the quality field, recognizing that end users and experts find our program and content useful present and of high quality. Finally, our ecoefficiency strategy ranked first in LatAm due to our actions for efficient water and energy use. As part of these efforts, we've decreased our direct emissions carbon footprint by 37% compared to 2019's baseline. Continuing with more ESG results on Slide 6. Our sustainable loan portfolio reached COP 13.6 trillion, accounting for around 10% of our total consolidated book. We continue working to explore potential new products and services to promote sustainable actions among our customers while being pressed in different ecosystems where we can generate a positive impact. Regarding the environmental front, we're also taking part in defining the road map through which the financial sector will contribute to Colombia's goal of becoming net 0 by 2050. As part of this initiative, we are working to improve carbon footprint measurement and mobilizing resources to climate change mitigation and adaptation while helping the nationally determined contributions. We believe these steps will help the sector and the country to transition towards long-term climate resilience. In terms of the social front, we aim to promote women's empowerment and entrepreneurship through our women's SME credit lines, which have shown good results in Colombia and El Salvador with 32% and 15% growth on an annual basis. On Slide 7, we present the evolution of the bank's digital transformation. The digital sales ratio, which accounts for digital sales within the total number of sales in retail and corporate banking, slightly decreased due to lower activity and disbursements as we anticipated. Additionally, it is important to mention that our branches perform an essential role in acquiring deposits diluting the overall digital results. However, Davivienda has developed strong capabilities through a comprehensive detail offering. In this sense, we continue to enable functionalities for our customers so they can reach more and more services through digital channel. As a result, when looking only at retail products available in both worlds, we observed that out of the total retail product sales in the quarter, around 85% were performed in digital. In addition, we continue to work on our usage efficiency with only 10% of monetized transactions being performed through physical channels. Digital loans and deposits maintained their increasing trends, 81% of new deposits opened during the third quarter were done digitally. Digital investment balance has been affected mainly by the interest rate environment and preference for fixed rate investment instruments. However, the number of digital investment products continue increasing, reaching a 10% growth over the year. Moving on to Slide 8. I would like to update you on some of DaviPlata's results during this quarter. DaviPlata's reached 15.2 million customers by the end of September, adding around 1.9 million during the year, which translates into a capability of acquiring about 150,000 new customers per month. Regarding leasing initiatives, DaviPlata's nano credit reached a total loan portfolio balance of COP 20.5 billion with an increase in average ticket per customer. We continue analyzing the overall behavior of this product and evaluating the scalability as well as our potential credit product launches. DaviPlata continues generating value for Davivienda through our cross-selling strategy with COP 4.9 trillion of outstanding loan portfolio allocated by the bank to around 589,000 customers acquired via Dipak. Regarding progress on our social impact ecosystems on Slide 9. We're very proud to share with you that we recently reached the goal of being part of the daily life of 100 farmers markets in Colombia, thanks to [indiscernible]. In this sense, they now have multiple digital functionalities that allow them to leverage their business capacities by using the platform to save, pay their employees, create catalysts to showcase their products and receive payments among many other solutions. As a key part of this financial inclusion strategy, we're also providing financial leadership aiming to improve their reality. As a result, we have reached 75,000 merchants in 49 municipalities, mobilizing around COP 240 billion in transactions during the year. This goal shows our ability to build trust-based models with the power to bring the barriers of culture edge, cash usage and in formal financing habits. We will continue supporting this important player in the religions economies and developing more ecosystems to drive positive impact. Generally speaking, we perceive an uncertain volatile global and local environment with complex macroeconomic conditions and inputs, which leads us to be more conservative in our expectations for 2022 and 2023. We will continue working hard to advance in our ESG strategy to face the challenges we have as a society and continue being a transforming agents while leveraging in our technological digital and analytical capabilities to navigate throughout the coming quarters. Let me turn the call over to Mr. Ricardo Leon, our Risk Executive Vice President to continue with the presentation.

Thank you, Javier. Good morning, everyone. Please move on to Slide 10, where we analyze the evolution of assets. Total consolidated assets closed at COP 177 trillion, increasing around 22% annually. If we exclude the 20% Colombian peso depreciation over the year, assets will have grown 14% annually. Cash and interbank funds increased by around 7% during the year, mainly explained by Central Americas exchange rate effect and the investment balance increased by 9%, aligned with the usual performance of the trading portfolio. We continue to observe growth in the loan portfolio in line with demand across the different segments, mainly in the commercial and consumer portfolios. In addition, a higher balance in derivatives and accounts receivables to explain the remaining assets increase. When looking at each of our operations, Colombia's assets accelerated at a 19.1% rate and Central America at an 8.2% rate in dollars. Please move on to Slide 11. The total consolidated loan portfolio grew by around 7% quarter-on-quarter and by 22% on an annual basis, supported by stable growth in the Colombian operation and a strong quarter in Central America. Overall demand remained relatively strong despite the economic activity, deceleration, the high interest rate environment and our adjustment in origination policies. As well, we would like to highlight that the exchange rate depreciation during the quarter had an important impact on our Central American balance team. In this sense, we show how the different portfolio will have grown when excluding the FX impact. For instance, the total consolidated book would have increased by around 5% quarter-on-quarter and by close to 16% on an annual basis. The consumer portfolio activity moderated during the quarter with a 6.1% growth compared to the 9.2% growth last quarter. Regarding the commercial portfolio, we observed the strong dynamics supported by corporates in the energy, agriculture, infrastructure and services sectors. Finally, mortgages continue to grow at a good pace in the different segments, mainly in Colombia. In the international operation, the loan portfolio continues to grow at its highest rate since the pandemic. The total loan book grew 10.5% during the year, which is mainly explained by the commercial and consumer loans. When analyzing the evolution of our loan mix, we see the total retail banking portfolio accounting for 55.5% of the book and the commercial portfolio increasing its share during the quarter, reaching the remainder 44.5%. Moving on to Slide 12. We present an update of PDLs and coverage rates. As you can see on the top graph, total PDLs over 90 days continued the downward trend mainly due to loan growth and some write-off of consumers affected by the pandemic. This trend is the same in the commercial and knowledge portfolios. As we anticipated in the previous guidance, high interest rates and inflation started to impact some customers, which reflects in the consumer PDLs increasing during the quarter. Given some uncertainty regarding the expectation on our consumer customers payment capacity, there are some early alerts that this ratio will have an increasing trend moving forward. Total compare ratio closed at 145.5% decreasing over the quarter, but is still higher than the levels of the deal-quarter of 2021 and well above the pre-pandemic ones. We continue to preserve our commercial levels to face the macroeconomic challenge of the rest of the year and 2023. Please move on to Slide 13, where we can see the evolution of the cost of risk, provision expenses and loans by states. Provision expenses increased by around 15% over the quarter, leading to an annualized quarter cost range of 2.7%, in line with the higher provision expenses that foresee the headwinds mentioned before. On an accumulated basis, provision expenses contracted close to 14% and the 12 months cost of risk closed at 2.10% positively impacted by loan portfolio growth. When looking at our loans by status, stage to increase is shared mainly due to some corporate clients that improved the rating and move from Stage 3 to Stage 2 and solid duration in consumer loans, as mentioned earlier. Now please move on to Slide #14, where you can see liabilities increasing by around 23% over the year, supporting access growth and contributing to maintain an adequate balance structure. Internal deposits increased by around 23% during the quarter and 36% on an annual basis, in line with the systems strategy of increasing stable funding supported to mass preference for these type of projects. Bonds decreased 5.9% over the year, mainly due to the maturity of an international Tier 2 bond in July this year. In addition, credit with entities grew around 41% compared to the prior quarter of last year, mainly explained by higher obligation with foreign and multilateral entities and by FX impact. Please continue to Slide 15, where you will see our capital extortion. As you can see, we have adequate and sufficient capital levels over the regulatory minimums to support the growth we have been seeing this year. Our core equity Tier 1 ratio rose at 11.7%, decreasing 3 basis points over the quarter, mainly explained by higher risk-weighted assets related to consumer and commercial portfolios. Total capital adequacy ratio decreased due to the maturity of an international [indiscernible] Tier 2 subordinated bond. However, as we have explained in the past, we anticipated this maturity and by issued the additional Tier 1 bond in the first semester of last year. As a consequence, we remain among the best capitalized balance in the region. Please move to Slide 16, where we present our margin. The gross financial margin expanded over the quarter and the year, mainly explained by higher loan income in line with assets repricing, loan portfolio growth and changes in the loan mix. However, loan income expansion was offset by a healthy increase in performing assets contracted over on NIM around 3 basis points over the quarter. On a [indiscernible] basis, loan NIM expanded 11 basis points, closing at 6.7%. Our investment income has been decreasing during the year, mainly explained by market volatility and portfolio evaluation, as you can see in the evolution of our investment NIM. However, this contraction is partially compensated by our FX changes and derivative strategies as observed in our NIM, including this income. When looking specifically at the FX changes and the EBITDA result for the quarter we observed an impact related to our foreign currency and in strategy in Central America and the Costa Rican colon present an important depreciation against the U.S. dollar during the quarter. However, it's important to recall that by having this strategy in place, we are able to immunize collective Q1 ratio against FX movements. Finally, I would like to highlight that despite the speed of interest rate increases, our NIM remained stable during the quarter and the year. Please continue to Slide #17. The nonfinancial income decreased 9.2% over the quarter due to basic rate displayed by some dividends we received last quarter, higher commission expenses and lower income from other businesses. When combined accumulated nonfinancial income to the same, while last year, we observed an increase of around 19%, in line with our expectation for the end of the year. This is mainly explained by higher credit and debit card fees and better performance of the insurance business. On an accumulative basis, OpEx increased by the peso depreciation, which explains 250 basis points of impact inflation as well as the increase in wages and benefits insurance, software and marketing. Please move on to Slide 18 to analyze the balance profit. Net profit decreased during the quarter, reaching COP 399 billion. This is explained by higher financial and provision expenses as well as a reduction in exchange and derivative income and nonfinancial income for the quarter. This is aligned with the expectation mentioned in previous conference calls and the actual macroeconomic condition. On an accumulated basis, net profit closed around COP 1.6 trillion, mainly explained by better loan income, lower provision expenses and higher nonfinancial income. Our 12-month return on average equity reached 13.03% in line with our guidance. To finish the presentation, please move on to Slide 19, where we'll share our great expectation for the end of the year and 2023. Considering the economy's expected acceleration, we expect our consolidated loan book to grow between 19% to 21% in 2022. In the case of this segment, we are expecting a growth of 18% to 20% in the commercial portfolio for the moderation of the consumer portfolio with an end of year growth between 26% and 28% and a 15% to 16% increase in the mortgage book. For 2023, we expect total loan portfolio growth of around 8%, 15% based on the potential 1% growth of the Colombia GDP. Regarding asset quality, not PDL ratio to close this year at around 2.8% to 3.1%. By the end of the year, we're expecting some adores closely between 2.8% to 3.2%. Our net interest margin to between 6% to 6.3% by the end of the year, reflecting the repricing effects of higher interest rates and changes in the portfolio as well as some pressure on our funding costs. Next year, we could have some upside potential depending on when the central money starts to increase interest rates. In this sense, we are considering 6% to 6.3% range. We expect our cost of risk to close 2022 between 2.1% to 2.4%, in line with the actual trends. By the end of next year, we expect our cost of risk to grow around 2.2% to 2.5% anticipating potential provisions and write-off during the next year due to a more challenging credit cycle. No financial event should end 2022 with an increase of 18% to 20% of 6% to 9% by the end of 2023 due to the overall lower activity levels. We expect an OpEx growth from 14% to 16% by the end of the year, in line with the actual trend and inflation levels and from 12% to 14% as of December 2023. Finally, our retro on average equity to grow between 12% to 14% in 2022 and 2023. We will continue to monitor the evolution of macro and business dynamics for any potential again on 2023 figures. Thank you for your attention. At this time, we can move on to the question-and-answer session.

[Operator Instructions] And we have Daniel Mora from CrediCorp with a question.

I have a couple of questions, if I may. The first one is related to margins. I know that you present the guidance with a NIM of between 6% and 6.3% for the next year. But I would like to know what will be the outlook, given that the Central Bank will start decreasing rates, we believe that in the middle of the year. So biggest NIM is going to be stable in the whole 2013 or do you feel that there are going to be some pressures at the beginning of the year and then a recovery at the end of the year? And also if this NIM is considering a stable income coming from FX and derivatives. I would like to know also if you believe that the performance will be stable in that front. And the second question is regarding to the effective tax rate. If you call provide more color regarding the increase in the effective tax rate in this quarter to 35% and what could be the effective tax rate in 2023 also consider in the surcharge coming from the tax reform. And if you believe that there are other direct impacts to the economic banking system besides the 5% surcharge.

Daniel, thank you for your questions. The third question, it's clear that our expectation to keep the NIM between 6% to 6.5% for 2022 and 2020 is a similar level. The result for 2022 is explained by first, changes in the portfolio mix with 55.5% share of personal banking in the total portfolio. And second, asset repricing, given the increase in the Central Bank interest rate as the area explanation. It's important to note that the interest rate has increased at a faster pace than originally expected, therefore, impacting our expectations regarding 2023, depending on when the interest rates start to decrease, we could be seeing some improvement in our NIM in terms of the pricing of assets and liabilities. Initially, we're expecting interest rates to remain stable during the first half of 2022, 2023 and to start to decrease to reach 8% by the end of the year. In this sense, we are expecting a 6% to 6.3%, mean by the end of 2023. And although investment income remained affected during most of 2021, we have a hedging strategy for interest rate grid and moving in the exchange rate. So the result of this strategy can be observed within the FX and derivative income. When taking into account the strategy, you can see [indiscernible] on an innovation by the end of 2022, we could be expecting around 20 basis points of the total mean due to the derivative strategy. Thank you.

Thanks all for your questions. This is Juan Carlos Hernández, Accounting and Tax Advisory President. In relation with your peer question related with the increase in the tax rate to 35% in this quarter the main explanation is related as a result of the lower tax income from our low income housing portfolio in Colombia during this quarter. The last quarter, the amount related with this in connection was COP 50 billion and in this quarter [ COP 40 billion ]. This is according to a calculation for the taxing and income. In relation with another question to the effective tax rate for 2023, according to our analysis, the impact is around 200 basis points and this amount is related with the increase in the surtax for financial entities that increased 3% to 5% until 2027. And another impact is related with the icon in industry and tax come tax because the current law is a con and the new low in for the deduction. This is about impact for our entity in 2023. Thank you.

And our next question comes from Mr. Olavo Arthuzo Duarte.

Yes. Actually, I have 2 questions. And the first one, it's kind of a follow-up on the margins for the next year because I noticed that the demand deposits is slightly decrease while term deposits posted a huge increase quarter-over-quarter in the third Q. So I just wanted to hear from you what could we expect in terms of the management of this cost of funding going forward? And the second question is related to the service fees performance of the bank because I also note that this performance was very, very negative impacted with the lower income and especially regarding the assets on the custom of the managed business of the bank. So what could we expect related to this income from mutual funds going forward because my intention is to understand the potential trend not for the next quarter, but also the trend for the next year.

Thank you for your question. This is Ricardo Leon, Vice President. With your first question. We are presently monitoring our funded based on our loan portfolio growth expectations. The behavior on global markets impacted our initial funding plan , and we have been raising funds through credit institutional and retail deposits. Additionally, we are working on other possibilities such as bonuses and securitization alternatives once the market shows the credit conditions. We continue working on extending the duration of our liabilities in line with the net stable funding ratio requirements. In this sense, we expect a higher increase in term deposits and credit this year around 40% compared to the increase in the demand deposits. Regarding 2022, we expect our funding mix to slightly change and we demand deposits accounting for 50% of our funding sources, followed by tens around 30% and the remaining 20% of bonds and credit.

Good morning, this is Javier Suarez for your second question on the service fees. We've seen growth in services over the last few years through a strategy that aims to improve the ability of the bank to charge for new services, and those include some the payments, services, bank assurance and other transactional fees, and that's been a strategy that has been steadily increasing the value of the nonfinancial income. Specifically for the assets under management fee income, part of it on the trust company is associated with the results of the portfolios and since we've seen interest rates going up, there have been some losses on those portfolios that also impact the fee income for those portfolios. As we expect interest rates to stabilize, then our expectation for next year will be having a more stable income from those assets under management business, and we'll probably see a normalized numbers for next year. In general terms, we see our ability to increase fee income as part of the strategies of the bank. Under the fee income line, especially on the guidance, we are including also some lines that are not exactly being those are the investments that we're doing in other lines of businesses, such as the rapid line of businesses that for accounting purposes, it's included under this line of fee income, and that explains why we have an expectation of around 6% to 9% growth for next year. But on the comparable basis on fee income, we're expecting a healthy growth for next year.

At this point, we will take the questions from the webcast. Our first question comes from María-José Quiñones from Seminario SAB and her question reads as follows. I was wondering if you could provide more details and why the interest expenses rose so much year-over-year. What does this repricing of liabilities mean?

Thank you, María-José. This is David Sanabria responsible for Investor Relations. So given the trend in interest rates in Colombia since October last year when they started increase the interest rates, the Central Bank started decreasing interest rates, that movement in interest rates has some pressure on the liabilities. Actually, the repricing of liabilities refers to how fast the liabilities change their interest rate considering those changes in general. So as we have explained in previous conference calls, the liabilities in our case, reprice faster than assets and since the interest rates have increased a little bit extra than expected at the beginning of the year, that has some pressure on interest expenses, and that's actually what reflects that behavior.

Thank you. Our next question comes from Sebastián Gallego from Ashmore. Could you please provide the evolution of transactional income, deposits, e-cards and quarterly purchases at DaviPlata as of third quarter 2022. Also, could you explain the increase in CAC at DaviPlata over the recent quarters? What could the market expect in terms of cash dividends in 2023, given the consumer loan growth observed in 2022, particularly in unsecured loans, along with economic slowdown in Colombia. How do you assess the likelihood of an additional asset quality deterioration compared to the initial guidance provided for 2023?

Thank you, Sebastian this is Javier again. On your first question on the numbers for DaviPlata on the transactional income transactional income for DaviPlata for the previous quarter was COP 15.3 billion, and that's if you compare it to last year, it's a decrease of 35% but as we have explained in previous calls, that's due to the fact that last year, we were paying subsidies for the government, and we are not paying those subsidies anymore. But if you take out those numbers, the numbers that come from the subsidies from the government on a normalized trend what we're seeing is a 21% increase year-over-year versus last year, which was COP 11 billion of transactional income is now COP 13.2 million and is growing as compared to previous quarter, it grows from COP 12.6 billion to COP 13.2 billion with be the normalized transactional income, excluding income from the government subsidies. So we're beginning to track this as the best indicator because as we are phasing out the payment of subsidies, we are focusing our efforts on transactional income that comes from day-to-day transactions that our customers will go through that plant. In terms of deposits, we're at COP 800 billion. It's stable from last quarter but if you compare it to last year, it's growing at a 45% rate, which is a healthy rate, and we're seeing a trend for the end of the year in which we're expecting a significant growth for the next quarter due to seasonality reasons. With respect to eCards, eCards continue to grow. We are growing at 26% year-over-year, the number of eCards and quarterly purchases are probably one of the indicators that give us a better view of the health of the platform. It came to COP 1.8 trillion for the quarter, with a 131% year-over-year increase. Last year, we were at COP 800 billion now we're at COP 1.8 trillion. So the amount of money that is going through a platform is growing significantly so we're seeing pretty good numbers on the platform. In terms of the cost of acquisition, it has increased for 2 reasons. One is, if you look at previous quarters, previous quarters had the benefit of some of those subsidies of government subsidy, the payment of government subsidies that have a very low acquisition cost. We are now acquiring customers based on our marketing activities. And so therefore, there's an impact there on the acquisition cost. Specifically for this quarter, the acquisition cost is higher because we're entering into some marketing campaigns that will actually have a benefit for next year for the first month of next year, but we're incurring those costs now. So for accounting purposes, it's actually increasing our cost for this year, but we expect that number to normalize for next year.

Our next question comes from Manuel...

One moment. The 2 questions this is Ricardo Leon. Related to the consumer growth and the rise in this portfolio, it's important to mention that the customer portfolio, this accelerated during the quarter and that actually growth was also impacted by the FX depreciation. An growth is explained by 2 main elements. First, there is a base effect as this loan book was decreasing during 2021 due to [indiscernible] related to the pandemic and second, 2022 growth was supported by depending campaigns implemented since the end of last year, new origination policies as well as by better analytics model and well-collected reprofile. Taking into account the outlook for the remaining of the year. We took some measure to moderate growth and adjusted origination policies, mainly in unsecured loans to risk growth level of 26 to 28 by the end of 2022. In terms of asset quality and provision expenses, we do expect an adverse in the consumer portfolio explained mainly by the current economic environment with higher interest rates and inflation lower growth during the second half of the year and the evolution of recent vintage. For 2022, the overall, we are expecting for the total portfolio of PDL 2.8 to 3.1 and a gross or between 2.1% to 2.4%. In terms of our prime portfolio, we're expecting EBITDA ratio around 2.8%. Thank you.

Thank you. Our next question comes from Manuela Mora from Compass Group. Could you please give more color on NIM guidance for 2023, which is expected to remain flat? How fast will a reduction in interest rates will be reflected positively in NIM.

Okay. We come in the in a few minutes ago, however, by the end of the year, we expect the geo expansion in our NIM, mainly explained by the loan book mix moving to our saving with higher margins such as the consumer book. And the burdens at higher interest rates, offset by the repricing liabilities. So the NIM for 2022 will be between 6% to 6.3% and is a similar level for 2023.

Thank you. Our next question comes from Joaquin Posada from Citibank. What explains the growth in assets, 22.2% and the other 47.1% in balance sheet, Slide 10.

Okay. Thank you. In this line, other assets, we have or is explained by mainly due to the higher volume of rebates that is in that account and the increase in account receivable caused by tax repayment of explained by tax prepayments. That is the explanation of this line of the audio assets. Thank you.

And our next question comes from [ Andreas Soto ]. One how do you evaluate the risk due to the strong growth of the consumer portfolio. We are already beginning to observe deterioration in this segment. What will be the bank strategies to mitigate this risk of more deterioration and how are you expecting this business to behave next year? Two, what are the expectations in terms of sustainable loan growth for 2023? Currently, what is the share from the total portfolio.

Okay. Thank you for your questions. And as I commented a few minutes ago, the expectation for rising for the consumer portfolio, in particular, that is the portfolio maybe more risk than other portfolios. And for consumer portfolio, we are expecting EBITDA of 2.7%. The impact in the total portfolio is to be between 2.8% to 3.1% of PDL ratio. The cost will be between 2.1% to 2.4%. And so thin that it's very important for the new year, we are establishing a PDL in level of 2.8% to 3.2% for the total portfolio and the cost we reported the total portfolio between 2.2% to 2.5%. And during the last quarter, we have been defining new risk policies for the consumer portfolio, particularly in unsecured ones, tightening the policy for new origination in this portfolio, especially. Thank you.

And there doesn't appear to be any further questions at this time. I would like to turn the floor back over to Mr. Suarez for any closing remarks.

We believe that there might be a question on sustainable loan growth in that sense. We expect the sustainable loans portfolio to be in line with the growth of the portfolio. We expect that to be a little higher than the overall loan portfolio growth. But for guidance purposes, we would stick with the same growth that we are giving for the overall loan portfolio. So start on that question. If there are no further questions, as we mentioned on previous calls, we were foreseeing a change in conditions, and we're beginning to see these conditions changing in terms of growth of the economy as well as the demand for credit, we're seeing lower demand for credit. You may see in the guidance, the numbers that we're expecting for growth of the portfolio for next year are in the around 8% to 10% loan growth based on an economy that will be growing at close to 1% those are one of the expectations for next year. So we're definitely seeing a change on the conditions in the market and with those changes and conditions, we're adjusting, of course, our operation to recognize that the environment is changing both in growth and as well as quality as Ricardo has explained. Regardless of those numbers for next year, we keep committed to the transformation of the bank. We've committed to investing on our digital platforms where actually this year, this 2022 has been a very good year in terms of generating new digital assets that will be part of the operation for next year. We're very excited on the road map that we have for this year in terms of new capabilities for our customers that will have better service as well as will be a source of efficiency for next year. Of course, the numbers for next year are also impacted particularly in expenses by the depreciation of the peso. Part of our expenses are, of course, dollar-denominated that's around 3 points around 3% of the growth on expenses is explained by the depreciation. So definitely, there are some challenges there, but we are committed to keep investing in the platforms, keep making the bank more digital and at the same time, improving the conditions of the portfolio by managing a period of time, which there would be some challenges on the quality of the consumer loans, basically because of the change in the conditions in the market. Even though the environment is changing, we're optimistic. We believe that there are opportunities still to keep working on our presence on the different segments in the market and the digital transformation is going as expected so we're excited about it. Thank you very much to everyone for participating in this conference, and we'll expect to see you the next quarter.

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