Good day, ladies and gentlemen and welcome to Bancolombia’s First Quarter 2014 Earnings Conference Call. My name is Sophia and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following the prepared remarks, there will be a question-and-answer session. (Operator Instructions) 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 and press releases or verbally addressed 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 the 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 describe in our reports filed with SEC. With us today is Mr. Jaime Velasquez, Chief of Strategy and Financial Officer; Mr. José Humberto Acosta, Chief Financial Officer; Mr. Juan Carlos Mora, Chief Operating Officer; Rodrigo Prieto, Chief Risk Officer and Alejandro Mejia, Investor Relations Manager. I would now like to turn the presentation over to Mr. Acosta, Chief Financial Officer of Bancolombia. Please proceed, sir. José Humberto Acosta Martin: Thank you. Good morning and welcome to our first quarter 2014 results conference call. It is a pleasure to be with you to follow so closely our operations and results. Let us start with a brief description of the main topics that impacted our business in this period. You can follow the slide presentation available in our investor website. First of all, I want to open this conference call…

Thank you, José Humberto. Now I will ask you to go slide number three in the presentation. As the market under Central Bank, we’re expecting the Colombian economy grew 4.3% during 2013. the sectors that lead the growth where the construction as our industry and services, which contributed to a decline in unemployment during the year, the latest report – report of unemployment figure was 9.7%, this is good news for us, because of the hyper relation between lower unemployment and credit quality. It is also remarkable in fact that 28% of 2013 GDP was explained by gross capital formation, which indicates that Colombian companies keeping best in growth deposits, the Central Bank expecting a 4.3% expansion during 2014, we share that view and estimate that the second half of the year should be more dynamic as the level of extent was spending of the Colombian government declare as well as households demand more goods. On the other hand, inflation for the 12 months ended April 2014 was 2.72%. inflation has been increasing towards 3%, which is the point target set by the Colombian central bank. This strength inflation plus the stronger economic activity let the Colombian central bank to increase the repo rate in the last session in April to 3.5%. This hike took the market and ourselves by surprise, as we were expecting increases to start in the second half of the year. Nevertheless we see this action as positive, as it signals a reduction in liquidity and that we might be able to originate loans at a higher yield and eventually, expand the names. Regarding the FX market, the Colombian peso experienced a depreciation of 2.2% during the first quarter of 2014 and 7.5% over the last year. nevertheless in March, we saw trend of appreciation of…

Thank you. We will now begin the question-and-answer session. (Operator Instructions) And our first question comes from Thiago Batista from Itaú Bba. Thiago Bovolenta Batista – Banco Itaú BBA International: Yes. Hi guys, good morning, and thanks for the opportunity. I had actually two questions. The first one is regarding the mortgage markets. Could you give to us your view about the mortgage markets in Colombia and also in Central America regarding the expansion, the margin evolution, and asset quality? So this is the first question. And the second one is regarding your coverage ratio, when compared to coverage ratio of the Colombian Banks and yours, Bancolombia with other Latin American banks, it’s easy to note that you have really high level of coverage ratio, especially if you look to the 90 days. And I think to reduce the level of the coverage in the future and may be it will help this will happen with the implementation of the IFRS during next year. This is possible to see this contraction in the coverage ratio? Thanks. José Humberto Acosta Martin: Thank you, Thiago. Let me start with your second question. Regarding the coverage, we are not expecting to change or modify the coverage of the ratio, basically because we are mostly a corporate bank. So we believe that this is a metric vision that we want to have and this is a kind of offer that we want to maintain. So we are not expecting to change that and if you check our numbers in the last five years, we always try to maintain the number of (indiscernible). Regarding the first question let me divide it into two different markets. First, in Colombia obviously the mortgage market in Colombia is still very strong. It’s growing at a pace about 20%. We are expecting to maintain interim on the same line of the market, we’re not expecting to gain market share. We don’t see an increase of interest rate of mortgage products. We believe that this year interest rates of mortgage will remain at the levels that we’re seeing right now which is between 11% to 12%. In terms of margins of this product for us, our margin is at around 5%. So, one of the main change of our balance sheet is because of the incorporation of Banistmo’s. Previously, the incorporation of Banistmo’s mortgage to our total loans were 8%, to-date is 11.5% and we’re not expecting to increase this proportion of mortgage into our loan portfolio. Regarding Panama, El Salvador is different in terms of the proposition of mortgage to total loans. In that case, it’s around 28% to 30% and we don’t expect again to improve the proportion of those mortgage loans in today Panama operations. Thiago Bovolenta Batista – Banco Itaú BBA International: Thanks.

And our next question comes from Tito LaBarta from Deutsche Bank. Tito LaBarta – Deutsche Bank Securities, Inc.: Hi, good morning everyone. Thank you for the call. Couple of questions, I guess the first question in terms of, can you give any color in terms of how much Banistmo’s contributed in the quarter, now that you have on your financials for full quarter. Just want to get a sense, what the contribution from that was like. And then second question in terms of ROE, you said you expect 14% for the whole year, but just wondering maybe thinking longer term and once Banistmo is fully integrated, how would you see – you are profitably evolving in 2015 and beyond. Do you think it can increase somewhere as you may get some synergies or some benefits from the integration of Banistmo once it’s completed? Thank you.

Thank you, Tito. Regarding Panamanian operation, Banistmo operation, we’re expecting that the total view of doing the 2014, that give us net profits of around COP90 million to COP100 million. Always this first part of the year, you will see an increasing of expenses because of the implementation of the different systems, we are implementing right now. But the final number for the whole year will be again COP90 million to COP100 million, but that’s already in the next coming years, which in 2015 and 2016, we expect to increase the level of profits from this operation of Panama. Regarding the return on equity because of that, because operations with Banistmo, we are expecting to grow that to the level of 16% in the next coming two years to three years. Based on several configurations, competition landscape here in Colombia and Panama in this laid to remain stable on the asset side. So, the profitability will be focused on reducing funding cost and operating 20% in the level of expenses. Tito LaBarta – Deutsche Bank Securities, Inc.: Thank you. That’s helpful. And then, just one clarification that you said, you expect expenses to grow 17% this year, that’s 17% because of the integration of Banistmo, does that mean expenses should increase of that significantly compared to the first quarter?

Yes, right. It’s used only accounts to Bancolombia operations that include in Banistmo this year. Our expenses revolves around 8% to 9%, that’s again, because we have to include 12 months of Banistmo operations against only two months of the Banistmo operations at last year, the number will grow to 17%. Tito LaBarta – Deutsche Bank Securities, Inc.: Thank you. That’s very helpful.

Thank you, Tito.

And our next question comes from Saul Martine with JPMorgan. Saul Martinez – JPMorgan Securities LLC: Hi, guys. Good morning. I wanted to exploit that you’d aim a little bit more and you gave good color hoping that. So but – what in your prepared remarks, but can you give us a sense of what you think a more normalized run rate for securities income or securities NIM is, you obviously mentioned that there was a positive valuation benefits, because of the strength of the bond market JPMorgan, NBN deck increasing the weighting that should continue to help. how do you see, it was a little bit higher than I’d anticipate it and a little bit higher than what you’ve had in the recent quarters, but how should we be thinking about your securities NIM going forward or your securities interest income going forward, just give us to get a little bit more color, on your lending NIM, similar question, on your lending NIM get guidance from 6 to 6.2, does that factor in the higher rate, what is the factoring in terms of interest rate assumptions and as we head into the 2015, you anticipate that that lending and interest margin should increase further than that?

Thank you, Saul. we have an equation of the name of the security portfolio in March, obviously because of the appreciation of that’s the extra lender pay, our NIM on the March was around 5% to 6%. remember that we were talking that in this year, our expectations of NIM, because of the security portfolio will be between 1% to 2%, future number of the first quarter today is currently 1.8%. so we are expecting these NIMs for the next coming quarters, I mean in between 1% to 2%. we have been doing several measures regarding the security portfolio reducing the volumes actually we will receive a lot of money, because of the insurance of equity, but we use that money in order to reduce that funding cost of our portfolio right now, almost a similar size that we’ve had year ago. And we reduced a volatility of that portfolio and we reduced the durations, right now, our duration is on the short part of the call. so we don’t expect for the next coming quarters, leadership profit immediately closes smaller, because again, it’s a portfolio, if I mean say under control. so the guidance would be again 1% to 2% in terms of meaningful for security portfolio. Second in terms of the loan portfolio in terms of the loan portfolio that this April we will do it for the next coming quarters is try to reduce the funding costs. we are not expecting an increase of interest rates, maybe we are expecting that a new value of a DPF, because of the interest rate that the government and the central bank is expecting to reach the level of 4% of NFCU. so we will gain some NIM, because of combination of better DPF and lower funding costs. Saul Martinez – JPMorgan Securities LLC: So does that mean your securities, I mean the lending income was right to smack that I think in the middle, there is nothing it will rate smack that in the middle of 1Q of your guidance range, but your guidance for the full year doesn’t really change in spite of the expectation for a higher DPF, lower funding cost, is this guidance conservative, should we be thinking that will gradually move up during course of the year and maybe, it would be higher than that in 2015?

It is conserve Saul, that the pace of appreciation of the interest rates in the asset side declined and the… Saul Martinez – JPMorgan Securities LLC: Yes.

And the pace of reduction of course, takes time, so that’s a reason of why we are not expecting that great increase of the NIM at least this year, obviously, maybe at the first half of next year you will see on the slight increase of NIM, because of that, because you have a new structure of liabilities with a lower cost. Saul Martinez – JPMorgan Securities LLC: Okay. I wanted to ask that the liabilities re-priced, can you give us sort of opinion and once again, give us the sensitivity of your NIM to 100 basis points?

It is around 70 bips for every 100 bips unchanged the central bank interest rates. Saul Martinez – JPMorgan Securities LLC: Okay. what is your expectation for year-end rate?

4%. Saul Martinez – JPMorgan Securities LLC: 4%.

Yes Saul Martinez – JPMorgan Securities LLC: Great, thank you.

Thank you, Saul.

Our next question comes from José Restrepo from Serfinco. José Restrepo – Serfinco SA Comisionista de Bolsa: Good morning and congratulation on the results. I have one question regarding the financing of all these infrastructure projects that are going on in Colombia right now. So I have seen in the local media, the banking lending is not that appropriate for this project, can you give us a color about the position upon Colombia about this infrastructure financing?

Yes, we are in the middle of conversation of course, we did project with the regulators. We believe that if something happens, we will be materialized in our loan portfolio, the four key infrastructure projects, just at the end of 2015. and that will be fully reflected on 2016, during this phase, we are just having conversations, try to design to better restructure from lending business. It’s conversations that we are having right now. so we don’t expect active answer in this conference call, because again, you have seen different they process on this module. José Restrepo – Serfinco SA Comisionista de Bolsa: And Juan, give us like the impact that you are expecting your loan portfolio of this infrastructure projects?

With the potential participation of our 4Q that will be around not had around 10% of dollar sort of the lawsuits during the next good year, in terms of 2014 project that will be increase for views, because that will take time to be resource these kind of products and obviously you’ll see an increase of loan portfolio that you will see into the down market so you would see that 4Q projects in the balance sheet of the banks in a different way, Ben, as the long term loans and finally as a best capital markets. José Restrepo – Serfinco SA Comisionista de Bolsa: Okay, thank you.

And then next question comes from Fred De Mariz, UBS. Frederic de Mariz – UBS Ltd.: Hi, good morning everyone. Thank you for the opportunity, a couple of question on my side, the first one on the PDL on the asset quality, you mentioned seasonality as a key driver of increase of the best two loan over 30 days, which was 2.2% you had a little bump in this number in the quarter does it mean that in the second quarter this number will already normalized, so it will get back to a level maybe close to 2.9%. Is it that fast, or is it something that takes longer to normalize and the second question is on the efficiency side you mentioned that there was some expense that was not booked in the first quarter, which maybe surprised there, and it’s going to be booked in the second quarter. I was just trying to get a bit more color on this expense, what exactly happen that was not booked and what kind of efficiency are you looking for this year, but also going forward, I would be interested in hearing on the cost-to-income that said, 3,250 is down the road for the bank? thank you.

Okay. with a number of loans, we expect that the next quarter is going to be like the time that we have last year, we compare the last year in the first quarter and first quarter through 2014 some of the same we experienced comps with two clients but it was not current risk. The risk is really good. The experience comes with the operation – with the operation some of them were implementing SAP. So that’s why we had unquestioned number of such loans under the 30-day basis. So we expect that we turn into the abnormal years that we have seen in the other quarters that are not the person. I want to turn and hasten back to the second question.

Okay.

Thank you, Rodrigo. Regarding the expenses trade, you are right. When how we see in the past under Colombian GAAP time, that we projected total expenses for the year and we impacted the income statement on accurate monthly basis. But because we are right now, we are preparing going forward IFRS, right now we are doing a 15 the real expenses on every month. So at the end of the day, you will see an increase of expenses at around 10%, 17% at the end of year. But you will see maybe availability of those – on these lines of expenses, because of that. Because regarding IFRS we want to maintain the thing within depreciation. And our guidance for efficiency at the end of this year will be at around 54%. But that was the explanation of the volatility right now of expenses. We have registering the real expenses that we have in every month. Frederic de Mariz – UBS Ltd.: Okay. That makes sense. And if I may ask you for followup and what was the expense that didn’t happen in the first quarter was it a big one, I don’t know marketing or was it just a lot of smaller ones that are pushed back to April or May?

There are some contracts that only will be paid at the second quarter of that year that is the reason why we have a deviation of expenses regarding the planning at the end of the year. Frederic de Mariz – UBS Ltd.: Okay. That's great. And you mentioned 64 for the full year going forward. What is the, a good target level that you can reach in terms of faster income.

Yes. Thank you. For medium term which means that the next coming contracts our level of our – our goal is to reach the 60% of efficiency ratio. Frederic de Mariz – UBS Ltd.: Great, 60%. Thank you very much.

I appreciate it.

And the next question comes from Carolina Yoshimoto from Goldman Sachs. Carolina Yoshimoto – Goldman Sachs: Hi, good morning, thank you for the opportunity. I have a couple of questions to you the first one is a follow up on the Panama operation. I was wondering if you could provide us with some more color on what is going on underground and what was the aero in the first quarter. And my second question is on cost control. You’ve mentioned that the bankers have been having a very strong focus on that. And so I was wondering if you could outline some of the efforts that has been doing in addition to contain the growth in headcount and branches. Thanks.

Okay Carolina. Regarding the Panamanian operation that we are having a contract with HSBC in which during 18 months, we will be placing our seasons they will see some quarters ours. The schedule is right on time then we are projecting to world 10% during in term of deposits and there will be more oriented in COP launch that we are expecting to grow that has owned 50% this year and in consumer loans we are projected to increase 5% this year. What we expect in terms of economics looking for the HSBC for the Banis operation that would be between 5% to 10% you will take in consideration, but we are right now making adjustments, we are doing a lot of expenses regarding the IT platform and also we are putting place some procedures that we have to do it directly in Panamanian operation. Give me one second. Can you repeat the second question? Carolina Yoshimoto – Goldman Sachs: Yes, of course my second question is on cost control about the branches has been doing in that from and if you could outline some of the efforts you’ve been combine expenses in addition to control headcount and branches. Thanks.

Okay, Carolina. Yes. In terms of cost control we again the guidance is to reach the level of 50% in the next coming years. How we’re doing that we have been specialty in Bancolombia focus on we intend to reduce some costs and we right now with distribution channels so we taking different channels as we mentioned during the presentation and the best example of that is we’re increasing only seven branches for this year and we use to go up at least 60 branches this year. We’ve maintain at the same labor cost because we’re not growing in terms of people, we’re growing in terms of transactions and volumes. So that there will be a combination of maintain the same interest total, but continuing growth in terms of transactions and claims, that’s why we able to efficiency level and that’s how we’re facing that and the results are very clear if you check whether to compare our expense to the total loan or the total asset side, that it is right now below 4%. Also we’re beginning a pricing project in which we’re right now analyzing every single product in terms of pricing. This is our trends in the banking industry in Latam. So right now we’re facing this project trying to increase our level of income regarding the clients of the transactions. Carolina Yoshimoto – Goldman Sachs: Okay. Thank you.

Thank you, Carolina.

And the next question comes from Boris Molina from Santander. Boris Molina – Santander Investment Securities Inc.: Yes. Good morning. Thanks for taking my question, I had a question regarding your IT an integration cost budget for the year, do you have the figure for the full-year expense is that you plan to incur in integration and how much integration expenses where in the first quarter of the year.

Thank you. As you know we are in the process of integrating by major – we have undergoing around 14 fronts of integration some are operation of some systems from HSBC, and other new systems that we’re implementing – the impact in the first quarter is not significant since we’re at the beginning of the project. So we’re expecting that those projects as impact during the next quarters. We’re in the process of quantifying the final expect during this year, but we think that its going to be around $30 million to $40 million the final effect of these integration projects on a consolidated basis because some of the investments are going to be in Bancolombia or in Colombia seems we’re going to operate some the systems from Colombia.

But at the end of this year at the end of the day when we say that will reflect net profit of $90 million this year, that is included in the expenses regarding the integration and remember that when we spend in integration process that will increase on the assets because of the software, that’s way we’re so again $90 million reflect also including a level expense of the product. Boris Molina – Santander Investment Securities Inc.: Okay, wonderful. Thank you so much.

You are welcome.

.: Marielle V. Jan de Beur – Wells Fargo Securities LLC: Hi, my question is related to Banistmo at fiscal year end the past due loans coverage was very low, I mean was around 70% I believe. Do you have plans to increase this coverage or why is that the level of 100%?

Thank you, Maria if you see the numbers in Colombia, under Colombian gas we have been included the provisions for the operation in Panama remember than in Panama provisions accounts popular that’s the reason why we increase our level of party loans under Colombian regulation, because I know we have high level of volatility of that loans, but what we’re doing in order to reduce our maintenance and control deposit loans in Panama we’re implementing a collection department in Panama and we are right now collecting and calling our clients beginning with the 30 days. They use to call the client after the day 90. So we’re expecting for the next coming quarters to reduce the level of party loans regarding 30 days party loans. But again under Colombian regulations we have – this coverage the level of party loans in Panama remember that in December we have to have an increase of $100 million in provisions and that is reflected in our booking in the Bancolombia operation under Colombian guidance. Marielle V. Jan de Beur – Wells Fargo Securities LLC: Okay. Thank you. And so what's the provisions that on loss reserve coverage as at the end of the first quarter for Panama. Do you have the data?

It is a 142 on consolidated basis I mean in Colombia because for us the most important progress take place in Colombia under Colombian gas. Marielle V. Jan de Beur – Wells Fargo Securities LLC: Okay.

If your question is under Panamanian gas we have been complaint with a coverage there which is at around 50% to 60% based on the standards of the Panamanian regulation, but the most important thing is we’ll reconsolidate Banistmo, we are having extra provisions to maintain our tight regulations under Colombian law. Marielle V. Jan de Beur – Wells Fargo Securities LLC: Okay fine and thank you very much.

My pleasure Maria. We are almost ended of quarter, 60% of the coverage on the Panamanian regulation. Under Colombian regulation we have almost 90% on the consolidated basis. We have to know that each portfolio has a history and we have to model each portfolio and that is free so that’s why we have each model for each country, that’s why we have this coverage on the Panamanian portfolio. One of the main factors for success at operation in Banistmo is almost 30% of the loan portfolio is mortgage, but has a different treatment in terms of provisions, that’s the reason why it’s reflected with level of provisions on the consolidated basis.

And our next question comes from Laura Mesa from Creditor from Credit Corp. Laura Mesa – Creditor Capital: Thanks. My question on efficiency level was already answered.

Thank you, Laura.

And our next question Carlos Gomez from HSBC. Carlos Gomez-Lopez – HSBC Securities USA, Inc.: Hi, good morning. I have two questions, the first one refers to your Page 10 on fee income. On banking services and other services you have 54% increase I wanted to understand if it was this mostly because of the integration of Banistmo, that it had a very high level of fees in this with regard, or there’s something anonymous or extraordinary in these figures. And the second question is regarding Page 12, on capitalization, you mentioned that you had already incorporated both the offerings. And if I understand correctly also in the accrued earnings from last year, is there anything else that you need to add to your capital? Should we expect higher capital ratios in the coming quarters or this should be at the highest of the year? Thank you.

Okay, thank you Carlos. Regarding your second question, we are expecting to see the level of Q1 between 8% to 9%, and based on our calculations for the next two, three years, we will maintain that. Remember them our level of dividend payout that will be one-third of our profit. So we are not expecting to go below the level of 8%, neither we are expecting to go after the level of 9%. So (indiscernible) we will maintain the same level of equity. Regarding the question of the…

Fees.

The third one is bank assurance, so we mentioned at the beginning it’s a very profitable business, we have been growing at a pace of 30%, 35% of the transaction point of view, which help us a lot. And the fourth factor as you mentioned Carlos, is the piece that comes from Banistmo provisions, that also is important because they are, we have almost 0.5 million clients with debit or credit cards, as well. The third one is bank assurance, so we mentioned at the beginning it’s a very profitable business, we have been growing at a pace of 30%, 35% of the transaction point of view, which help us a lot. And the fourth factor as you mentioned Carlos, is the piece that comes from Banistmo provisions, that also is important because they are, we have almost 0.5 million clients with debit or credit cards, as well. Carlos Gomez-Lopez – HSBC Securities USA, Inc.:

This is bank assurance, mostly… Carlos Gomez-Lopez – HSBC Securities USA, Inc.: Market share, okay.

Yes, right. Carlos Gomez-Lopez – HSBC Securities USA, Inc.:

No we only generate that because of the profits, correct. Carlos Gomez-Lopez – HSBC Securities USA, Inc.: Okay, thank you very much.

Thank you, Carlos.

Nicolas Noreña – Serfinco SA Comisionista de Bolsa: Hello, good morning and thank you for hosting this conference call. My question regards factoring Bancolombia and its announcement to transfer assets and liabilities to some Bancolombia’s operation. I understand this would actually help efficiency, but my question is regarding leasing Bancolombia. Is there an intention to merge leasing Bancolombia to the banks, to the main banking unit as well?

When you reached on why we are really based the business of flattering is because of funding. That will be very more efficient doing from our bank and from our book. With leasing operations we have not contemplated an integration of the operation. Nicolas Noreña – Serfinco SA Comisionista de Bolsa: Okay. Thank you.

My pleasure.

And we have no further questions at this time. I will turn the call back to you. Mr. Mejia.

Thank you again for your time. Hope to see you in the next coming quarter. Thank you again all of you guys.

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