Carlos Gomez

Carlos Gomez congratulated Credicorp on Yape and Bolivia, then asked if the "target-rich environment" for investment across the region (Bolivia, Chile, Peru) due to political changes and commodity prices would incline Credicorp to invest more and distribute less, and if there were any particular geographical preferences. He also asked for an update on Credicorp's sensitivity to interest rates in both USD and Soles.

Answer

CEO Gianfranco Ferrari affirmed a positive outlook for Bolivia, Chile, and Peru, driven by pro-market governments and high commodity prices (copper, lithium, gold). He emphasized that Credicorp's vision extends beyond political cycles, seeing a much more positive environment for the upcoming years compared to the last four or five. CFO Alejandro Perez-Reyes stated the theoretical sensitivity to a 100 basis points parallel rate decrease is 17 basis points, with 15 from USD and 2 from Soles, but noted that in practice, NIM has grown despite rate cuts.

Carlos Gomez inquired about the COP 266 billion reversal of reserves from model recalibration, specifically its geographical split and applicable tax rates, and Grupo Cibest's strategic stance on M&A (buyer or seller) given its new flexible structure.

Answer

Juan Carlos Mora (CEO) explained that model recalibration is a regular, annual process across all Cibest banks, reflecting improved credit risk. Mauricio Botero Wolff (CFO) provided approximate effective tax rates for various countries (e.g., Colombia ~30%, El Salvador ~22%) and clarified that ~COP 75 billion of the reversal came from Central America. He stated that the new flexible structure allows Grupo Cibest to continuously assess M&A opportunities as both a buyer and seller.

Carlos Gomez from HSBC asked for details on the COP 266 million reversal of reserves from model recalibration, including its geographical scope (Colombia vs. Panama) and the tax rates applied. He also questioned Grupo Bancolombia's stance on M&A opportunities given its new flexible corporate structure, asking if the company is a willing buyer or seller of assets.

Answer

CEO Juan Carlos Mora explained that model recalibration is a regular, annual process across all banks in Grupo Bancolombia, reflecting improved credit risk. He noted the tax effect of provision expenses is marginal. CFO Mauricio Botero Wolff provided approximate effective tax rates for different countries (Colombia ~30%, El Salvador ~22%, Guatemala ~10%, Banistmo ~16%), with an overall Grupo Bancolombia rate of ~28%. He confirmed that 75 million of the 266 million reversal came from Central American countries. Regarding M&A, the CEO stated the new structure provides flexibility to continuously assess opportunities and be both buyers and sellers to optimize capital and grow.

Carlos Gomez asked about the double-digit decline in the payroll portfolio and the bank's view on the agricultural portfolio. He also inquired about the government's intention to be tougher on the use of deferred tax assets (DTAs) and its potential impact on Santander and the broader banking industry.

Answer

CEO Mario Leão explained that the payroll loan portfolio's decline was due to macro factors and government-imposed interest rate caps on INSS (retirees) loans, making them less profitable. Origination in correspondent channels was significantly reduced, with focus shifting to more profitable bank-owned channels and private payroll loans where the bank expects growth as a selective niche player. He stated that the agricultural portfolio is not large for the bank. Regarding DTAs, he confirmed that starting next year, the entire system will begin amortizing legacy DTAs through the P&L, in addition to current marginal provisions. This will create pressure on the taxable income of all banks, likely affecting the effective tax paid, and the bank is proactively managing this anticipated flow.

Carlos Gomez asked about the declining payroll loan portfolio and the bank's view on the agricultural portfolio. He also inquired about the government's intention to be tougher on deferred tax assets (DTAs) and its potential impact on Santander and the broader banking industry.

Answer

CEO Mario Leão explained that the payroll loan portfolio's decline is due to disciplined capital allocation. Origination in INSS (retirees) decreased significantly due to government-imposed interest rate caps making net spreads unattractive, especially through correspondent channels. Private payroll loans are expected to grow selectively within a larger market pie. Regarding DTAs, Leão confirmed that starting next year, the entire system will begin amortizing legacy DTAs through the P&L over 10 years, in addition to current marginal provisions. This will create pressure on the taxable income for all banks, likely challenging the effective tax paid. He emphasized proactive management to absorb these DTAs efficiently.

Carlo Gomez from HSBC inquired about how Grupo Supervielle is managing the current volatility and high levels of interest rates in Argentina and how long this situation might last. He also sought clarification on the capital ratio, confirming the decline in Q2 was not related to the Basel III rule changes implemented in Q1.

Answer

CFO Mariano Viglia confirmed the operational risk capital requirement change was implemented in Q1, and the Q2 CET1 ratio decline was due to loan growth and dividend payments. Chairman and CEO Patricio Supervielle stated that the high real interest rates are harmful but transitory, expecting them to relax after the elections. Mr. Viglia added that the government is prioritizing exchange rate stability over interest rate stability ahead of elections.

The analyst asked about the timeline and terms of the Itau acquisition and sought confirmation on the bank's confidence in its full-year ROE guidance, considering political and economic uncertainties.

Answer

The CFO expects the Itau deal to receive regulatory approval before the end of 2023, but acknowledges potential delays due to elections. He reaffirmed the ~20% real ROE guidance for 2023, noting that Q3 performance is strong but Q4's outlook is uncertain due to the election, which is why the forecast is cautious.

Asked about the bank's strategic positioning for the end of the year regarding liquidity, risk appetite, and hedging against inflation and currency movements. Also questioned the sustainability of the strong Q2 results and the factors driving them.

Answer

The outlook is highly uncertain due to macroeconomic and political volatility, with year-end inflation projected between 175-200%. The bank is focused on protecting its balance sheet from inflation, maintaining good liquidity, and improving efficiency. The strong Q2 results were primarily driven by the increase in the monetary policy rate and the bank's significant exposure to public sector assets like CER and LELIQ.

Carlos Gomez from HSBC followed up on the MXN2 billion loss from debt reprofiling, asking if the bank would consider legal recourse. He also inquired about the expected income tax rate for 2020.

Answer

Pablo Firvida, Institutional Relations Manager, responded that taking legal action regarding the reprofiling was not discussed, as it was viewed as a very short-term payment postponement. He confirmed that the income tax rate for the following year (2020) is expected to be 25% on inflation-adjusted earnings.