Banco de Bogotá S.A. (BOGOTA) Earnings Call Transcript & Summary

Welcome to the 4Q 2022 Consolidated Results Conference Call. My name is Maria, and I will be your operator during this conference call. [Operator Instructions] Please note that this conference is being recorded. We now ask you take the time to read the disclaimer included on Slide 2. When applicable, in this webcast, we refer to trillions as millions of millions and to billions as thousands of millions. Thank you for your attention. Mr. Alejandro Figueroa, CEO of Banco de Bogotá, will be the host and speaker today. Mr. Figueroa, you may begin your conference.

Thank you, Maria. Good morning, ladies and gentlemen, and welcome to Banco de Bogotá Q4 2022 earnings call. Thank you all for joining us today. Last quarter, Banco de Bogotá tender over to sell 20.89% or remaining 25% participation Holding International Corporation, the holding company or the Central American Banking Group. As you may recall, in March 2022, Banco de Bogotá completed a spin- off of 75% of BHI in favor of the bank's shareholders and retaining a 25% stake in the holding company. In December 2022, Banco de Bogotá asserted a tender offer for common shares of BHI and the same price per share use cash basis for the March spinoff. The price was acceptable to the bank considering higher discount market rates and because it represented a 50% premium to the trading price of the stock. As a result, the bank sold 20.89% of BHI lower in stake to 4.11%. This decision was driven by the same consideration that has led the bank to spin-off BHI in the first place. This transaction increased Banco de Bogotá solvency ratio and improved its net stable funding rate or [indiscernible] allowing for loan growth with reduced pressure on cost to performance. The transactions were timing considering the [indiscernible] in Colombia. As previously disclosed, the bank's Q1 2022 results included an net income of COP 1.32 trillion because of the spin-off of 75% of BHI. The sale in Q4 2022 of an additional 20.89% of BHI resulted in loss COP 983 billion, net of transaction resulted in a time gain of [ COP 642 billion ] during 2022. So I will make a summary of the bank's main results. Attributable net income in 2022 was COP 2.8 trillion, resulting in profitability ratios at 1.9% for return on assets and 15.9% for return on equity. Total NIM increased annually 24 basis points to 4.5%, [indiscernible] by a 28 basis point growth in lending NIM as cash loan portfolio moved up by 246 basis points as rate of cost of funding growth of 234 basis points. Gross fee income total COP 1.7 trillion in 2022, 16.5% higher than in 2021. Cash banking fees and credit card fees grew a 18.6% and 20.9%, respectively. Fee income ratio stood at 24.8%, improving generally by 170 basis points. Cost to assets was 2.5% in the year, and cost-to-income was 48.5% both within past periods. Regarding our balance sheet performance. Gross loan portfolio amounted to COP 96.1 trillion, growing at a stated rate of 17.3% year-on-year. Mortgage experienced the highest expansion at 31.9% year-on-year. Deposit remain our principal source of funding, representing 74% of the mix, reaching COP 88 trillion. The positive loan ratio was 0.97x, close to our target of 1x. The quality of the loan portfolio remained stable with a 3.5 ratio for 90 days loans, decreasing 36 basis points versus Q4 2021. Annual net cost of rate for the year is at 1.5% below our 1.8% guidance for 2022, having improved 54 basis points yearly in the consolidated portfolio. Finally, capital adequacy ratio remained stable with Tier 1 capital and total servicing at 10.1% and 15%, respectively, remaining above regulatory minimums. Now, I'll turn the presentation over to German Salazar, Executive Vice President of the bank.

Thank you, Alejandro, and good morning, everyone. On Slide 4, we present our digital strategy results for the quarter. Digital business has contributed to maintaining the bank's growth rate, responding to our efforts to improve and connect digital channels with customer needs. As a result, we have achieved 5.4 million digital sales and 2.2 million digital products sold in 2022, which imply a 45% increase versus 2021. These results allow the bank to reach COP 6.2 trillion in digital loans and products with an 84% year-on-year growth. Let me begin with some detail on the digital sales results in Q4 2022. Digital sales saw a steady growth, reaching more than 595,000 products sold and representing 77% of total product sales. Also, our balance sheet has increased by COP 1.2 trillion in digital products, a 26% growth over the previous quarter. We would like to highlight the most relevant products that allow us to accomplish these results. Credit cards set a new all-time monthly record reached in December with over 55,000 products sold, a 12.7% increase from the previous quarter and 47% year-on-year growth. This success was due to the effective implementation of QR codes in a live point-of-sale business, allowing customers to easily request a product using their mobile phones and making the first purchase. Total consumer loans imbursements in Q4 reached COP 528 billion, a 73% growth versus Q4 2021. For full year 2022, total digital consumer loans amounted to COP 2.2 trillion, a 114% growth year-on-year. This was possible due to a growth of 85% in consumer digital credit sales and an average ticket that increased by 16% year-on-year due to a better user experience and the implementation of the smart pricing system in Q3. Digital time deposit sales increased 13% quarterly with a total of over 15,000 products sold and over 240,000 year-on-year growth. This allow us to achieve a milestone of COP 532 billion in digital time deposit funding in 2022, with a 303,000 year-on-year growth. This was due to factors such as competitive rates, improvements in the conversion rate and enabling digital time deposit sales through new channels such as the new [ LiNX ] tool and the implementation of a communication strategy to boost digital acquisition through e-mail and text messages that allow time deposits renewal. Over 195,000 digital savings accounts were opened in Q4 with a 21% annual growth. Worth highlighting for this quarter, the web comparison rate, which increased from 70% to 77%. Also, these results were achieved due to payroll account sales that represented 50% of digital account sales in Q4 with over 94,000 products sold as well as the reinforcement of our sales force of the usage of digital account short links. Digital insurance had 21% quarterly growth, proven success in our cross-selling strategies with credit cards, where discretionary insurance sales occur in 6 out of 10 new credit cards and 4 out of 10 digital consumer loans. In addition, tailor-made life insurance, saw a 15x growth in sales, increasing to over 28,000 policies sold in 2022. This is a brand-new value offer for our customers as they now have the choice to buy flexible life insurance products according to their needs. This product's performance had a year-on-year growth of 75%. We also continue to expand our digital products portfolio, which we continue to improve based on the following initiatives. First, the digital vehicle loan strategy, which was already expanded in Q4 by implementing the approval flow and the strengthening of coverage in Colombia with the auto show and specialized vehicle portals, including [indiscernible]. Furthermore, we have also improved our conversion rates through lead recovery with our sales force for new and use of vehicles, allowing us to strengthen our ecosystem strategy. Second, regarding digital micro credits, our efforts persist in widening financial inclusion to a broader audience through a fully digital experience. During this quarter, we performed improvements enabling an alternate flow for customers who were not able to go through digital authentication, allowing a 38% share in micro credit cells with a total of 2,107 sales and a 22% quarterly growth. And third, we continue working on our assisted digital channels, where each personal adviser aids consumer digitalization through tablets. For 2022, 47% of digital sales were made by digital assisted personnel in retail branches. During 2022, 54% of total sales in branches were made in tablets, generating a significant contribution in sales during 2022. The following results highlight the performance of our digital channels as well as our digital customer metrics. During Q4, we had over 2.3 million active customers on our digital channels, a 19% increase from the previous year. This growth was due to our focus on enhancing customer experience through web and mobile upgraded functionalities in payment options for products such as cardless cash withdrawals and for utility bill payments. This led to a 46% year-on-year increase in digital transactions, totaling 60.5 million, evidencing achieved towards more digital and mobile usage. During the quarter, our sell-to-sell functionality provide solutions for Grupo Aval and Dale. Allowing more efficiency in transfers between these accounts. In the first month after its launch in Q4, sell-to-sell reported over 19,000 transactions between Aval banks and Dale, thus reinforcing our digital ecosystem position. In 2022, processed a total of 4.47 million outbound transactions and 524,000 inbound transactions, a yearly growth of 11x and 1.4x versus 2021, respectively. For Q4 transaction, processed 1.95 million outbound transactions and 232,000 inbound transactions, a 35% and 48% quarterly growth, respectively. We also kept improvement functionalities for users of our digital assistance center, both highlighting, among others, the possibility for clients to see the name and contact of their adviser. We also implemented functionalities such as the e-mail, onetime password, OTP, to provide access to our digital channels, to clients who are abroad on to transaction, allowing for fast secure and 100,000 digital transactions through self assistance. We had 10,000 customers inquiring on how to make transfers, increasing the average number of transactions per client from 2.37 to 5.27 during Q4. Lastly, for our group strategy, we have strengthened our position in real-time payment solutions, promoting Grupo Aval's digital wallets in Dale. As a complement to the group's payment ecosystem with Banco de Bogotá has grown over 425,000 versus 2021, with a clientele of over 605,000 accounts in 2022. Now turning to Slide 5. We would like to present our ESG progress for the year. 2022 was a year of various challenges regarding sustainability, mainly the expansion of our contribution towards more social responsible economy with lower carbon emissions. To meet this challenge, we took several actions. In terms of policy, we strengthened our ESG strategy, redefining our sustainability commitments by prioritizing efforts to better align with government goals and the Paris climate agreement. We also strengthened our efforts on climate impact in the following aspects: development of green products and services; strengthening of climate change risk management with the environment and social risk management system and the carbon neutral management. Also, our adherence to the net zero policies, accompanying customers' efforts in transitioning towards a green economy. In terms of commitment, our main objective is to further generate prosperity through a sustainable and inclusive manner. Our commitment is aligned with the best ESG practices as well as reporting and transparency with excellence. We have adhered to 3 new initiatives: first, net zero banking alliance in which banks commit to carbon-neutral portfolios by 2050; second, task force on climate-related financial disclosures, or TCFD, which commits us to use recommendations for the identification of climate change impact measurements; and third, responsible banking principles whereby we incorporate sustainable criteria throughout all the bank's areas will -- while measuring contribution to sustainability. These principles further our efforts to implement communication mechanisms with clients and stakeholders to develop sustainable practices and to promote a responsible banking culture. For the third consecutive year, we consolidated our position as one of the top 5% of the 710 banks internationally evaluated and the world's most sustainable banks. In terms of achievements, we would like to highlight the following. Over 1.8% of our loan portfolio is represented by green products. We have products such as a credit line for sustainable development, loans for sustainable construction, sustainable financial leasing, project finance, sustainable mortgages and housing leases, sustainable use housing loans for hybrid and electric vehicles, Amazon debit cards. Our goal is to reach COP 4 trillion in green products by 2025. Other achievements are, we managed to successfully measure our clients' carbon footprint for measure and disclose the bank's progress with regards to clients' emissions. Our environmental and social risk management system analysis of all above COP 21 billion to further evaluate the impact on the environment and their social footprint. We are the first bank in Colombia to obtain carbon neutral certification by ECON Tech. We installed solar panels on 18 branches and 2 administrative buildings. We planted over 80,000 trees in an alliance with -- from the [indiscernible] saving the Amazon. We benefited over 8,000 people with our sustainable mobility program, which diminished carbon dioxide emissions by 37 tonnes. Our digital -- our electric energy consumption is a 100% renewable backed by renewable energy certificates. We benefit 357 customers through a financial education program, furthering applicable knowledge for responsible financial management. Regarding social efforts, we disbursed COP 216 billion to support small businesses, reaching 756 municipalities in Colombia, a 26 yearly growth. We placed over 300,000 Unicef cards, which support throughout Colombia. We have to [indiscernible] where we obtain friendly fees, a certification due to the efforts in reducing gender salary gaps. Financially, we obtained the diversity, equality and inclusion market leader, designation for Euromoney. Moving on to Slide 6. Let me summarize the local macroeconomic overview. In 2022, the Colombian economy completed its second consecutive year with very good dynamics. Growth was 7.5%, one of the highest in Latin America and in the city. Most sectors advance, but there were some exceptions, such as agriculture and mining. The production level began to stabilize in the second part of the year, evidencing the deceleration of the post-pandemic recovery. This behavior has led to a downward adjustment in economic growth projections in 2023. Our economic research team forecast a GDP expansion of 1.5% for this year. Inflation constantly exceeded expectations in 2022, closing the year at 13.1% annually, the highest since 1999. Consumer prices were impacted by the significant rebound in food with inflation closing in 2022 above 27%. However, price pressures were more generalized than exclusively from the food prices. More than 90% of the products and sales of CPI basket had inflation above 4% in 2022, a level that represents the selling of the Central Bank's target range. Core inflation also accelerated significantly closing the year at 10.4%. Most consensus projections point to a moderation of inflation in 2023. However, the magnitude of the correction will depend closely on food prices. Our economic research team expects inflation to close the year at 8.5%. The economic dynamics and the acceleration of inflation led to new increases in the reference interest rate by the Central Bank during 2022. The monetary policy rate closed the year at 12%, which represented the most aggressive rate hike cycle so far this century, with a total increase of 2022 of 900 basis points, positioning Colombia as the second economy in the world among the main ones with the most increases during the year, only surpassed by Hungary. The real interest rate is all greatly reaching levels not seen since the international financial crisis. Our economic research team does not consider the hiking cycle to have ended in December. It is expected that in the first quarter, the ceiling will be reached with a terminal rate of 13.25% and the second semester, the downward cycle will begin with an expectation of an end-of-year rate close to 10%. Exchange great markets experienced high volatility throughout 2022. The first semester, [indiscernible] but not as strong as in the second semester. After this, with a scenario of global monetary policy tightening, the local political uncertainty positioned itself as the main driver in markets. The upward pressure led to a new all-time high for the dollar of over COP 5,500 per dollar in November. This contrast with the minimum for the year in April, close to COP 7,700 per dollar. Volatility for the year was over COP 1,400 per dollar, the highest ever. In the final part of the year, exchange rate pressures moderated and the currency closed at COP 4,810. The rebound in aggregate demand that boosted imports, the graded outflow of dollars from investment income, profits and dividends from foreign companies established in Colombia and the accounting effect that reduces the size of GDP in dollar terms due to the devaluation. There was a limited correction of the current account deficit. The deficit continued to widen and close 2022 above minus 6% of GDP, a broad correction of the current account is expected for 2023, reacting to the slowdown in domestic demand. Our economic research team expects the forecast of a deficit of 4.2% of GDP for 2023. The change of government brought a new tax reform, which seeks to collect around COP 20 trillion, an amount that will gradually increase in the following years. The reform focused on high-income individuals and the energy and mining resorts. The Ministry of Finance announced that the resources will be used entirely for social spending. In the final part of the year, the government presented the final plan with positive announcements in the fiscal front. The physical -- the deficit was adjusted downward to minus 5.5% to GDP for 2022, while for 2023, it was revised upwards to 3.7% of GDP. In both cases, complying with the fiscal rule. Finally, in 2022, there were no changes for the sovereign rating in the part of 2022. Fitch ratings reaffirmed the notes at BB+ with a stable outlook. Moving on to Slide 7. Let me summarize Panama's macroeconomic overview. [ 2027 ] was the second year of strong recovery in the Panamanian economy after the recession caused by the pandemic in 2020, stock GDP by minus 17.9%, with advances of 15.3% in 2021 and 7% in 2022. According to the most recent forecast from the IMF, activity would have exceeded the levels in place before the COVID 17 -- sorry, the COVID-19 stock. By sectors, the recovery was almost generalized with growth dynamics in most components of the economy, though with the composition in their contribution. In particular, the recovery in tourism allow the hotel and restaurant industry to register a growth of more than 20% in the third quarter. Meanwhile, international trade gave way to an increase in traffic through the Panama Canal with a growth of almost 7% year-to-date up to October, doubling what was observed the previous year in 3.3%. Thus, the transport, storage and communication sector grew 13% annually in the third quarter. In the third quarter, the commerce sector grew 13%. Finally, construction and other service grew at higher rates than the general economy, 18% and 15% annually in the third quarter, respectively. By 2023, as in the rest of the world, the Panama growth moderation is expected to continue as the benefit of the reopening of the economy after the pandemic are left behind. The IMF project annual growth of 4% in GDP in 2023. Turning to prices. Inflation followed a global trend, starting the year 2022 with a rebound to reach a maximum of 5.2% annually, around the middle of the year. Since then, the trend has been downwards, ending the year at 2.1% below the 2021 level of 2.6%. For 2023, the IMF projects inflation at 3.1%, which will depend on the magnitude of the correction in food and energy prices. In terms of credit rating, Panama remain above the investment-grade threshold with creating of BBB by Standard & Poor's, BAA2 by Moody's, which is BBB investment and BBB minus for Fitch. The latter which is a lower rating than its peers raise, its outlook from negative to stable at the beginning of 2022. Meanwhile, the most recent pronouncement came from Moody's, which maintained its negative outlook. Rating agency highlight Panama strong growth and the stabilization of its public debt at around 50% of GDP. Now I will hand over the presentation to our Head of Corporate Development, Financial Planning and Investor Relations, Mr. Javier Dorich, who will provide details on our financial results for the year.

Thank you, German, and good morning, everyone. Beginning on Slide 8, we present our consolidated asset structure. Consolidated assets totaled COP 137.9 trillion at the end of Q4 2022, presenting a yearly 17.9% increase or 2.8% quarterly. In terms of composition, the net loan portfolio continues to be our main asset, representing 69.1% of consolidated assets, followed by other assets with 12.5%. Investment portfolios in fixed income and equity represent 10.7% and 7.7% of total assets, respectively, increasing by 4.5% and 12.1% yearly. Equity investments mainly include our participation in Corficolombiana and Porvenir. The gross loan portfolio closed at COP [ 96.1 trillion ] in Q4 2022, increasing 4.2% in the quarter and 17.3% yearly. When excluding FX fluctuations, the gross loan portfolio grew 13.2% annually and 3.3% quarterly, versus 2021, a loan mix continues to reflect our strategy to rebalance composition towards higher retail segment participation as evidenced by the evolution of the consumer and mortgage portfolios. Mortgage loans represent 12%, growing 31.9% yearly or 23.1% when isolating FX depreciation, driven by a yearly increase of 32% in the Colombian portfolio and still reflecting positive market dynamics. In Panama, Multibank's mortgage portfolio increased 8.9% in dollar terms during the year and 31.6% in peso terms. Consumer loans increased 17.3% in the year and 13.1% excluding FX. This is the result of our strategy to rebalance composition, reflecting a greater use of credit cards, personal and auto loans. In Panama, growth in this segment was 1.8% in dollar terms in 2022. The commercial loan book represents 65.1% of total loans, growing 15.1% yearly and 11.7% when excluding FX. Colombia increased 13.2% annually and Panama increased 26.3% or 4.6%, excluding FX. Loan growth outperformed previous guidance for 2022 of 15%. For 2023, a moderation on loan growth is expected to be between 10% and 12%, due to lower GDP growth, higher average interest rates and a less dynamic economic outlook, both locally and globally. Moving on to Slide 9. We present loan quality ratios. On the top left, 30-day PDL ratio decreased 38 basis points yearly and remained stable on quarterly terms at 4.6%. The Colombian portfolio improved 47 basis points yearly to a level of 4.8%, while the Panamanian level deteriorated 12 basis points annually to a level of 3.9%. On the bottom left, one can observe commercial and consumer 30-day PDL ratios improving by 31 and 45 basis points yearly mainly due to the Colombian portfolio's performance throughout all categories on a yearly basis. On the top right, 90-day PDL ratios remained stable with a 36 basis point improvement yearly and a slight 9 basis points deterioration quarterly. The Colombian portfolio improved 58 basis points yearly and 12 basis points quarterly, while the Panamanian portfolio deteriorated 72 basis points yearly and 104 basis points quarterly due to deterioration in the commercial portfolio. On the bottom right, you will observe that PDLs, the consumer portfolio improved 101 basis points in annual terms while other portfolios, excluding micro credits remained stable. Both Panamanian and Colombian consumer portfolios experienced improvements close to 1 percentage point year-on-year. Micro credit remain a small component of our loan portfolio, comprising 0.3% of gross loans. The 30-day and 90-day PDL ratios continued improving throughout the year. On Slide 10, we present coverage ratios. On the top left, our coverage ratio for 30-day PDLs is at 1.18x, slightly lower than the previous quarter. Colombian portfolios reflect a higher coverage of 1.33x while Panamanian 30-day coverage ratios remained stable at 0.43x. Panamanian coverage is relatively low due to the high collateral value on credit exposures. On the top right, we observed the consolidated coverage ratio for 90-day PDLs remaining stable at 1.57x. On the bottom, one can observe a decline in allowances over gross loans to a level of 5.5%. The Colombian figure declined yearly by 71 basis points year-on-year to 6.4%, and the Panamanian figure declined 11 basis points for the same period. This is due to a lower need for coverage as delinquency diminished throughout the year. On Slide 11, we present our cost of risk and charge-off ratios. On the top left, cost of risk increased by 15 basis points quarterly and decreased 24 basis points yearly to 1.6%. Cost of risk diminished by 24 basis points in Colombia and 25 basis points in Panama to 1.6% and 1.1%, respectively. It is worth noting that our cost of risk is lower than our Q4 2021 guidance for 2022. For the consolidated portfolio, charge-offs over 90-day PDLs stand at 49%, a reduction of 16.5 percentage points year-on-year and 11 points quarter-on-quarter. Colombia's charge-offs over 90-day PDLs stand at 52%, decreasing by 15.5% year-on-year and increasing 1.4% quarterly. For Panama, the ratio stands at 25%, having decreased by 14.4% year-on-year. Charge-offs of average loans decreased by 91 basis points in the year and 37 basis points quarterly to 1.7%. Colombia's figures remain stable at 1.9%, and Panama's figure decreased 24 basis points yearly. These figures diminished overall due to a lower delinquency of loans in general. Continuing with consolidated funding on Slide 12, we present our liability structure. Total funding reached COP 118.4 trillion, increasing 16.4% and 3.4% in annual and quarterly terms, respectively. Excluding the FX, FX growth was 12.4% for 2022 and 2.5% in the quarter. Deposits continue to be our main source of funds, representing 74.4% of total funding, followed by banks and others with 15.2%, long-term bonds with 9.5% and interbank borrowings with 0.9%. Deposits totaled COP 88 trillion, growing 14.5% annually and quarterly by 5.3%. Excluding FX, deposits grew 11% yearly and 4.5% quarterly. In terms of deposit composition, time deposits continued to lead with 44.3% of the mix as interest rates have become more attractive. Saving accounts represented 36.7%, while checking accounts decreased their participation to 18.5%. Deposits to net loans ratio was 0.97x in Q4 2022, close to our target of being fully matched. Turning to Slide 13. Our equity and solvency levels are presented. Total equity for Q4 2022 was COP 15.8 trillion, decreasing 3.3% quarterly, mainly explained by the accounting of COP 983 billion loss due to BHI tender offer. Consequently, our tangible common equity decreased to COP 14.4 trillion, representing a 4% quarterly reduction as explained by the previously mentioned tender offer. Tangible capital ratio in Q4 was 10.5% and total equity represented 11.5% of total assets. In Q4, total solvency ratio was 13.1%, with a Tier 1 ratio of 10.1%, remaining at the same levels as the previous quarter. Our Tier 1 ratio remains 3.6 percentage points above the regulatory minimum, and total solvency remains 2.8% above the regulatory minimum. Continuing with our P&L metrics on Slide 14, we present NIM performance. Total net interest income was COP 1.25 trillion in Q4 and COP 4.66 trillion for 2022. Q4 2022 results had a 23.7% year-on-year increase or a 5.1% quarter-on-quarter increase. Yield on loans increased 116 basis points in the quarter and 418 basis points year-on-year to 11.5% for Q4 2022. Commercial loans experienced the highest increase, 535 basis points year-on-year and 134 basis points quarter-on-quarter as most of the commercial lending portfolio has variable rates. Yield on investments increased 341 basis points year-on-year and 138 basis points quarterly to a 6.4% level. For 2022, investment yield was 4.5%. These trends are mainly driven by higher interest on fixed income investments. Now regarding funding costs, they increased as well. Driven by the macroeconomic hawkish environment, reaching 6.6% for Q4 2022. This represents a 409 basis points year-on-year increase and a 144 basis point quarter-on-quarter increase. For 2022, funding cost was 4.6%, 234 basis points higher than in 2021. It is worth highlighting the nature of the bank's balance sheet as NIM has been stable in past periods due to correlated movements in loan yields and cost of funds. Net interest margin stood at 4.5% for Q4 and for the year 2022 and was favored by the trend in lending NIM throughout 2022. Moving to Slide 15, we present the fee structure and other income. Total fees stood at COP 1.7 trillion for 2022, a 16.5% increase versus 2021. For Q4, total fees amounted to COP 461 billion, a 16.9% year-on-year increase and a 5.7% quarterly increase. The highest increase comes from banking fees which in 2022 stood at COP 1.4 trillion, a 19.4% increase versus 2021. Q4 banking fees grew 19% yearly and 5.7% quarterly driven by a positive performance in credit card fees along 2022 with a 22.7% annual growth. Fee income ratio for Q4 2022 was 32% and 24.8% for the full year. This represents a 178 basis points annual increase. Other operating income increased COP 176 billion in 2022 to COP 1.1 trillion from the following: a COP 1.2 trillion gain on derivative instruments for trading, which was offset by a net loss on foreign exchange adjustments caused by the devaluation of the Colombian peso. Valuation of the trading portfolio was impacted by market volatilities and interest rate increases, which led to a net loss of COP 38 billion. Net other income increased by COP 477 billion, mainly resulting from the extraordinary income from BHI's spin-off and tender offer. The spin-off represented an extraordinary income of COP 1.3 trillion, while the tender offer represented a COP 983 billion loss. Finally, equity method in 2022 increased COP 132 billion from the positive performance from Corficolombiana and Porvenir. On Slide 16, we present our efficiency ratios. Operational expense totaled COP 933 billion for Q4, increasing to 12.6% quarterly. For 2022 operational expense was COP 3.3 trillion, increasing 11.8% from general administrative costs driven by inflation. Meanwhile, total income increased 9 -- cost-to-assets ratio slightly increased 24 basis points over the quarter and stands at 2.7%. For the year 2022, cost-to-assets ratio was 2.5%, below the historical average. For 2022, cost-to-income ratio was 48.5% when excluding extraordinary income and remains within past figures. We expect cost-to-income ratio to be around 48% in 2023 in line with our historical average. Finally, on Slide 17, we present our profitability ratios. Attributable net income for 2022 was COP 2.8 trillion. Q4 net income was negative due to the sale of 20.89% of BHI in December. As we disclosed in December 2022 Extraordinary Shareholders' Meeting BHI standard offer negatively impacted net income in COP 983 billion. Net income from continued operations was COP 391 billion for the quarter and COP 1.7 trillion for the year. For 2022, ROAA stood at 1.9% and ROAE at 15.9%. When excluding BHI spin-off in March and the tender offer in December, ROAA stands at 1.6% and ROAE at 13.9%. Q4 figures, excluding BHI tender offer stand at 1.2% ROAA and 10.5% ROAE. Lastly, I want to stress that continued operations, excluding BHI's figure shows steady consistent figures with a net attributable income annual growth of 23.7%. Before moving on to the Q&A session, I'd like to summarize our general guidance for 2023. Loan growth is expected to be between 10% and 12%. Net interest margin target is expected between 4.5% and 4.6%. Net cost of risk is expected to be between 1.5% and 1.6%. Fee income ratio should come in at 24%. Cost-to-income ratio around 48%. And regarding profitability, ROAA should be around 1.4% and ROAE should be between 12% and 13%. And now we are open to your questions.

[Operator Instructions] Okay. I have 2 questions. The first one is about the expenses. Do you have any guidance for this year?

International expenses, what I could say is that definitely, we are -- inflationary environment that we really is going to be control, is going to take some time, expectations are that this year it's going to end sometime around 8% to 9%. And hopefully, next year, it will be about 4% to 5%, between the simple bank range. So having said that, we are leaving this abnormal period of which we are doing every effort to make sure that we contain as much as possible to [indiscernible]. It means that the [indiscernible] going to be for the reinforce on one hand. And secondly, we are working heavily on finding different efficiencies that we have internally. And in addition to that, we are embarked on a very strict project -- agility, lean methodology is being implemented. So the combination of them are going to facilitate a lower increase based on inflation and hopefully, next year onwards that situation should not arise. It's just a marker of a cycle that we are basically riding on, but we feel comfortable that we'll come ahead.

Mayara Sa Riddlebaugh, Wells Fargo. Can you please provide an estimate of the impact of the recent credit card interest rate cut and your net interest revenues and overall profitability?

The expectation that we have based on the fact that this new campaign is going to be for new purchases of certain credit cards, is that it's not going to exceed 0.5% of effective to the bottom line for this year.

Natalia from Bancolombia. I have three questions. Can you confirm through which mechanism the 4.11% sale by the OPA will be made? Will it be done through the BBC? What do you expect from volume growth by segment? How do you expect deposits to behave this year in which interest rates continue to be high, but a slowdown in the portfolio is expected? The bank's strategy to achieve the proposed goals in a very challenging economy environment in 2023.

In connection with the first one, Natalia, I could tell you that given that the amount of the [indiscernible] going to be lower than 5%, there's no need to go through this of the change, and we do it directly. In connection with added 2 questions, Javier is going to provide the answer.

So regarding the second question, we expect consumer and mortgage to growth to be closer to 12%. And in the case of commercial portfolio, close to 10%. And the third and final question regarding deposits. We believe this year that, that growth can be close to 10%, especially in term deposits more than the saving accounts.

[indiscernible] from Goldman Sachs. Our securities portfolio is mark-to-market adjusted through OCI equity. What is the size of unrealized loss on held-to-maturity assets relative to tangible equity? What's the average duration of the held to maturity book and available for sale book?

The amount -- the realized losses that we have in our portfolio, which is in available-for-sale category is about COP 770 billion, which is about 5% of our total foreign equity. The duration of the portfolio is about 3 years in maturities from '25 or worse maybe '27. So we do believe that pass off time in the next year or so is going to be a much lower amount and -- but still nowadays, it doesn't really constitute a threat to our solvency ratio. As a matter of fact, the amount that you see in equity or already includes the devaluation of this portfolio.

Mario [indiscernible]. Can you please repeat the guidance?

Of course, Mario Jose. So loan growth is expected to be between 10% and 12%. Net interest margin is expected between 4.5% and 4.6%. Net cost of risk is expected to be between 1.5% and 1.6%. Fee income ratio up 24%. Cost-to-income ratio around 48%. ROAA around 1.4% and ROAE should be between 12% and 13%.

[indiscernible] from Bancolombia. I have two questions. The first one is about the expenses. Do you have any guidance for this year? And the other one. Could you give me some details about the loss generated by the spin-off of the 20.89% of BHI because you executed a spinoff of a 75% equity stake in BHI on March 2022, and it generated a positive income. So I would like to understand better.

In connection with expenses, as I was indicating, we are working heavily, of course, limiting the impact of this environment, inflationary environment. We do believe that it's going to be above few percentage points above last year inflation.

Yes. And regarding the second question, explaining the loss for the sale of 20.89% of BHI, there was an impairment, and that was already explained in the December shareholders' assembly. As Figueroa mentioned, the price was acceptable because market conditions have changed. So that's why we thought that it was a fair price, even an attractive price for us, and we accepted the offer. And yes, the answer about the spin-off in March, we had an extraordinary income of about COP 1.3 trillion, that when you combine it with the COP 983 billion loss in December, you get our combined P&L of COP 341 billion gain for the whole year.

[indiscernible] from AFP Integra. My question is, how are you going to manage the increase in delinquency ratio from the consumer segment?

Thank you for your question. I would like to begin by saying that we had a very good 2022 year in terms of the loan quality in all categories, I would say, in commercial loans and all. And then you go one by one of the consumer categories in general, and we see that the trend and the results are very positive. Altogether, we have a 90-day loans of 3.5%. And that continues to be and in some cases, will certainly improvement by the end of last year and even the improvement this one. However, in personal loans, we're beginning to see certain innovation small though, but that are bringing us to evaluate. There was a very thorough detail to make sure that we begin a -- have an earlier alert, that we begin quickly closing the wholesale segments in which we believe that we have to record asset tighter. And that's exactly what we're doing at this moment, in the previous weeks, we went through all the regular analysis. And we've been now particularly in the personal loan category. And perhaps we have to do it in credit cards, but it's going to be marginal at least at the moment. We are very attentive as to how the risk developments are presenting.

[Operator Instructions] Daniel Mora from CrediCorp Capital. What is the long-term target guidance of ROAE? And what would be the improvement when compared to the current guidance of 12% and 13%?

Thank you, Daniel. So our long-term target guidance of ROAE is between 14% and 15%. And when you ask, for example, what should we improve? We think, for example, there is room to improve in net interest margin when we get the mix that we are hoping to get in the next years. And there's always room for improvement also in efficiency ratios, and also in the fee income ratio where we see the utilization is a great tool to get there.

Okay. Julian Ausique from Davivienda Corredores.

I would like to understand a little bit the expectation about the cost of risk because we are already seeing during the fourth quarter of the year, an increase in the cost of risk for Colombia. But on the hand, we saw a real decreasing the cost of risk of Panama. And also, I would like to know if there is any -- if it's the bank have to release the information about the private agreement that we have to -- for selling the BHI participation that is remaining. If the market -- we will know the price of the transaction and the condition of the transaction.

Yes, of course, Julian. First, regarding your second question, there is a value of public information in our website about the transaction. There was shareholders' assembly at the beginning of the week. The price is not only the same as in the sale or the tender offer, that is COP 293. And it doesn't have to go through the stock exchange because the transaction is below 5% of the total equity. And regarding your first question, our expectation for cost of risk, as I mentioned, is between 1.5% and 1.6%. And the breakdown of that is a slightly higher number for Colombia, maybe 1.7%, 1.8%, but a lower than 1% figure for Panama. And a couple of years ago, especially in 2020, we constituted some provisions that we haven't used yet. So that's why we will be able to give that performance of our net cost of risk between 1.5% and 1.6% this year.

Okay. Daniel Mora from CrediCorp Capital. What is the long-term guidance of ROAE? And what would be the improvement when compared to the current guidance of 12% and 13%?

Yes, we already answered that. I think there's another question in the queue.

Okay. Can you please repeat what would be the impact of the benefit provided to credit cards or margins, fees and PLs cost of credit? Would you implement this benefit to other products or just credit cards? Daniel Mora from CrediCorp Capital.

The amount is going to be [ 0.5%, 0.1% ] of total expected income for [indiscernible] year. At this moment, it's going to be offered to holders of Banco de Bogotá card for certain means and new purchases, and that's what we [indiscernible].

We have no further questions at this time. Now I will return to Mr. Alejandro Figueroa for final remarks.

Thank you very much to all of you, ladies and gentlemen, for attending the meeting. And you're also invited to our next quarter conference call. Have a good time all of you.

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