Bancolombia S A : 1T 2023 Bancolombia S.A. Transcripción de llamada de Presentación de Resultados en inglés

Bancolombia S.A. - First Quarter 2023 Earnings Results Conference Call, May 11, 2023

C O R P O R A T E P A R T I C I P A N T S

Juan Carlos Mora, Chief Executive Officer

Laura Clavijo, Chief Economist

José Humberto Acosta, Chief Financial Officer

Mauricio Rosillo, Chief Corporate Officer

Rodrigo Prieto, Chief Risk Officer

C O N F E R E N C E C A L L P A R T I C I P A N T S

Yuri Fernandes, JPMorgan

Ernesto Gabilondo, Bank of America

Julian Ausique, Davivienda Corredores

Carlos Gómez López, HSBC

Tito Labarta, Goldman Sachs

Andres Soto, Santander

P R E S E N T A T I O N

Operator

Good morning ladies and gentlemen. Welcome to Bancolombia's First Quarter 2023 Earnings Conference Call. My name is Ashia (phon) and I'll be your operator for today's call.

At this time, all participants are in listen-only mode. Following the prepared remarks there will be an opportunity to ask questions. (Operator instructions).

Please note that this conference 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, in future filings, in press releases, or verbally, address matters that involve risk and uncertainties. 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

1

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-02621-604-929-1352www.viavid.com

Bancolombia S.A. - First Quarter 2023 Earnings Results Conference Call, May 11, 2023

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 the SEC.

With us today is Mr. Juan Carlos Mora, Chief Executive Officer; Mr. Mauricio Rosillo, Chief Corporate Officer; Mr. José Humberto Acosta, Chief 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. Mr. Juan Carlos, you may begin.

Juan Carlos Mora

Good morning and welcome to Bancolombia´s first quarter 2023 results conference call.

The results for the quarter show an overall good performance. Net income was 1.7 trillion pesos driven by the Bank´s capacity to generate strong income on the loan and securities' portfolios that offsets higher operating costs on the back of peaking inflation, high interest rates and credit deterioration. As we will further elaborate, after posting strong GDP growth in 2022, the countries in which we operate are now facing an economic slowdown. Particularly Colombia is facing a deceleration in private consumption, adding pressures to an already challenging macro backdrop scenario with falling but still high deficits.

The Central Bank in Colombia increased the reference rate up to 13.25% in its effort to control a peaking inflation that reached 13.3% as of March. Given this macroeconomic scenario and the consequent adjustment in risk appetite in some portfolios, the loan book growth moderated in the quarter, posting a 1% drop on gross loans. On top of this, the peso appreciated 3.4% during the period, reducing the contribution of U.S. dollar denominated loans. Therefore, the loan book moderated its growth pace on a yearly basis to 20%.

Deposits were flat quarter-over-quarter and increased 20% year-over-year in line with the loan book performance. NIM was 7.2% with a slight 10% basis point drop quarter-over-quarter, but expanding 120 basis points year-over-year, as the result of our asset-sensitive condition on which we will further elaborate.

Net provisions for credit losses for the quarter were 2 trillion pesos equivalent to a cost of risk of 3.1% for the quarter. This represents an increase of 17.5 % quarter-over-quarter driven mainly by consumer segment deterioration as households' disposable income faces pressure on the back of high interest rates and persisting inflation.

As expected, nonperforming loans reflect the rollover deterioration, with a 2.7% 90 days NPL´s ratio. However, loan loss coverage remains strong at 218% for 90 days past due, while Basel III Core Equity Tier 1 ratio stood at 9.8 % and total capital ratio at 12, well above the minimum regulatory capital.

OpEx decreased 4.6% quarter-over-quarter and grew 26% year-over-year, driven mainly by increases in wages, and FX depreciation.

Efficiency ratio for the quarter was 41%.

All in all, higher income generation steaming out of the loan and securities portfolio contributed to offset the broad expense increase, posting an ROE of 17.7% for the quarter. However, as discussed in our previous call, less favorable global and local macro conditions have moderated Colombia´s pace of growth after the strong rebound in the last two years after the pandemic. This, coupled with intensified political uncertainty, lead us to believe the economy will grow 0.6% during the year. It is still soon to assess other economic and

2

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-02621-604-929-1352www.viavid.com

Bancolombia S.A. - First Quarter 2023 Earnings Results Conference Call, May 11, 2023

social impacts arising from the government´s ambitious reforms, particularly those related to fiscal imbalances, labor costs and private consumption as well as the new cabinet´s policy decision making.

We are following the situation closely as we continue committed to base our decisions under a combined share long-term approach, confident on the robustness of our financial system´s institutions and a robust regulatory framework.

For further detail on the macro-outlook, I will turn the presentation to Laura Clavijo, who was appointed as Bancolombia´s Chief Economist after the resignation of Juan Pablo Espinosa. Laura.

Laura Clavijo

Colombia experienced an impressive economic rebound following the significant impact of the COVID-19 pandemic. For the period comprising 2021 and 2022, the Colombian economy expanded at an average quarterly growth rate above 8% in real terms, spurred mainly by consumer demand, a dynamic services sector and thriving activity in manufacturing.

However, during the first months of 2023, economic activity has slowed significantly in response to higher inflation and rising interest rates. According to market forecasts, GDP is expected to grow below 1%, with our forecast set at 0.6% for this end of year. For 2024, a moderate rebound is expected, coming from a lower growth base, with our estimate set at 1.6% of real GDP growth.

High inflation has been a persistent theme in the Colombian economic outlook for the past few years, much in line with global rising prices. Inflation in Colombia peaked at 13.3% year-over-year during March and fell to 12.8% during this past April, in what is thought to be the beginning of a much-anticipated downward trend.

On the positive side, food prices increased at a much slower rate, enabling a drop from its 30-year peak of 27.8% in 2022, towards a lower level of 18.5% this past month. On the downside, there is an elevated risk of climate-related pressures to food prices for the second half of the year, in addition to sticky prices coming from regulated goods such as fuel and gas. Consequently, inflation is expected to fall to 9% this year and 4.8% in 2024, moving gradually closer, but still far away from the Central Bank's target range of 2% to 4%.

Even though inflation in Colombia remains a concern, subsiding core inflation may serve as a potential backdrop to halt further interest rate hikes. The Central Bank´s reference rate saw at the beginning of May, what could be its final rate increase of 25 basis points reaching 13.25%; thus accumulating a 1150 bps increase since late 2021 when rates started to increase.

Increasing interest rates have begun to pressure households and the financial sector's loan portfolio has deteriorated accordingly, especially in a consumer segment. Considering the economic slowdown, we anticipate the Central Bank will begin its cycle of interest rate cuts in the second semester of this year.

On the fiscal side, higher than expected oil revenues and additional tax collection from 2022's budget reform, will help the Central Bank's deficit to fall from the 7% to 8% level of the COVID years, to around 4.4% of GDP in 2023, thus, enabling the Government to meet fiscal rule targets and, at the same time, increase social spending.

Overall, the economic outlook for Colombia remains cautiously stable, with moderating inflation and expected interest-rate stability amidst an economic slowdown. Consumer confidence has dwindled to an all-time low amidst these economic challenges, political shifts, and social unrest. The left-wing government of Gustavo Petro has proposed significant changes to the status-quo economic model, through an ambitious agenda, including tax, health, pension and labor market reforms. More recently, a wide cabinet

3

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-02621-604-929-1352www.viavid.com

Bancolombia S.A. - First Quarter 2023 Earnings Results Conference Call, May 11, 2023

overhaul, included the exit of Finance Minister Ocampo, this has set a new political scene in an attempt to advance in the approval of the reform agenda. Incoming Minister Bonilla, a close economic advisor to Petro, has announced continuity to former Minister Ocampo's agenda of prudent macroeconomic policy and fiscal sustainability.

We will continue to closely monitor economic indicators, changing market conditions and the political environment.

Now, please let me turn the presentation back to Juan Carlos, who will present Bancolombia's quarterly performance.

Juan Carlos Mora

Thank you, Laura.

Moving to Slide Number 4, I want to call your attention on a set of distinctive capabilities that result from on our capacity to generate transactional volume, which in turn are based on our strong client growth and our digital evolution, two relevant avenues of growth of which we shared relevant metrics in our previous call. In this opportunity, I will refer to the merits of this capacity and its three-fold contribution on, first, deposits and fee income generation, second, balance sheet structure and NIM performance and third, cash flow data that feeds our risk models

.

In the following slides I will further elaborate on each of these elements that allow us to adjust to economic cycles, preserving income generation and balance sheet protection to deliver short and long-term profitability.

In Slide Number 5, you can see the strong growth correlation in terms of number of clients, transactional volume, and size of our deposits. However, the curve of transactions is clearly steeper, outpacing the others. This is not a coincidence as in the last years we have been investing in developing a broad, robust, and interoperable ecosystem, an engine that engages more clients, increases overall transactional volume and fees, and thus attracts more deposits. In the last years, this effort has been mainly focused on our digital platforms and products, such that as December 2022, Bancolombia processed around 74% of the market´s mobile digital transactions and around 45% of the online banking transactions. As an example, Nequi today has more than 1.47 million active users per day, and close to 10.2 million active users per month.

Moving to Slide Number 6, the most interesting edge of our digital strategy with the evolution of products and channels is that we have been able to attract former unbanked and underbanked individuals that seek for low value transfer and cash out solutions. This in turn, results in highly diversified low amount, low-cost and sticky deposits that come in mainly through savings accounts. Even as a portion of these deposits have shift towards time deposits in the last quarters, seeking for higher rates, savings accounts remain highly relevant due to its scale, representing a 52% stake in the overall funding mix and thus, serving as one of the key elements for net interest margin performance.

By nature, savings accounts are stable cash-management related deposits tied to fixed rates. In Colombia, four years ago, they accounted for 25% of the total funding mix and they have been growing steadily, reaching today at 52%. Thus, in the upper left graph, you can see the cost advantage that savings accounts represent to us today due to its significant contribution in terms of volume and low-cost relative to the total funding mix.

Now, from a balance sheet perspective, this funding structure clearly contrasts with that of the loans as approximately two thirds are tied to floating rates, allowing the Bank to repreciate a larger portion of the

4

ViaVid has made considerable efforts to provide an accurate transcription. There may be material errors, omissions, or inaccuracies in the reporting of the substance of the conference call. This transcript is being made available for information purposes only.

1-888-562-02621-604-929-1352www.viavid.com