Grupo Cibest S.A. (CIB) Q2 2026 Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to Grupo Sebest from Colombia second quarter 2026 earnings conference call. My name is Melissa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question and answer session. During the question and answer session, if you have a question, please press star, then 1 on your touch-tone phone. Please note that this conference call is being recorded. Please note that this conference call will include forward-looking statements, including statements related to our future performance, capital position, credit-related expenses, and credit losses. All forward-looking statements, whether made in this conference call and future filings, in press releases, or verbally, address matters that involve risk and uncertainty. Consequently, there are factors that could cause actual results to differ materially from those indicated in such statements, including changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by our targeted clients, changes in business strategy, and various other factors that we described in our reports filed with the SEC. With us today is Mr. Juan Carlos Mora, Chief Executive Officer, Mr. Mauricio Botero-Wolf, Chief Strategy and Financial Officer, Mr. Rodrigo Prieto, Chief Risk Officer, and Ms. Laura Clavijo, Chief Economist. I will now turn the call over to Mr. Juan Carlos Mora, Chief Executive Officer. Sir, please go ahead.

Good morning, and welcome to Grupo Civis' second quarter conference call. Please turn to slide two. Lower political uncertainty following Colombia's electoral process has helped reduce sovereign risk premiums. However, fiscal sustainability remains a key challenge and will require a credible adjustment The economy continues to expand at a moderate pace, and we estimate GDP will grow 2.7% in the second quarter, supported by resilient private consumption and sustained public spending. Despite a challenging environment, we deliver strong results. Merck income reached 2.7 trillion pesos, supported by a NIME close to 8 percent, solid asset quality that kept cost of risk at 1.6 percent, and continued efficiency gains. Together, these factors drop a historic quarterly ROE of 28.7%. Moreover, we are pleased to see how these results reflect the success of our strategy and the consistency of our execution. First, these results highlight the strength of our competitive advantage, which is built on a value proposition rooted in transactional activity, a sustainable source of low-cost funding, and a valuable data that enhances credit risk management. Second, they demonstrate the flexibility of our commercial and financial model, which enable us to dynamically allocate resources between the loan and investment portfolios and maximize revenue generation across economic and risk cycles. Third, they prove our commitment to operational efficiency. Ultimately, these results reflect our ability to create value throughout the successful Banismo divestment, PAM's tournament round, NECI's growing contribution, the strategic use of capital instruments to strengthen our capital structure, and the extraordinary dividend proposal recently announced for shareholder approval in August. Last week, Grupo Civis completed the acquisition of 100% of Avista Colombia, strengthening our capabilities in payroll lending and expanding access to more inclusive, tailored financing solutions for Colombians. Avista Colombia strengthens our position in a low-risk lending segment with strong growth and cross-selling potential. complementing our existing offering and expanding our ability to serve this market. By combining Avista's proven technology and business model with Banco Colombia's funding advantages, we see a clear path to improve profitability and potentially scale the platform across Central America. I will now hand the call over to Laura Clavijo, our Chief Economist, for an overview of the macroeconomic landscape. Laura?

Thank you, Juan Carlos. If you could please proceed to slide four. The Colombian economy likely expanded at a pace of around 2.7% during the first half of the year, showing early signs of a moderation in growth dynamics. Public spending and private consumption continue to support overall growth activity. However, elevated interest rates, persistent inflationary pressures, and weak private investment remain significant headwinds. Reflecting on this backdrop, we have revised downward our GDP growth forecast for 2026 from 2.9% to 2.6%. Inflation remains one of Colombia's most pressing macroeconomic challenges. At the end of the second quarter, inflation surpassed 6.1%, placing it among the highest in Latin America. Underlying price pressures remain persistent, particularly in the services sector, while the risk of a severe El Nino event poses additional upside pressures on energy and food prices, as well as on inflation expectations. As a result, the central bank raised its policy rate by 75 basis points to 12% at its June meeting. According to the bank's staff projections, inflation is expected to reach 6.9% by year end and remain above target through 2028, suggesting that further monetary tightening may be required. Accordingly, we continue to expect the policy rate to reach 12.75% by the end of 2026. Alternatively, should the board fail to secure a majority in favor of additional rate hikes, a higher for longer interest rate environment is likely to prevail throughout 2027. From an external perspective, Colombia continues to benefit from several important strengths. Favorable commodity prices, resilient exports, and record remittance inflows are supporting both external accounts and domestic demands. Meanwhile, the Colombian peso has appreciated significantly, gaining more than 15% year-to-date, driven by carry trade flows and strong market optimism. While this appreciation reflects improved investor sentiment, it may also weigh on export competitiveness. In addition, global trade tensions, geopolitical uncertainty, and tighter financial conditions remain key risks that could affect capital flows, financing costs, and broader market sentiment. Consequently, the external environment is likely to remain a source of volatility over the coming quarters. Fiscal dynamics also remain a key source of vulnerability. We expect the central government deficit to widen to 6.5% of GDP in 2026, a strong expenditure execution, structural rigidities in public finances, and rising financing needs continue to constrain the pace of fiscal adjustments. While authorities are expected to pursue gradual consolidation over the medium term, elevated deficits and rising public debt levels underscore the importance of advancing structural reforms that strengthen fiscal sustainability and reinforce investor confidence. Looking beyond 2026, Colombia's economic outlook under Abelardo de las Trelas' administration is likely to be characterized by a combination of opportunities and structural challenges. The start of a new political cycle could help reduce uncertainty and support a gradual recovery in investment, driven by improved business confidence, infrastructure development, housing activity, and opportunities in natural resources and financial services. However, the strength and durability of the recovery will ultimately depend on the successful reduction of inflationary pressures, the normalization of interest rates, and the restoration of fiscal credibility. If you could please proceed to slide five. Central America's outlook remains broadly resilient despite more challenging external environments. In El Salvador, growth is expected to moderate to 2.9% in 2026. But economic activity should remain supported by infrastructure investment and construction, partially offsetting weaker remittance inflows and rising inflation pressure. Guatemala continues to benefit from infrastructure projects and institutional reforms that encourage private investments, supporting solid economic performance, despite softer remittance growth and higher inflation. Meanwhile, Panama is expected to grow at a pace of just under 4%, supported by canal-related activity, logistics, tourism, and construction, even as global disruptions and linear-related risks and rising unemployment present ongoing challenges. Now, please let me turn the presentation to Mauricio, who will present CBEST's quarterly performance.

Thank you, Laura. Please proceed to Slide 7. Our gross loan portfolio was almost flat over the quarter as expected due to the uncertainty created by the electoral process. However, on an annual basis, this represents a 5.7% growth or 9.6% net of effects, which is in line with our annual projections. Commercial Consumer loans were stable over the quarter and grew slightly over the year. The mortgage portfolio kept on growing at 1.8% during the quarter and posted a 12% growth over the year. Meanwhile, consumer loans expanded by 0.5% during the quarter and 7.4% over the year, supported by a strong growth in vehicle lending, NECI, and credit cards.

Please proceed to slide eight.

Banco Colombia and Banco Agricola led credit origination, the latter reflecting the success of our strategy to deepen penetration among retail clients, which continues to generate strong and consistent growth. Our U.S. dollar loan portfolio in offshore operations continues to expand at a robust pace. These operations serve as strategic cross-border lending platforms for the group, allowing us to leverage our regional presence and efficiently provide foreign currency funding to clients across different geographies. As of June, BAM's cross-border loan portfolio reached $580 million, which represents a 56% growth over the year, while Banco Agricola's cross-border portfolio totaled $751 million, growing 42%. These figures are included exclusively for business performance purposes and are not part of their accounting balances. Please proceed to slide 9. Over the quarter, deposits declined 0.2%, which represents a 1.2% growth net of ethics. Year over year, deposits increased 7%, which represents a 12% growth net of ethics, outpacing loan growth and reflecting our ample liquidity position. Savings accounts largely explain deposit growth both over the quarter and over the year. Please proceed to slide 10. Our funding mix continues to demonstrate resilience amid the higher interest rate environment in Colombia because of deposits increased from 4 percent to 4.4 percent, mainly reflecting higher remuneration on savings accounts, which accounted for most of the funding growth during the quarter, while remaining significantly less expensive than time deposits. Despite two policy rate hikes, totaling 200 basis points during the first half of the year, Ban Colombia's stand-alone cost of deposits increased by only 64 basis points over the past two quarters. This funding strategy reflects our share of site deposits, which has lower sensitivity to the reference rate and represents 57% of our consolidated funding base, reaffirming our ability to attract and retain stable, cost-efficient funding. Please proceed to slide 11. Net interest income increased 16.5% during the quarter, supported by a strong performance from both lending and investment portfolios. Lending meme expanded from 7.8% to 8.3%, mainly reflecting higher asset yields in Colombia. Our asset-sensitive balance sheet continues to benefit as loan yields reprised in line with the central bank's progressive repo rate increases. Investment NIMS delivered a very positive performance, rising from 1.8% to 6%. Our strong liquidity position, supported by robust funding and still moderate loan growth, enabled us to capitalize in Colombia's fixed income markets. During the quarter, greater activity from international investors pursuing carry trade strategies supported transaction volumes and related intermediation revenues, contributing to the performance of our investment portfolio. Increased volatility, partly associated with the evolving electoral backdrop, created favorable trading and positioning opportunities in test-related instruments. Therefore, NIME expanded by 91 basis points in the quarter from 7% to 7.9%. Banco Agricola and BAM also reported NIME expansion, supported by higher loan portfolio yields and market-to-market gains on their investment portfolios, particularly in securities issued by their respective governments. Please proceed to slide 12. Net fee income continued to deliver solid growth, increasing 9.8% over the quarter and 17.7% over the year. This growth was supported by the result of bank assurance, particularly through our partnership with Sura. On a year-over-year basis, growth was supported by credit and debit card and payments, reflecting broader card penetration and higher transaction values. Banking services also contributed positively, primarily through digital banking fees. Fee expenses, on the other hand, decreased during the quarter and during the year, improving from ongoing efficiency initiatives. The fee income ratio stood at 18.3%, mainly reflecting a higher contribution from the net interest income due to the name expansion that I just explained. Please proceed to slide 13. Now, I would like to highlight the continued progress of our digital ecosystem, where scale, connectivity, and innovation are increasingly reinforcing each other. WMP continues to expand its role in the payments ecosystem, reaching new merchants and broadening its value proposition through solutions such as Neki Negocios and in-person payments, supporting the platform's profitability and long-term growth potential. At the same time, Wenya is gaining momentum, driven by rapid growth in issuers and transaction volumes. The successful rollout of Wenya Connect and the launch of USDW are strengthening our capabilities in digital assets, cross-border transactions, and future tokenization opportunities. Moreover, through its integration with 1PN Wenya, Neki is helping extend the reach of the ecosystem across consumers, merchants, and digital financial services. Together, these businesses are creating a more connected ecosystem that accelerates innovation, expands customer relationships, and unlocks new opportunities for sustainable growth fully aligned with Grupo CIVES' long-term strategy. Please proceed to slide 14. As previously announced, following the authorization granted by the Financial Superintendency of Colombia, NECI is expected to begin operating as an independent financial entity within Grupo CIVES on September 1, 2026. This milestone marks the completion of the transfer of the assets, liabilities, and contracts associated with the products and services currently offered under the Neki brand. Importantly, both Neki and Bancolombia will continue to operate under Grupo CIVES and the customer experience will remain unchanged. There will be no changes on how they access or use Neki's products and services and experience within the app as well as customer service channels. NECI continued to strengthen its ecosystem monetization during the second quarter, supported by sustained growth in users, transactionality, deposits, and lending. The monetized user base increased to $18 million, while the activity ratio reached 81.6%. Together, these metrics demonstrate deeper customer engagement, broader adoption, and value-added products and services. and NECI's growing ability to convert its expensive user base into sustainable revenue opportunities. Deposits closed at 7.6 trillion pesos, increasing 12% in the last quarter, recovering from the seasonal decline observed at the beginning of the year. This performance reinforces NECI's position as the leading digital savings and transactional platform while strengthening its funding base to support growth. Neki's loan portfolio reached $2.2 trillion, growing 14% quarter over quarter, driven by low-ticket loans originated through its scalable digital model. Asset quality remained in line with expectations supported by discipline, underwriting, and collection capabilities. Cost of risk reflects NECI's strategy to expand credit access in underserved segments while maintaining a sound risk management framework. Please proceed to slide 15. Total income reached P492 billion, increasing 16% quarter over quarter, while financial Income grew 19%, supported by loan portfolio expansion and higher investment income. Net fee income increased 10% on a stronger transactionality and broader adoption of value-added services. Please proceed to slide 16. Net provision expense amounted to $1 trillion in the second quarter, representing a 17% quarterly decline, reflecting the overall good performance of the loan portfolio across our geographies. The reduction was mainly driven by recoveries from specific clients. As a result, the quarterly annualized cost of risk declined to 1.6%. These positive effects more than offset higher provisioning in consumer loans, as well as in the SME and commercial segments, where deterioration remained concentrated among specific clients rather than reflecting a broader decline in credit quality. When broken down by entity, Bancolombia led the quarterly reduction supported by a stable economic environment and significant recoveries from specific clients. BAM reported broadly stable provision expenses as newer loan vintages continue to improve the portfolio mix. By contrast, Banco Agricola recorded higher provisioning consistent with the loan growth in segments with greater risk appetite and higher risk-adjusted returns. Please proceed to slide 17. In line with the healthy performance observed in recent quarters, overall asset quality remained well-contained. From a new pass-view loan formation standpoint, the volume of loans becoming delinquent declined during the quarter. Despite some pressure in consumer loans, mainly credit cards and personal loans, as well as some deterioration in mortgages, the overall 30-day and 90-day NPL ratios remained broadly stable, while commercial loans ratios improved slightly. Consistent with this performance, the stage distribution remained relatively stable during the quarter. Stage 2 loans increased modestly, mainly reflecting commercial clients in specific economic sectors under closer monitoring due to foreign exchange exposure and potential effects from El Nino. Meanwhile, SH3 loans declined slightly, explained by the release of clients that were previously classified as in default. Please proceed to slide 18. Operating expenses declined 10% over the quarter, mainly reflecting the $374 billion wealth tax recognized in the previous quarter under Colombia's second economic emergency decree. On a year-over-year basis, operating expenses increased by only 1.9 percent, supported in part by the appreciation of the Colombian peso, well-contained labor expenses, the absence of non-recurring costs associated with the expansion of Grupo CIVES, continued cloud migration efficiencies, and lower contact center operating costs. In Colombia, our efficiency agenda remains focused on leveraging artificial intelligence in collections and contact center channels, automating operational workflows, among others. By entity, BAM continues to show the most significant improvement supported by its profitability and cost optimization strategy with its efficiency ratio declining from 44.5% to 42.2% in the quarter. Banco Agricola also improved from 47.9% to 47%. Overall, the consolidated cost to income ratio reached 43% in the quarter. Please turn to slide 19. Grupo CIVES shareholders' equity grew 4.8% over the quarter, mainly driven by net income generation. On the other hand, Banco Colombia's standalone common equity tier one ratio stood at 12.1% and total solvency ratio reached 13.9% as of June, an optimal level to support growth while enhancing profitability. At this point, I would like to highlight the broad set of initiatives we're now deploying to manage capital more efficiently across the group, taking advantage of our new corporate structure under the holding company. First, we continue executing the share buyback program approved in April, which remains effective for three years. We have already repurchased more than 17 million shares, amounting to $967 billion during the last 12 months. Second, we are pursuing corporate development and intragroup capital transactions, such as capital contributions to NECI, AT1 Instruments, and subordinated debt design to optimize capital allocation and enhance return for the holding company. Third, we have designed a disciplined capital and liquidity management framework that allows Grupo CIVES to optimize capital distributions to shareholders while preserving healthy double leverage ratios to support future growth. Notably, we will propose a $1.2 trillion extraordinary dividend with the proceeds from the Banismo sale through, in addition to our annual dividend distributions, demonstrating our continued focus on capital efficiency and long-term value creation for shareholders. Please turn to slide 20. Net income reached P2.7 trillion during the quarter, increasing 87 percent quarter over quarter. As a result, annualized ROE stood at 29%, with BanColombia posting a standalone ROE of 36%. Our Central American operations continue to generate strong returns in 2026, supported by the strategic advantages of Grupo Civis' cross-border platform. Access to efficient funding through our international banking operations supports profitable loan growth and enhances reported profitability with both entities, delivering ROEs of 20% in the second quarter. We are particularly encouraged by BAM's sustained momentum and improved performance during the year, supported by improved asset quality and origination standards, higher margins, and a record low cost-to-income ratio of 43%, reinforcing its contribution to Grupo CIVEST's overall profitability and efficiency. With this, I will now hand the presentation back to Juan Carlos. Juan.

Thank you, Mauricio. Please turn to slide 21. Grupo CIVEST continues advancing its business with purpose strategy. with cumulative disbursements reaching 364 trillion pesos since 2020, equivalent to 58% of the groups adjusted 2030 target of 629 trillion. PAM's 100th anniversary was another important milestone, celebrating a century of contribution to Guatemala's economic development and underscoring its institutional legacy, strong governance, and long-term value creation with Grupo C-List. On the social front, Ban Colombia was recognized by Mercotalento 2026 as Colombia's best company to work for and the top employer in the financial sector. Its talent and culture team was also ranked first in the country for the third consecutive year, reflecting our commitment to professional development, employee well-being, diversity, and inclusion. Please turn to slide 23. Reflecting the group's strong results, we have updated selected 2026 guidance metrics. Long growth guidance remains unchanged at 7% to 8%, while NIME guidance has been raised to 7.4% to 7.6%, supported by strong margin performance. We maintain our cost of risk guidance at 1.6% to 1.8% as credit quality continues to perform in line with expectations. For efficiency, we now expect the ratio to be around 48 percent, reflecting positive operating leverage as revenue growth continues to help base expenses. As a result, we are raising our ROE guidance to 21 to 22 percent. Please now turn to slide 24. In closing, one year after our transformation into Grupo Civist, our results reflect the strength of our strategy and business model. Over the past year, our ADR price increased by more than 90%, demonstrating the market's recognition of the value we have created, while ROE reached 21.5% in the first half of 2026. We remain fully committed to unlocking additional value for our shareholders. The proposed extraordinary dividend is another step in that direction, enhancing shareholder return while preserving disciplined capital management. Looking ahead, a more favorable macroeconomic outlook and improved security conditions could support a recovery in investment and create better conditions for economic growth. This concludes today's presentation.

We will now be happy to take your questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star then 1 on your touchtone phone. If you wish to be removed from the queue, please press star 2. If you are using a speakerphone, you may need to pick up the handset first before pressing the star key. Once again, if you have a question, please press star, then one on your touchtone phone. Our first question comes from the line of Yuri Fernandez with J.P. Morgan. Please proceed with your question.

Hi, Mauricio, Juan Carlos, everyone, and congrats for another good quarter. All the trajectory of the bank, you know, very impressive 29 ROEs. We know there were some kind of one-time items, but even excluding a pretty strong quarter. So congrats. I have a question regarding your guidance for the year. And I would like to understand a little bit how you see the second half of the year versus the first half. First half was very strong this quarter. You had the wealth tax that was a negative year as well. Historically, maybe second half is seasonally better than the first half. So just asking, do you think like the second half can be as strong as the first half or stronger? Like what is your overall view here and how this compares to your guidance? Because like in our exercise, if you were to assume the 22 ROE that you had as the top of the guidance, this implies a slowdown in the second half. But I don't know if this is the case. And then I have a second question regarding asset quality. If you can comment on the sad earthquake, if you see any impact for asset quality. And also the stronger currency. How do you see this hurting exporters in Colombia? And how this compares to your guidance of cost of risk? Thank you.

Thank you, Yuri, and thank you for your words. Regarding the second half of the year, as you said, usually the second half of the year is better than the first half. There are more demand. The company is prepared for the end of the year season. So usually it's a better period. And we expect that year to be the case. We need to take into account that there are factors that could have some impact on the second half results. But overall, we expect a strong quarter in line with what is happening in the first half. meaning that we even expect a higher credit demand. The big question is how the risk, the credit risk is going to behave and what is going to be, and that's related to your second question. There are some factors, including El Nino, that in Colombia creates an effect on no rain, and that could have an effect on inflation. And the other is the yesterday's earthquake that also has some impact. So we think it's going to be a strong quarter that our guidance, we maintain even with those effects our guidance for the full year, an ROE on 22%, and a NIM that is going to be positive. So, overall, we think that that guidance could have a little up at risk, but in general, it will be in line with the first semester. I don't know, Mauricio, if you want to complement something.

Hi, Judy. If you look at the first half ROE, we are in 21.5%, which is right in the middle of the range of the guidance for the whole year. So yes, there could be some downside risks around asset quality, but there are also some upside risks. So just to project the guidance between 21% and 22% should be in line with the projections.

And just to complement, regarding the strong peso, that also could have some effect on some exporters that could also affect the cost of risk. So those are the elements that we are taking into account to support our guidance for the full year, Yuri.

No, super clear, Juan Carlos. So basically, better margins, maybe better volumes, but the main risk is the asset quality cost of risk. And when we put all those things together, you're comfortable with 21, 22 ROI guidance. Super clear. Thank you very much, everyone.

Thank you, Yuri.

Thank you. Our next question comes from the line of Ernesto Gabilando with Bank of America. Please proceed with your question.

Thank you. Hi, good morning, Juan Carlos, Mauricio, and Catalina. Congrats on your results, and thanks for the opportunity to ask questions. My first question is also in terms of the needs trends. So we're seeing we can have interest rates higher for longer, and maybe that this could last for the first half of next year. So do you see potentially looking to some alternatives to reduce the sensitivity to interest rates? I don't know if you will be evaluating derivatives or changing the loan mix. And I believe today for every 100 basis points increase in the average repo rate, It improves NIMS by around 20 basis points. So how much could this sensitivity be reduced over the next months? So that's my first question. Then my second question is on your sustainable ROE. As you pointed out, ROE could be between 21%, 22%, and likely that to translate into 2027. But what should we think about the sustainable ROE when you have an normalization in interest And my last question is on NECI. We noted asset quality deterioration in terms of MPLs and cost of risk on a sequential basis. We have the MPL at 3.7, cost of risk at 14.6%. So, what would be the maximum levels that boat ratios should be reaching, and what level of boat ratios would you be more conservative in your long-growth appetite? Thank you.

Thank you, Ernesto. Let me start for your second question. I will also take your third about NECI, and I am going to ask Mauricio to give you some comments about the NIM. And I am going also to take the opportunity of your question to ask Laura, our chief economist, to give her view on interest rates and on inflation that I think it is important to give you background to your question. So regarding sustainable ROE, we think that in the level of 2021-2022, we can think on a sustainable ROE on those levels. We know that interest rates are going to go down probably by the second half of next year, and Laura will elaborate on that in a moment. But even with that, we think with the long volume that we are building and the development of our strategy, we are able to deliver an ROE above 20%. So we firmly believe that we can deliver an ROE above 20% on the long term. Regarding NECI, as you know, NECI is building its loan book with very healthy growth. NECI targets a segment that is not bankrupt. We are in the process of learning how that segment behaves. But with that, we are very confident that in the level that we are, Neki loan book is profitable. We don't expect additional deterioration. You probably will see some changes, but at those levels, we feel comfortable. We are closely following all the vintages in Neki and how the loan book is behaving. And we now have enough information to be confident that at those levels it's profitable and we can maintain those levels without additional deterioration. So Mauricio, about the NIM, and then Laura about the interest rates and the inflation. Mauricio Hernando- Hi, Ernesto.

In fact, as you mentioned, the lending NIM is going to have a positive impact because of the repricing of the assets. We're seeing that, and we believe that that's going to continue, as Juan Carlos mentioned, because of the repo rate until at least the first half of next year. So we're going to have a benefit from that in 2026, the whole year. And we believe in 2027 is going to be even better because at the beginning of the year, the interest rates will be at around 12 to 12.75. So thinking about derivatives, yes, but not yet. We were doing it. we were implementing some hedge accounting measures when interest rates were coming down. Now that they are going up, we don't see a need to implement derivatives, but that's a tool that we have ready to use once we believe we're reaching the inflection point. And the other thing to take into account in terms of sensitivity is that we were mentioning that for every 100 basis points in interest rates, we had a 20 basis points NIME effect. That has moved from 20 to 25, basically because of the divestment of Banismo, because now Grupo Sivest depends more on Banco Colombia's results, which is the entity that is more asset sensitives. With that, I'll give it to Laura.

Thank you. So inflation continues to be one of the main challenges moving forward. And even though yesterday, July print showed a little bit receding headline inflation, we still believe pressures in inflation will come. The phenomenon del niño is said to be quite aggressive and could impact prices of food, which was one of the segments that helped the July inflation reading. So in this sense, we believe that the central bank still has space to continue a restrictive monetary policy to the 12.75% level, but in case the board does not manage to find common grounds on further hikes, especially perhaps giving some leeway to the new government and the fiscal adjustment that is set to be in place. We believe that at the 12% level, 2027 will be a year of higher for longer rates, as was mentioned. And in that case, in line with what my colleagues have mentioned, should maintain more in duration kind of those high levels in the length of time and not so much reaching that peak of the 12.75%. Inflation is still an ongoing challenge, despite yesterday's more receded reading.

Excellent. Now, thank you very much. Super helpful.

Thank you, Ernesto.

Thank you. Our next question comes from the line of Brian Flores with Citibank. Please proceed with your question.

Hi, Tim. Good morning. Thank you for the opportunity. Congrats on the results. Two questions here. One, now that we have your whole thing there, I just wanted to get your views on the Incoming administration, I know the sector as a whole was very targeted in terms of taxes. And I just wanted to cross-check with you what are your impressions, your initial discussions regarding what could happen, not only as they present the reform in some days now, but going forward, right? I think it could be very determinant for the sector. And then a second question on capital allocation. And naturally, with these levels of ROE, maybe you get more optionalities. I just wanted to check with you what your priorities are. If it's a bit more dividends, organic growth, buybacks, just wanted to check with you. Thank you, Ryan.

The administration that started a few days ago creates a positive environment in general. And let me explain why. The Minister of Finance has given a message that they are going to work on the fiscal deficit as a main priority, and I think that's important because one of the main issues in the Colombian economy is that, specifically the fiscal deficit. So the message in which they are going to work not just on taxes, but on the expenses of the government, and particularly they have talked about being more efficient on tax collection and create a more business-friendly environment. those are very, very important messages. So it is not an easy task, but I think the new government, particularly the Minister of Finance and the team that he has designated to help him in that task, are very capable with experience. So that creates a positive view of what is coming. There are challenges around what Laura mentioned, inflation, how interest rates are going to behave. But in general, I think it's a positive view that the measures that they take in order to have a more flexible fiscal situation will help. That will take probably a year, but that is also important. Another aspect that is positive is we believe that private investment, local and international investments, are going to come to Colombia, and that will also create a positive economic activity in the future. So, in general, it's positive, but being clear that it's challenging what is coming, particularly in the first year of the government. Regarding capital allocation, I'm going to pass that question to Mauricio.

Hi, Brian. In terms of capital allocation, we're definitely going to use all the tools we have at pace that make sense. Let me explain how. Extraordinary dividends respond to a specific moment or specific matters. Last year, it was because of the creation of CIVES. This year is because the divestment of Banismo. So every time we have a significant corporate event, we would be able to consider that. Ordinary dividends, our plan is to grow in real terms. So a couple of points above inflation, that's our plan. Buy-back program, it's only going to be executed according to market conditions, so we're not forced to execute the whole amount approved by the shareholders' assembly, but only if it makes sense. Corporate development initiatives are very much linked to a strategy. So capabilities that would make sense in terms of our strategy is something that we are always going to consider as long as they also make sense in terms of profitability. And we are investing a lot in internal initiatives. So if you look at all the tools we have, plus the facts and the instruments we have executed internally in Grupo Civics, we have deployed more than 5 trillion Colombian pesos in capital in the past 12 to 15 months.

No, thank you, Tim. Super clear. Just if I may, would it be, in your view, fair to say that maybe the, I would say, the risk of higher taxes or specific taxes targeting the financial system, could we say that now are a bit lower than maybe, I don't know, three, six months ago? Is that fair?

It's difficult to tell, Brian. We think that the general message of this incoming government is not additional taxes. I think yesterday earthquake creates a situation in which could generate additional taxes to attend the emergency. But in general, and letting aside that situation, I think your comment is fair that it's lower. But in this matter, it's better wait and see.

Super helpful. Thank you, and congrats. Thank you, Brian.

Thank you. Our next question comes from the line of Carlos Gomez with HSBC. Please proceed with your question.

Hello, and good morning. and we always say congratulations for the results but this really was quite so again congratulations on the results and the long-term strategy and how you have restructured the group and where Banco-Lombia is today relative to where it was 12 years ago. So looking forward, first we have talked about the incoming government. We know that one important issue that happened in the last four years was the change in the usury rate, the interest rate cap what do you think the chances are that that could be re-reviewed by the new government. We understand that it's early days, but do you have any insight on whether this is something that is at all in their horizon or not? And second, regarding the geographical structure of the group, you are down to three countries. Colombia is now 80% of the total. Where do you see the group five years from now? Do you see it operating in more geographies, perhaps with other countries that could be of interest, or do you see it operating in the same or perhaps fewer, but diversifying into things like fintechs or other products.

Thank you, Carlos. Regarding the interest rate cap, which has been in Colombia for very long, I mean, more than 30, 40 years, it is a continuous conversation on the impact of the cap rate. We are convinced that that measure what generates is exclusion of credit alternatives of many people. And we, and with the banking association, we promote the conversation around what we need to do as a country to include more people on formal credit. With that, I mean, it's a discussion that is not easy. What happened during the last four years is that the cap rate went down on, I think, more on artificial calculations in the sense that we're not in line with other rates in the economy. With this, I think it's an active conversation. I think it's possible. We are, as a banking association, promoting alternatives that create more credit opportunities, which is what we are looking for. So it will be, I think, a matter that will be on the table, but it will take some time to evolve, I think. But it's a continuous and active conversation, and we will continue promoting that more credit access. Regarding your second question, in five years, we think that there are opportunities in Latin America, not the traditional opportunities of buying and establish an institution, but through the creation of entities and capabilities that allow us to serve markets in other geographies in Latin America. So we are actively looking for opportunities and we will analyze and that will take time. We are not going to jump in the market if we are not sure that we can deploy our knowledge and capabilities and that will contribute to Grupo Civis. But definitely it's very difficult to think on an expansion on a traditional way of the path of buying established institutions. We'll be more deploying the capabilities that we are creating with Neki, with Wenya, with Wompy, with our more advanced financial services entities, Carlos.

Very clear. Congratulations again. Thank you.

Thank you, Carlos.

Thank you. Our next question comes from the line of Juliana O'Hara with Goldman Sachs. Please proceed with your question.

Congratulations on the results again, and thanks for taking my question. Could you describe more about your recent acquisition of El Vista? I know it's focused on payroll lending, but I want to understand more of the strategic rationale behind the acquisition and how you see this scaling and contributing to the to see best over time and if i can a second one could you also share a bit more uh what drove equity income and fees i know they were super strong but i wanted to understand more as well if they should be sustainable through the rest of the year thank you thank you juliana uh vista it's It's an acquisition that complements our offering on payroll lending.

It's a line in which we want to grow and what we are bringing to Group of Civis is an expertise, a technology, a team that will help us on that goal. So we are confident that this acquisition, as I mentioned, complement our offering and will allow us to grow on a segment that has a lower cost of risk and important opportunities.

Regarding your second question, let me give you, Juliana, some color on the name from investments. There is an open window as of today, a carry trade for international investors to participate in the local market. So that has been growing, and we have been able to use our funding, our low-cost funding, liquidity that we have because the loan book has not been as dynamic as we were expecting because of elections and all of that. So we have been able to serve those international investors by selling derivatives on the Colombian sovereign debt, but we're also buying the bonds. So, we're not increasing our interest rate exposure, and we are serving them in short-term investments. Those are 30-day investments that most of them have rollover situations, and we're able to capture a carry trade along with international investors. So that's why you see the investment portfolio expanding and the NIM from investments expanding. That window should be reduced over time, but it is open as of today, and we're taking advantage of that.

And regarding fees, fees are also behaving very well, particularly bank assurance. It's evolving very well, and that's because of an agreement that we have with Sura Seguros. So, I think those fees are sustainable and will continue to be on strong performance, Julián.

Our next question comes from the line of Andres Soto with Santander. Please proceed with your question.

Good morning, everybody, and thank you again for very strong results. I have a few questions. The first is related to macro in the context of the change of government. When I see your GDP estimates for 2027, you are expecting 2.6% in line with the performance of 2026. But I would imagine very different drivers as Colombia's economy has been supported by consumption, which probably is going to suffer if the government decides to stop spending while investment could recover. So can you help us understand how fast this transition can occur and what are your expectations for investment recovery versus consumption slowdown given the new government policies? Still on macro, but more related to short-term events, do you have any expectations of what could be the implications of the earthquake in Colombia in terms of the short-term macro performance, and specifically regarding your portfolio, what is the exposure of CBEST to the areas exposed to this calamity? And finally, on capital, can you please remind us after your capital optimization and deployment initiatives for this year, where do you see your double leverage ratio, and what would be the level that you consider is still possible for you to achieve thank you thank you for your question uh we did revise downward for 2.9 expected gdp to the 2.6 you have mentioned for 2026 this is uh according to our calculations also gdp potential for colombia and we are currently

somewhere around that also for 2027. nonetheless as you have mentioned uh there are many policy pushes that could come in terms of investment, in terms of the dynamics for key sectors such as infrastructure, construction, housing, as well as the energy sector. Those will be obviously very contingent on the policies that are put in place, as well as the likelihood of them being implemented. But we see that perhaps favoring growth more for the second half of 2027, especially because these are more long-term investments. And on the flip side, as you have mentioned, consumption has been giving the push for just growth dynamics in general. From the transactional data that we process, we are seeing somewhat of a moderation in terms of consumption. dynamics. Nonetheless, it's still quite strong. We see strong households in terms of still remittances and other forms of revenue. And in that sense, consumption, private consumption is still a driving force to sustain kind of that 2.6% growth. And as also you mentioned, And the other key driver, of course, is public spending. We saw this accelerate significantly up to the second quarter. And even though the new government is bringing in good signs in terms of budget cut of $20 billion and some freezing of just public spending, we know that there are some rigidities in terms of really doing that fiscal adjustment. And in that sense, 2007, when there's kind of this pushback in terms of government spending, but a new investment perhaps from private sector that could help even out kind of those opposing forces. So just to conclude, 2.6% represents a number that denotes moderate growth, but we do see headwinds for 2027, and we will be revising that forecast come September.

Hi, Andres. In terms of asset quality and the exposure we have to the earthquake areas and sectors, I would say we don't have exact figures yet, but I would say the downside risk from asset quality. But we see the double leverage ratio at 105 at the end of this year after distributing the extraordinary dividends and implementing the different capital instruments that we have disclosed we're going to implement. So, in terms of appetite for double leverage is 120, so in 105, we are at very comfortable levels. Now, in terms of Bancolombia as an individual operation, we see a total solvency reaching 15.3% at the end of the year, well above our appetite of around 12.5%.

Thank you, Mauricio. I'm not sure if it was just me, but we lost you for a bit. Can you just repeat the number for double leverage after the corporate transactions that you are planning the second half of the year?

I'm sorry. We have an interruption in the call. Could you repeat that question, please?

Yeah, exactly, Mauricio. We lost you just at the end when you were responding to my question on the impact of the earthquake. There was a long silence, and you came back when you were given the numbers on the double Okay.

So, I'm sorry. So, in terms of asset quality, I would say the downside risks that we have and the things you should pay attention to is earthquake, El Nino effect, and the effect that the exchange rate could have on exporters. So those are the three topics to take into account for asset quality in the second half and in 2027. In terms of capital, we are very comfortable at 94% double leverage. We expect to close the year at 105. And as an individual entity, Bancolombia is expected to close the year with a solvency ratio of 15.3 percent, also well above our appetite and what has been the historical level for solvency ratio of the bank.

That's very clear. Thank you, Mauricio. Congratulations to everybody on the results, and I hope all your team's families are doing okay in this strategy.

Thank you very much, Andre.

Thank you. Our next question comes from the line of Daniel Vaz with Banco Zafra. Please proceed with your question.

Good morning.

Juan Carlos, Mauricio, and everyone, congrats on the results again. And I guess most of the questions have been answered. And I wanted to touch base on your 2027 appetite for loan growth. You mentioned in the call, good and some bad trends. So you have more beneath fiscal scenario. Still sticking inflation though. And if you were to think of your next year or next year's growth for commercial loans, is this new environment enough for you to grow at high single digits again on the commercial side? You expect the commercial to still continue to lose participation in total loans and maybe a word on consumer mortgages. Also, if you can comment on your consumer appetite, you have been growing at low teens if we exclude the FX impact and mortgages as well. Very good pace and very strong momentum in low income. So if you can give us a little guidance on the next year's appetite for these three lines, Thank you.

Hi, Daniel.

2027 long growth should be, I would say, in the upper range, in the upper part of the range for 2026, which has a guidance of 7% to 8%. Now the breakdown of that, we don't see double digits yet for 2027. The breakdown of that should be double digits for mortgages, maybe double digits for consumer, but commercial should be around 8%. We don't see more growth than that, which is in line with nominal GDP. And why not? Because interest rates are still going to be high, and some of the significant investments that we see from our corporate customers will take time to happen because of infrastructure, because of structuring terms. So we might see more of that in the second half of 2027, not at the beginning of 2027. So overall, a long growth of around 8%, maybe a little bit more than that, but not until double-digit figures, until the interest rates come down.

Thank you again for the pertinent questions.

Thank you, Daniel.

Thank you. Our final question this morning comes from the line of Santiago Villanueva with La Vivienda Corredores. Please proceed with your question.

Good morning, and thank you for taking my question, and congratulations on the results. I just have three questions. My first question is, are you seeing Bank Colombia relative to the rest of the Colombian banking market? Do you believe that the current ROE levels would allow you to put pressure on prices across the rest of the market to gain market share, or are you preferring to protect your current meme levels? And my second question is, it's interesting to see how the asset mix changed during the While the portfolio grew 6% year over here, investment grew 40% and increased from 9% as a percentage of the total assets in December to 13% right now. And given the performance of the investment during this quarter, the asset allocation was quite sound. And the question is, is this asset the mix sustainable, or should we step declining the proportion of investment relative to the total assets?

And my third question is, if you could please break down the NIMA guidance for NIMA loans and NIMA investment. thank you thank you Santiago with something creating competitive advantages during now a long period and our focus is on delivering ROE to our shareholders and we will continue on that line I mean we have improved the delivery of our results based, as I mentioned, on competitive advantages, and we will continue doing that. I mean, there is not a particular objective difference of continuing developing that strategy and delivering a strong return to our shareholders. So, that's the strategy, and we will behave in the market with that in mind. The other two questions, I'm going to pass them to Mauricio.

Hi. In terms of the breakdown of the assets, yes, we had a very dynamic quarter for the investment portfolio. but that's taking into account two things. One is the window opportunity that I mentioned before about the carry trade and the international investors coming in the market, so we take advantage of that, but also the fact that there was no enough demand for credit because of the uncertainty of the electoral process. So once that picks up, you may see a recomposition of the assets moving some money from investment to the loan book. Now in terms of NIM, the breakdown of the guidance of the NIM should be the The lending mean, the lending mean around 8% and the investment mean should be around 3.5%, both numbers for the whole year.

Thank you.

Thank you. Ladies and gentlemen, that concludes our question and answer session. I'll turn the floor back to Ms. Amora for final comments.

Thank you, everybody, for joining this second quarter CBES results. We are very happy with the performance of Grupo CBES companies. We believe that we have created a strategy that could deliver mid- and long-term results. The BAM is performing much, much better, and we will continue improving that performance. Ban Colombia, particularly, it's doing very well. NECI will be separated from Ban Colombia and will act as a separate entity under a group of civics and will also allow the company to deliver its strategies. So we are very positive with what is coming for the rest of the year and for 2027. So again, thank you for joining this call and we wish to see you on our third quarter results conference call. Have a good day, everybody.

Thank you. This concludes today's conference call. While you may disconnect your lines at this time, thank you for your participation.