Banombia S.A.(CIB) - 2024 Q3 - Quarterly Report

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS Condensed Consolidated Interim Statement of Financial Position The Condensed Consolidated Interim Statement of Financial Position shows an increase in total assets to COP 352.20 billion as of June 30, 2024, from COP 342.93 billion at December 31, 2023, primarily driven by growth in loans and advances to customers and financial asset investments, alongside increased total liabilities and a modest rise in total equity | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | ASSETS | | |\ | Cash and cash equivalents | 31,465,176 | 39,799,609 |\ | Financial assets investments | 30,573,634 | 25,674,195 |\ | Loans and advances to customers, net | 251,427,847 | 237,728,544 |\ | Total Assets | 352,199,072 | 342,928,809 |\ | LIABILITIES AND EQUITY | | |\ | Deposits by customers | 257,869,276 | 247,941,180 |\ | Total Liabilities | 311,994,122 | 303,879,080 |\ | Total Equity | 40,204,950 | 39,049,729 | Condensed Consolidated Interim Statement of Income For the six-month period ended June 30, 2024, net income slightly decreased to COP 3.15 billion from COP 3.25 billion in the prior year, despite an increase in net interest margin and valuation on financial instruments after impairment to COP 7.41 billion from COP 6.16 billion, largely due to reduced credit impairment charges | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Total interest and valuation on financial instruments | 18,040,869 | 18,457,804 | 8,943,475 | 9,074,683 |\ | Interest expenses | (7,695,965) | (8,166,276) | (3,756,886) | (4,141,013) |\ | Net interest margin and valuation on financial instruments before impairment | 10,344,904 | 10,291,528 | 5,186,589 | 4,933,670 |\ | Total credit impairment charges, net | (2,933,763) | (4,127,844) | (1,618,783) | (2,082,200) |\ | Net interest margin and valuation on financial instruments after impairment | 7,411,141 | 6,163,684 | 3,567,806 | 2,851,470 |\ | Total operating income, net | 10,671,556 | 10,501,789 | 5,113,126 | 5,081,463 |\ | Total operating expenses | (6,466,588) | (6,242,635) | (3,288,049) | (3,170,973) |\ | Profit before income tax | 4,204,968 | 4,259,154 | 1,825,077 | 1,910,490 |\ | Income tax | (1,058,203) | (1,012,699) | (363,323) | (426,328) |\ | Net income | 3,146,765 | 3,246,455 | 1,461,754 | 1,484,162 |\ | Basic and Diluted earnings per share | 3,256 | 3,333 | 1,511 | 1,533 | Condensed Consolidated Interim Statement of Comprehensive Income Total comprehensive income attributable to equity holders of the Parent Company saw a significant positive swing, reaching COP 4.56 billion for the six-month period ended June 30, 2024, compared to COP 0.91 billion in the prior year, primarily driven by positive foreign currency translation adjustments offsetting a slight decrease in net income | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Net income | 3,146,765 | 3,246,455 | 1,461,754 | 1,484,162 |\ | Total other comprehensive income that will not be reclassified to net income, net of tax | 28,138 | (6,459) | 22,212 | (14,975) |\ | Total other comprehensive income that may be reclassified to net income, net of tax | 1,385,736 | (2,323,353) | 1,319,451 | (1,778,519) |\ | Total comprehensive income attributable to Equity holders of the Parent Company | 4,562,561 | 913,230 | 2,804,792 | (311,496) | - Foreign currency translation adjustments (net of tax) significantly impacted comprehensive income, moving from a loss of COP (2.40 billion) in 2023 to a gain of COP 1.40 billion in 2024[5] Condensed Consolidated Interim Statement of Changes in Equity Total equity increased to COP 40.20 billion as of June 30, 2024, from COP 39.05 billion at January 1, 2024, primarily driven by net income and other comprehensive income, partially offset by dividend payments and appropriations to reserves | Metric | As of June 30, 2024 (Millions COP) | As of January 1, 2024 (Millions COP) | |:---|:---|:---|\ | Share capital | 480,914 | 480,914 |\ | Appropriated reserves | 22,632,835 | 20,044,769 |\ | Retained earnings | 2,675,951 | 2,515,278 |\ | Net income attributable to equity holders of the Parent Company | 3,103,246 | 6,116,936 |\ | Accumulated other comprehensive income, net of tax | 5,469,515 | 4,074,161 |\ | Total Equity | 40,204,950 | 39,049,729 | - Dividends paid amounted to COP (3.34 billion) for the six-month period ended June 30, 2024[6] Condensed Consolidated Interim Statement of Cash Flow Net cash used in operating activities significantly shifted to COP (6.08 billion) for the six-month period ended June 30, 2024, from COP 2.43 billion provided in the prior year, while investing activities turned positive, and financing activities used more cash, resulting in an overall decrease in cash and cash equivalents | Metric | 2024 (Millions COP) | 2023 (Millions COP) | |:---|:---|:---|\ | Net income | 3,146,765 | 3,246,455 |\ | Net cash (used) / Provided by operating activities | (6,080,906) | 2,433,333 |\ | Net cash provided / (used) in investing activities | 342,261 | (988,898) |\ | Net cash used in financing activities | (4,914,091) | (1,039,212) |\ | Effect of exchange rate changes on cash and cash equivalents | 2,318,303 | (3,356,431) |\ | (Decrease) / Increase in cash and cash equivalents | (10,652,736) | 405,223 |\ | Cash and cash equivalents at end of year | 31,465,176 | 28,694,083 | - The significant decrease in net cash from operating activities in 2024 was primarily due to a large increase in 'Net interest Change in operating assets and liabilities' to COP (9.01 billion) from COP (9.70 billion), and a substantial increase in 'Increase in loans and advances to customers' to COP (10.89 billion) from COP (6.19 billion)[8] Notes to Condensed Consolidated Interim Financial Statements Note 1. Reporting Entity Bancolombia S.A., a credit establishment listed on the Colombia Stock Exchange and NYSE, operates primarily from Medellin, Colombia, with an international presence, undergoing strategic adjustments including the dissolution of Barbados and Cayman Islands operations and Nequi S.A.'s independent licensing process, maintaining a significant operational footprint with 33,887 employees and 851 offices as of June 30, 2024 - Bancolombia S.A. is listed on the Colombia Stock Exchange (BVC) since 1981 and on the New York Stock Exchange (NYSE) since 1995[10] - Operations in Barbados (Mercom Bank) and the Cayman Islands (Sinesa Cayman, Inc.) are in the process of dissolution and liquidation[10] - Nequi S.A., the Group's digital platform, is in the process of obtaining an authorization certificate or operating permit from the Financial Superintendence of Colombia to operate as a 100% digital credit establishment[10] | Metric | As of June 30, 2024 | |:---|:---|\ | Employees | 33,887 |\ | Banking correspondents | 34,658 |\ | ATMs | 6,101 |\ | Offices | 851 | Note 2. Material Accounting Policies This note details the basis for preparing the Condensed Consolidated Interim Financial Statements, adhering to IAS 34 and IFRS, confirming the Group's going concern ability for at least 12 months with no significant changes in estimates or judgments, and outlining recently issued accounting pronouncements including amendments to IAS 1, IFRS 16, IFRS 9/7, and the new IFRS 18, along with their assessed or pending impacts - The Condensed Consolidated Interim Financial Statements are prepared in accordance with International Accounting Standard 34 (IAS 34) and International Financial Reporting Standards (IFRS)[11] - Management has assessed the Group's ability to continue as a going concern and confirms adequate liquidity and solvency for at least 12 months[11][12] - No changes in significant estimates and judgments were made by Management in applying the Group's accounting policies compared to December 31, 2023[14] - Amendments to IAS 1 Presentation of Financial Statements (Effective Jan 1, 2024): Clarifies requirements for classifying liabilities as current or non-current and disclosures for liabilities subject to covenants. Management concluded no impact[15] - Amendments to IFRS 16 Leases - Lease liability in a sale and leaseback (Effective Jan 1, 2024): Adds subsequent measurement requirements for sale and leaseback transactions. Management assessed no impact[15] - Amendments to IFRS 9 Financial instruments and IFRS 7 Financial instruments: disclosures (Effective Jan 1, 2024): Clarifies classification of financial assets with ESG features and settlement of liabilities through electronic payment systems. Management is assessing the impact[16] - New standard IFRS 18 Presentation and Disclosure in Financial Statements (Effective Jan 1, 2027): Replaces IAS 1, introduces new categories for income/expenses (operating, investing, financing), new subtotals (operating profit), enhanced transparency for management-defined performance measures, and more useful grouping of information. Management is assessing the impact[16] Note 3. Operating Segments The Group's operating segments, defined by product, service, and geography, are regularly evaluated by the CODM using key financial metrics like Net Interest Margin, Return on Assets, Return on Equity, Efficiency Ratio, and Asset Quality, encompassing Banking Colombia, Panama, El Salvador, Guatemala, Trust, Investment Banking, Brokerage, International Banking, and other segments, each offering specialized financial services - The Chief Operating Decision Maker (CODM), comprised of the Bank's President (CEO) and Financial Vicepresident (CFO), evaluates operating segments based on financial performance and resource allocation[17] - Banking Colombia: Provides retail and corporate banking to individuals, companies, and governments in Colombia, focusing on value-added and long-term relationships[18] - Banking Panama: Offers retail and commercial banking in Panama, including Banistmo S.A. and its subsidiaries[18] - Banking El Salvador: Delivers retail and commercial banking to individuals, companies, and governments in El Salvador through Banco Agrícola S.A[18] - Banking Guatemala: Provides retail, commercial banking, and insurance products to individuals, companies, and governments in Guatemala via Banco Agromercantil de Guatemala S.A[18] - Trust: Offers trust and asset management services in Colombia through Fiduciaria Bancolombia S.A[19] - Investment Banking: Provides corporate and project financial advisory, underwriting, capital markets, and private equity management through Banca de Inversión Bancolombia S.A[19] - Brokerage: Offers brokerage, investment advisory, and private banking services to individuals and institutions via Valores Bancolombia S.A., including US operations[19] - International Banking: Delivers international banking services to Colombian and foreign customers through Bancolombia Panamá S.A. and Bancolombia Puerto Rico International, Inc[20] - All other segments: Includes financial and operating lease activities (Renting Colombia S.A.S.), real estate services, and results from investment vehicles (e.g., Negocios Digitales Colombia S.A.S., Wompi S.A.S., Wenia LTD)[20] | Segment | Total Operating Income, Net (6M 2024, Millions COP) | Profit Before Income Tax (6M 2024, Millions COP) | |:---|:---|:---|\ | Banking Colombia | 7,168,957 | 2,633,020 |\ | Banking Panamá | 642,874 | 194,470 |\ | Banking El Salvador | 674,670 | 284,470 |\ | Banking Guatemala | 430,761 | 117,997 |\ | Trust | 204,362 | 127,431 |\ | Investment Banking | (80,307) | (104,070) |\ | Brokerage | 123,362 | 29,776 |\ | International Banking | 494,790 | 451,108 |\ | All other segments | 1,012,087 | 470,766 |\ | Total segments | 10,671,556 | 4,204,968 | Note 4. Cash and Cash Equivalents Cash and cash equivalents decreased to COP 31.47 billion as of June 30, 2024, from COP 39.80 billion at December 31, 2023, primarily due to operational transactionality and the cancellation of COP 3.5 billion in interest-bearing deposits, while restricted cash for derivative contracts also slightly increased | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Cash and balances at central bank | 21,374,700 | 27,974,984 |\ | Money market transactions | 10,090,476 | 11,824,625 |\ | Total cash and cash equivalents | 31,465,176 | 39,799,609 | - The decrease in cash and cash equivalents is mainly due to the usual transactionality of Bancolombia's operations and the cancellation of COP 3.5 billion in interest-bearing deposits in January 2024[27] - Restricted cash, included in other assets, amounted to COP 1.22 billion as of June 30, 2024, representing margin deposits pledged as collateral for derivative contracts[27] Note 5. Financial Assets Investments and Derivatives This note details the Bank's financial asset investments and derivative financial instruments, showing a significant increase in financial asset investments driven by FVTPL securities, substantial decreases in derivative assets and liabilities, and the Bank's active use of derivatives for customer business, hedging, and arbitrage, particularly for foreign exchange risk management of net foreign investments 5.1 Financial Assets Investments Total financial asset investments increased to COP 30.57 billion as of June 30, 2024, from COP 25.67 billion at December 31, 2023, primarily driven by an increase in FVTPL securities, particularly those issued by foreign and Colombian governments, while FVTOCI debt instruments decreased | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Total debt instruments | 29,909,988 | 25,092,666 |\ | - Fair value through profit or loss | 17,020,038 | 12,096,407 |\ | - Fair value through other comprehensive income, net | 5,350,499 | 6,148,177 |\ | - Amortized cost, net | 7,539,451 | 6,848,082 |\ | Total equity securities | 632,732 | 543,210 |\ | Total financial assets investments | 30,573,634 | 25,674,195 | - The increase in FVTPL securities is mostly in Bancolombia S.A. and Banistmo S.A. for bonds issued by the United States, and in Bancolombia S.A. for Treasury securities (TES)[29] - The loss allowance for debt instruments at amortized cost decreased from COP 55.80 million at January 1, 2024, to COP 44.51 million at June 30, 2024[35] 5.2 Derivative Financial Instruments Derivative assets significantly decreased to COP 3.44 billion from COP 6.25 billion, and derivative liabilities to COP 3.68 billion from COP 6.71 billion as of June 30, 2024, as the Bank utilizes derivatives for customer business, hedging, and arbitrage, primarily managing foreign exchange and interest rate risks, including a hedging strategy for its net foreign investment in Banistmo | Derivative Type | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Derivative assets | 3,444,239 | 6,252,270 |\ | Derivative liabilities | 3,680,218 | 6,710,364 |\ | Total forwards (net) | 2,154 | (151,913) |\ | Total swaps (net) | (246,115) | (284,182) |\ | Total options (net) | 7,982 | (21,999) | - The Bank designated debt instruments in issue for USD 1.12 billion as of June 30, 2024 (down from USD 1.59 billion at Dec 31, 2023) as hedge accounting for its net investment in Banistmo to protect against foreign exchange rate risk (USD/COP)[39][40][41] - The exchange difference related to the conversion of debt securities issued and financing with Correspondent banks, recognized directly in OCI, amounted to COP (0.45 billion) for the six-month period ended June 30, 2024, a significant change from COP 1.30 billion in the prior year[41] Note 6. Loans and Advances to Customers, Net Net loans and advances to customers increased to COP 251.43 billion as of June 30, 2024, from COP 237.73 billion at December 31, 2023, driven by the commercial portfolio and peso devaluation, while the allowance for loan losses decreased by 28% due to improved lending and a more favorable macroeconomic outlook, despite increased Stage 3 exposure from SME and corporate delinquencies | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Total gross loans and advances to customers | 268,108,682 | 253,951,647 |\ | Total allowance for loans, advances and lease losses | (16,680,835) | (16,223,103) |\ | Total loans and advances to customers, net | 251,427,847 | 237,728,544 |\ | Commercial loans | 146,301,228 | 134,687,396 |\ | Consumer loans | 54,991,509 | 54,591,769 |\ | Mortgage loans | 38,713,478 | 36,250,408 |\ | Financial Leases | 27,005,509 | 27,277,057 |\ | Small Business Loans | 1,096,958 | 1,145,017 | - The loss allowance for the first half of 2024 decreased by 28% compared to the same period of the previous year, primarily due to a decrease in credit loss provision on the consumer portfolio, resulting from improved lending and collection actions and a more favorable macroeconomic outlook with a downward trend in interest rates in Colombia[43] - Stage 1 (12-month expected credit losses): Exposure increased by COP 12.14 billion, while loss allowance decreased by COP 0.47 billion, driven by better corporate portfolio disbursements, dollar loan restatement, and a more favorable economic outlook[43] - Stage 2 (Lifetime expected credit losses): Exposure increased by COP 0.80 billion, and loss allowance increased by COP 0.11 billion, mainly due to clients exiting Stage 3 and increased deterioration within the corporate portfolio[47] - Stage 3 (Lifetime expected credit losses): Exposure increased by COP 1.22 billion, and loss allowance increased by COP 0.82 billion, primarily due to SME portfolio clients reaching over 90 days delinquency and increased risk levels in SME, business, commercial, real estate, and construction sectors[47] Note 7. Goodwill and Intangible Assets, Net Goodwill and intangible assets, net, increased to COP 9.19 billion as of June 30, 2024, from COP 8.49 billion at December 31, 2023, primarily driven by an increase in goodwill | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Goodwill | 8,484,039 | 7,818,125 |\ | Intangible assets | 707,259 | 671,572 |\ | Total intangible assets and goodwill, net | 9,191,298 | 8,489,697 | Note 8. Investment Properties Investment properties increased to COP 5.42 billion as of June 30, 2024, from COP 4.71 billion at December 31, 2023, mainly due to acquisitions including PA Cedis Sodimac and Constellation, and gains on valuation, with a significant increase in rental income during the period | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Balance at January 1 | 4,709,911 | 3,994,058 |\ | Acquisitions | 694,492 | 294,569 |\ | Gains on valuation | 51,820 | 232,462 |\ | Balance at June 30 / December 31 | 5,423,018 | 4,709,911 | - Acquisitions in 2024 included PA Cedis Sodimac for COP 0.46 billion and Constellation for COP 0.16 billion[50] | Metric | June 30, 2024 (Millions COP) | June 30, 2023 (Millions COP) | |:---|:---|:---|\ | Income from rentals | 145,419 | 62,475 |\ | Operating expenses (investment properties that generated income) | 22,476 | 11,651 |\ | Operating expenses (investment properties that did not generate income) | 5,883 | 3,353 | Note 9. Premises and Equipment, Net Premises and equipment, net, decreased to COP 6.05 billion as of June 30, 2024, from COP 6.52 billion at December 31, 2023, primarily due to cancellations and transfers of leased vehicles to inventories, while the Group continues to utilize fully depreciated assets and holds temporarily idle equipment | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Total premises and equipment - net | 6,048,006 | 6,522,534 |\ | Balance at January 1 | 6,522,534 | 6,727,066 |\ | Additions | 401,848 | 1,522,986 |\ | Expenses depreciation and impairment | (326,341) | (640,856) |\ | Disposals | (47,823) | (103,552) |\ | Assets classified as held for sale and other assets | (564,414) | (806,365) | - The decrease in premises and equipment is mainly due to cancellations and transfers to inventories of leased vehicles[53] - Fully depreciated premises and equipment still in use amounted to COP 0.71 billion as of June 30, 2024[55] - Temporarily idle premises and equipment amounted to COP 88.23 million as of June 30, 2024[55] Note 10. Income Tax This note provides a comprehensive overview of the Group's income tax, detailing components recognized in the interim statement of income and comprehensive income, reconciling the effective tax rate, and outlining deferred tax assets and liabilities, with a slight increase in total income tax expense, growth in net deferred tax liability, recognition of a deferred tax asset for future taxable profits, and addressing tax contingent liabilities 10.1 Components Recognized in the Condensed Consolidated Interim Statement of Income Total income tax expense for the six-month period ended June 30, 2024, was COP (1.06 billion), a slight increase from COP (1.01 billion) in the prior year, driven by higher current tax partially offset by deferred tax adjustments | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Current tax (Fiscal term) | (822,349) | (648,358) | (163,926) | (207,179) |\ | Current tax (Prior fiscal terms) | 161,943 | 1,452 | 92,104 | 1,111 |\ | Total current tax | (660,406) | (646,906) | (71,822) | (206,068) |\ | Deferred tax (Fiscal term) | (409,268) | (362,376) | (312,040) | (229,305) |\ | Deferred tax (Adjustments for consolidation purposes) | 11,471 | (3,417) | 20,539 | 9,045 |\ | Total deferred tax | (397,797) | (365,793) | (291,501) | (220,260) |\ | Total income tax | (1,058,203) | (1,012,699) | (363,323) | (426,328) | 10.2 Reconciliation of the Effective Tax Rate The effective tax rate reconciliation for the six-month period ended June 30, 2024, shows an accounting profit of COP 4.20 billion, with a nominal tax rate resulting in COP (1.68 billion), and various adjustments including non-deductible expenses, accounting and non-tax expense/income differences, and tax-exempt ordinary activities income contributing to the total income tax expense | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Accounting profit | 4,204,968 | 4,259,154 | 1,825,077 | 1,910,490 |\ | Applicable tax with nominal rate | (1,681,987) | (1,703,662) | (730,031) | (764,196) |\ | Non-deductible expenses to determine taxable profit (loss) | (182,760) | (277,060) | (133,919) | (148,340) |\ | Ordinary activities income exempt from taxation | 832,115 | 473,169 | 637,908 | 262,184 |\ | Tax rate effect in other countries | (225,026) | (85,911) | (147,935) | 952 |\ | Total income tax | (1,058,203) | (1,012,699) | (363,323) | (426,328) | 10.3 Components Recognized in the Condensed Consolidated Interim Statement of Comprehensive Income (OCI) The tax effects on OCI components showed a net positive impact of COP 0.19 billion for the six-month period ended June 30, 2024, a significant reversal from a net negative impact of COP (0.51 billion) in the prior year, largely influenced by foreign currency translation adjustments | Metric | June 30, 2024 (Millions COP) | June 30, 2023 (Millions COP) | |:---|:---|:---|\ | Net tax recognized in OCI (Accumulated) | 189,895 | (514,319) |\ | Net tax recognized in OCI (Quarterly) | 170,545 | (373,900) |\ | Exchange differences arising on translating the foreign operations (before tax, Accumulated) | 1,669,069 | (3,196,672) |\ | Loss on net investment hedge in foreign operations (before tax, Accumulated) | (452,000) | 1,303,197 | 10.4 Deferred Tax The net deferred tax liability increased to COP (1.33 billion) as of June 30, 2024, from COP (1.10 billion) at December 31, 2023, reflecting various movements in deferred tax assets and liabilities across categories including property and equipment, deterioration assessment, and net investment coverage in operations abroad | Metric | December 31, 2023 (Millions COP) | June 30, 2024 (Millions COP) | |:---|:---|:---|\ | Total Asset Deferred Tax | 2,116,516 | 2,262,628 |\ | Total Liability Deferred Tax | (3,216,134) | (3,593,994) |\ | Net Deferred Tax | (1,099,618) | (1,331,366) | - The Group expects to generate enough liquid income in the future to offset deductible deferred tax items, based on financial projections considering GDP growth, loan growth, and interest rates[62] 10.5 Amount of Temporary Differences in Subsidiaries, Branches, Associates Over Which Deferred Tax Was Not Recognized In accordance with IAS 12, no deferred tax credit was recognized for certain temporary differences in local and foreign subsidiaries, based on management's control over the timing of reversal and the expectation that such reversals will not occur in the foreseeable future | Category | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Local Subsidiaries | (1,076,678) | (1,378,775) |\ | Foreign Subsidiaries | (19,554,400) | (17,696,145) | - No deferred tax credit was recorded because management can control the future moment in which such differences are reversed and this is not expected to occur in the foreseeable future[64] 10.6 Tax Credits A deferred tax asset was recognized for 2024, reflecting the Group's expectation of generating future taxable profits sufficient to utilize fiscal losses and presumptive income excesses, with Nequi S.A. and Renting Colombia being significant contributors to this asset - A deferred tax asset was recognized for 2024, as Group companies are expected to have future taxable profits to offset temporary differences[66] | Company | Base (Millions COP) | Deferred tax recognized asset (Millions COP) | |:---|:---|:---|\ | Renting Colombia | 53,170 | 17,546 |\ | Nequi S.A., Compañía de Financiamiento | 122,988 | 43,046 |\ | Wompi S.A.S | 14,142 | 4,950 |\ | Total | 190,300 | 65,542 | 10.7 Dividends Dividend distributions by the parent company or its subsidiaries are subject to each country's tax regulations and withholding taxes, though dividends received by the Bank from national affiliates are expected to be non-income tax and not subject to withholding tax due to their affiliation within the same business group - Dividend distributions are subject to the tax regulations of each country and withholding at source[68] - Dividends received by the Bank from national affiliates are expected to be non-income tax and not subject to withholding tax, as they belong to the same business group[69] 10.8 Tax Contingent Liabilities and Assets The Group applies tax regulations based on its interpretations, acknowledging the complexity and instability of the Colombian tax system, and despite potential differences with tax authorities, Bancolombia has not recognized uncertain tax positions in its financial statements, adhering to IFRIC 23 criteria - The Colombian tax system's complexity and ongoing amendments may lead to different interpretations by tax authorities[70] - Based on IFRIC 23, Bancolombia did not recognize uncertain tax positions in its financial statements[70] Note 11. Deposits by Customers Deposits by customers increased to COP 257.87 billion as of June 30, 2024, from COP 247.94 billion at December 31, 2023, primarily driven by the 8.53% peso devaluation against the dollar impacting foreign currency deposits, an increase in time deposits, and contributions from Nequi deposits | Deposit Type | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Saving accounts | 111,241,322 | 108,971,334 |\ | Time deposits | 106,871,203 | 98,686,516 |\ | Checking accounts | 35,245,828 | 34,993,066 |\ | Other deposits | 4,510,923 | 5,290,264 |\ | Total deposits by customers | 257,869,276 | 247,941,180 | - The increase in deposits is mainly explained by the 8.53% devaluation of the peso against the dollar as of December 2023, which had an upward impact on foreign currency deposits[71] - Nequi deposits are included, amounting to COP 3.19 billion as of June 30, 2024[71] Note 12. Borrowings from Other Financial Institutions Borrowings from other financial institutions decreased to COP 12.94 billion as of June 30, 2024, from COP 15.65 billion at December 31, 2023, primarily due to cancellations of obligations for advance payments and maturities, particularly from foreign banks, with the Bank maintaining compliance with all financial covenants related to capital adequacy and past due loans | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Obligations granted by foreign banks | 7,370,339 | 9,139,834 |\ | Obligations granted by domestic banks | 5,568,420 | 6,508,772 |\ | Total borrowings from other financial institutions | 12,938,759 | 15,648,606 | - During 2024, the Bank discontinued USD 200 million from its hedging relationship due to the prepayment of financing with Correspondent Banks[74] - The variation in foreign obligations is due to cancellation of obligations for advance payments and maturities[76] - No financial covenants related to capital adequacy ratios, past due loans, and allowances were breached[79] Note 13. Debt Instruments in Issue Debt instruments in issue increased to COP 16.11 billion as of June 30, 2024, from COP 14.66 billion at December 31, 2023, primarily driven by new subordinated bonds from Bancolombia S.A. and ordinary bonds from subsidiaries, partially offset by repurchases, with a significant portion designated as net investment coverage abroad | Issuer | Currency | Face Value (Millions USD) | Balance (Millions COP) | Rate Range | |:---|:---|:---|:---|:---|\ | Bancolombia S.A. (Local) | COP | 3,627,966 | 3,647,807 | 9.81%-14.38% |\ | Bancolombia S.A. (Foreign) | USD | 2,061,981 | 8,440,422 | 3.02%-8.82% |\ | Banistmo S.A. | USD | 691,644 | 2,909,578 | 3.00%-6.35% |\ | Banco Agrícola S.A. | USD | 169,950 | 705,043 | 5.60%-7.66% |\ | Total debt instruments in issue | | | 16,107,674 | | - On June 24, 2024, Bancolombia S.A. issued Subordinated Bonds for USD 800 million, maturing in 2034, with an 8.625% coupon[80] - On June 24, 2024, the Bank repurchased bonds maturing in 2025 and 2027 for USD 0.27 billion and USD 0.28 billion, respectively[81] - Banistmo S.A. issued bonds totaling USD 10.10 billion in 2024[82] - Banco Agrícola S.A. issued ordinary bonds for USD 7.25 billion in 2024[82] - As of June 2024, USD 1.12 billion of debt instruments were designated as net investment coverage abroad[80] Note 14. Other Liabilities Other liabilities increased to COP 14.20 billion as of June 30, 2024, from COP 12.65 billion at December 31, 2023, primarily driven by a significant increase in dividends payable and liabilities related to collection services, partially offset by a decrease in general payables | Category | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Payables | 4,281,945 | 4,746,323 |\ | Dividends | 2,573,539 | 870,846 |\ | Collection services | 1,918,015 | 820,393 |\ | Suppliers Advances | 1,668,539 | 1,653,424 |\ | Provisions | 385,610 | 401,111 |\ | Total | 14,199,672 | 12,648,581 | Note 15. Provisions and Contingent Liabilities This note details various judicial and administrative proceedings and litigations involving Bancolombia and its consolidated entities, with claims exceeding USD 7.11 million, where the Bank assesses the likelihood of loss for each case, classifying contingencies as remote, possible, or eventual, and records provisions where deemed necessary, such as for the Santa Elena property remediation plan, with several cases ongoing and the Bank actively defending its positions - Bancolombia S.A.: Involved in lawsuits regarding a loan vs. lease dispute (Neos Group S.A.S., COP 65 million claim, remote), a public interest class action (Departamento del Valle, possible), and a fiscal responsibility proceeding (Contraloría de Cundinamarca, COP 7.65 million liability, paid and seeking reimbursement)[85][86][87] - Santa Elena Property Remediation Plan: Bancolombia has established a provision of COP 73.52 million for the accomplishment of remaining environmental remediation activities, with Stage III approved to begin in 2025[88] - Fiduciaria Bancolombia: Facing a lawsuit from Quinta Sur S.A.S. (COP 128 million claim, possible), with a favorable judgment issued but pending appeal[89] - Banistmo: Involved in cases including alleged fraudulent property sale (Constructora Tymsa S.A., USD 10 thousand claim, eventual), a dispute over fund transfers (Deniss Rafael Pérez Perozo, USD 5.25 million claim, remote), and alleged fraud in international transfers (DD&C, USD 28.1 thousand claim, remote, pending appeal)[90][91][92][93][94] - Banco Agrícola: Facing a tax dispute with Dirección General de Impuestos Internos El Salvador (USD 6.34 thousand liability, remote, pending initial hearing)[95][96] - Banco Agromercantil: Involved in a lawsuit by Bapa Holdings Corp. (USD 7 thousand claim, remote) and a tax adjustment dispute with Superintendencia de Administración Tributaria (SAT) (USD 13.58 thousand liability, remote)[97][98][99][100][101] Note 16. Appropriated Reserves Appropriated reserves increased to COP 22.63 billion as of June 30, 2024, from COP 20.04 billion at December 31, 2023, reflecting the appropriation of net income and other movements, with the legal reserve serving to strengthen capital and absorb potential economic losses rather than being distributed as dividends | Concept | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Appropriation of net income | 12,751,479 | 12,794,057 |\ | Others | 9,881,356 | 7,250,712 |\ | Total appropriated reserves | 22,632,835 | 20,044,769 | - The legal reserve fulfills two objectives: to increase and maintain the company's capital and to absorb economic losses, and this amount shall not be distributed in dividends to the stockholders[102] Note 17. Operating Income This note details the Group's operating income components, showing an increase in total interest and valuation on financial instruments, a decrease in interest expenses, a rise in commissions income, a decline in other operating income due to lower net foreign exchange and derivatives income, and a net loss from dividends and net income on equity investments primarily due to impairment charges 17.1. Interest and Valuation on Financial Instruments Total interest and valuation on financial instruments increased to COP 1.21 billion for the six-month period ended June 30, 2024, from COP 0.48 billion in the prior year, primarily driven by higher valuation in the portfolio of securities issued by foreign governments and increased repos | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Interest on debt instruments using the effective interest method | 497,912 | 503,397 | 240,138 | 253,026 |\ | Debt investments | 583,100 | 196,876 | 284,827 | (118,407) |\ | Repos | 159,184 | (60,505) | 50,792 | (25,415) |\ | Total valuation on financial instruments | 708,556 | (20,467) | 302,510 | (212,274) |\ | Total Interest and valuation on financial instruments | 1,206,468 | 482,930 | 542,648 | 40,752 | - The increase is mainly presented in Bancolombia S.A., due to a higher volume and higher valuation in the portfolio of securities issued by foreign governments (United States Treasury Bonds), which are directly related to the variations in the exchange rate[104] 17.2. Interest Expenses Total interest expenses decreased to COP 7.70 billion for the six-month period ended June 30, 2024, from COP 8.17 billion in the prior year, primarily due to maturities of debt securities in legal currency and a decrease in the intervention rate issued by the Banco de la República de Colombia | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Deposits | 6,235,521 | 6,461,026 | 3,047,647 | 3,270,957 |\ | Borrowing costs | 734,351 | 813,515 | 332,778 | 424,032 |\ | Debt instruments in issue | 595,519 | 762,372 | 310,348 | 377,204 |\ | Total interest expenses | 7,695,965 | 8,166,276 | 3,756,886 | 4,141,013 | - The intervention rate issued by the Banco de la República de Colombia for 2024 started at 13.00% and closed at 11.75%, impacting deposit and financial obligation rates[106] - The decrease in debt instruments in issue expenses in 2024 is mainly due to maturities of debt securities in legal currency[106] 17.3. Commissions Income, Net Total commissions income increased to COP 3.70 billion for the six-month period ended June 30, 2024, from COP 3.45 billion in the prior year, driven by various banking services, credit and debit card fees, and payment/collection services, with total commissions expenses also increasing, primarily in banking services and sales/collections | Category | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | |:---|:---|:---|\ | Total revenue from contracts with customers Commissions income | 3,699,938 | 3,451,440 |\ | Credit and debit card fees and commercial establishments | 1,581,663 | 1,497,774 |\ | Banking services | 538,362 | 485,609 |\ | Payment and collections | 505,422 | 467,406 |\ | Bancassurance | 494,385 | 467,654 |\ | Fiduciary Activities and Securities | 272,014 | 229,359 |\ | Total commissions expenses | 1,669,168 | 1,451,846 |\ | - Banking services | 788,110 | 713,405 |\ | - Sales, collections and other services | 434,259 | 405,513 | - The Bank recognizes revenue from contracts with customers as 'Commissions income, net', fulfilling performance obligations at a point in time or over time depending on the service[107][108][109][110] 17.4. Other Operating Income Total other operating income decreased to COP 1.37 billion for the six-month period ended June 30, 2024, from COP 2.11 billion in the prior year, primarily due to a significant reduction in net foreign exchange and derivatives income, despite an increase in income from leases and related services | Category | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Leases and related services | 902,031 | 849,020 | 441,935 | 431,320 |\ | Net foreign exchange and Derivatives Foreign exchange contracts | 163,051 | 736,434 | 143,537 | 452,635 |\ | Investment property valuation | 51,820 | 122,485 | 44,001 | 36,998 |\ | Gains on sale of assets | 32,995 | 91,060 | 15,090 | 43,497 |\ | Logistics services | 23,160 | 88,405 | 11,245 | 44,878 |\ | Total other operating income | 1,370,413 | 2,109,605 | 741,084 | 1,119,725 | - The decrease in net foreign exchange and derivatives income corresponds to the management of assets and liabilities in foreign currencies and the volatility of the U.S. dollar[119] 17.5. Dividends and Net Income on Equity Investments Total dividends and net income on equity investments resulted in a net loss of COP (0.14 billion) for the six-month period ended June 30, 2024, a significant decline from a net income of COP 0.23 billion in the prior year, primarily due to substantial impairment of investments in joint ventures, partially offset by income from the equity method and a gain from the purchase of P.A. Cedis Sodimac | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Equity method | 133,312 | 129,052 | 56,023 | 36,769 |\ | Dividends | 33,867 | 56,192 | 23,867 | 32,312 |\ | Impairment of investments in joint ventures | (313,284) | - | (313,284) | - |\ | Others (gain from advantageous conditions) | 13,520 | 54,874 | 13,520 | 54,874 |\ | Total dividends and net income on equity investments | (140,768) | 228,906 | (225,575) | 112,270 | - Impairment of investments in joint ventures for COP 0.31 billion was recognized in the Investment Banking segment, Banking Colombia, and Negocios Digitales[121] Note 18. Operating Expenses This note details the Group's operating expenses, which saw an overall increase for the six-month period ended June 30, 2024, with stable salaries and employee benefits, a rise in other administrative and general expenses due to increased frauds, claims, and commercial litigation, and increased impairment, depreciation, and amortization driven by higher depreciation of premises and equipment and other asset impairments 18.1. Salaries and Employee Benefits Total salaries and employee benefits remained relatively stable at COP 2.68 billion for the six-month period ended June 30, 2024, compared to COP 2.68 billion in the prior year, with salary increases due to inflation indexing offset by lower bonuses and private premiums | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Salaries | 1,211,954 | 1,150,516 | 602,370 | 572,287 |\ | Social security contributions | 314,303 | 284,170 | 154,432 | 141,066 |\ | Bonuses | 307,329 | 443,545 | 153,956 | 209,541 |\ | Private premium | 287,230 | 339,033 | 123,555 | 192,033 |\ | Total Salaries and employee benefit | 2,683,347 | 2,676,774 | 1,348,396 | 1,353,981 | - Salary increases are mainly explained by indexing to inflation[122] 18.2. Other Administrative and General Expenses Total other administrative and general expenses increased to COP 2.44 billion for the six-month period ended June 30, 2024, from COP 2.34 billion in the prior year, primarily driven by higher costs related to frauds and claims, useful and stationery expenses, commercial litigation, and an increase in taxes other than income tax | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Maintenance and repairs | 446,345 | 425,180 | 228,343 | 216,432 |\ | Fees | 404,381 | 431,832 | 215,901 | 224,721 |\ | Frauds and claim | 174,965 | 134,495 | 82,938 | 73,398 |\ | Useful and stationery | 55,022 | 22,769 | 34,090 | 10,068 |\ | Disputes, fines and sanctions | 22,855 | 13,400 | 6,216 | 4,408 |\ | Taxes other than income tax | 780,826 | 694,729 | 389,932 | 346,834 |\ | Total other administrative and general expenses | 2,437,740 | 2,339,859 | 1,259,988 | 1,198,981 | - The increase in frauds and claims is generated mainly in virtual transactions and card frauds[124] - The increase in useful and stationery is mainly generated by the issuance of debit and credit cards[124] - The increase in disputes, fines and sanctions is mainly due to commercial litigation[124] - The increase in taxes other than income tax mainly generates in industry and commerce taxes and value added tax (IVA)[124] 18.3. Impairment, Depreciation and Amortization Total impairment, depreciation, and amortization increased to COP 0.56 billion for the six-month period ended June 30, 2024, from COP 0.53 billion in the prior year, primarily due to higher depreciation of premises and equipment and an increase in the impairment of other assets | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Depreciation of premises and equipment | 325,919 | 294,316 | 160,999 | 152,930 |\ | Depreciation of right-of-use assets | 99,374 | 120,710 | 49,677 | 58,755 |\ | Amortization of intangible assets | 102,687 | 95,307 | 53,881 | 49,627 |\ | Impairment of other assets, net | 36,695 | 20,940 | 25,176 | 9,865 |\ | Total impairment, depreciation and amortization | 564,675 | 531,273 | 289,733 | 271,177 | Note 19. Earning Per Share ('EPS') Basic and diluted earnings per share (EPS) to common shareholders decreased slightly to COP 3,256 for the six-month period ended June 30, 2024, from COP 3,333 in the prior year, reflecting lower net income allocated to common shareholders despite a stable weighted average number of common shares outstanding, with no dilutive potential common shares | Metric | Accumulated 2024 (Millions COP) | Accumulated 2023 (Millions COP) | Quarterly 2024 (Millions COP) | Quarterly 2023 (Millions COP) | |:---|:---|:---|:---|:---|\ | Net income from controlling interest | 3,103,246 | 3,177,268 | 1,439,774 | 1,460,491 |\ | Less: Preferred dividends declared | 770,703 | 770,703 | 385,864 | 385,864 |\ | Less: Allocation of undistributed earnings to preferred stockholders | 672,846 | 707,641 | 283,606 | 293,344 |\ | Net income allocated to common shareholders for basic and diluted EPS | 1,659,697 | 1,698,924 | 770,304 | 781,283 |\ | Weighted average number of common shares outstanding (In millions) | 510 | 510 | 510 | 510 |\ | Basic and diluted earnings per share to common shareholders | 3,256 | 3,333 | 1,511 | 1,533 | - The Bank had no dilutive potential common shares as of June 30, 2024 and 2023[126] Note 20. Related Party Transactions The Bank conducts banking and financial services with its related parties under market-based terms similar to those with third parties, and for the six-month period ended June 30, 2024, no material related party transactions significantly affected the Group's financial position or results - Transactions between companies included in the consolidation process and the Parent company meet the definition of related party transactions and were eliminated from the Condensed Consolidated Interim Financial Statements[128] - The Bank offers banking and financial services to its related parties in terms similar to those of transactions with third parties[129] - For the six-month period ended June 30, 2024, there were no transactions with related parties that materially affected the financial position or results of the Bancolombia Group[130] Note 21. Liabilities from Financing Activities Total liabilities from financing activities decreased to COP 30.20 billion as of June 30, 2024, from COP 31.37 billion at January 1, 2024, primarily due to net cash outflows from borrowings and debt securities, partially offset by foreign currency translation adjustments and accrued interests | Metric | Balance as of January 1, 2024 (Millions COP) | Cash flows (Millions COP) | Foreign currency translation adjustment (Millions COP) | Interests accrued (Millions COP) | Balance as of June 30, 2024 (Millions COP) | |:---|:---|:---|:---|:---|:---|\ | Repurchase agreements and other similar secured borrowing | 470,295 | 110,501 | 14,187 | - | 594,983 |\ | Borrowings from other financial institutions | 15,648,606 | (4,548,843) | 1,103,927 | 734,351 | 12,938,759 |\ | Debt securities in issue | 14,663,576 | (44,786) | 893,365 | 595,519 | 16,107,674 |\ | Preferred shares | 584,204 | (57,702) | - | 28,650 | 555,152 |\ | Total liabilities from financing activities | 31,366,681 | (4,540,830) | 2,011,479 | 1,358,520 | 30,196,568 | - The cash flows related to Borrowings from other financial institutions and Debt securities in issue include the interests, which are classified as cash flows from operating activities[131] Note 22. Fair Value of Assets and Liabilities This note provides a comprehensive overview of the fair value of the Bank's financial assets and liabilities, categorized by the IFRS 13 fair value hierarchy (Level 1, 2, and 3), showing an increase in total assets measured at fair value and a decrease in total liabilities measured at fair value, detailing valuation techniques for various instruments, and providing a rollforward of Level 3 fair value measurements and sensitivity analysis for unobservable inputs | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Assets (Fair Value) | | |\ | Debt instruments at fair value through profit or loss | 17,020,038 | 12,096,407 |\ | Debt instruments at fair value through OCI | 5,350,499 | 6,148,177 |\ | Derivative financial instruments | 3,444,239 | 6,252,270 |\ | Equity securities at fair value | 632,732 | 543,210 |\ | Investment property | 5,423,018 | 4,709,911 |\ | Total Assets (Fair Value) | 33,714,221 | 31,459,076 |\ | Liabilities (Fair Value) | | |\ | Derivative financial instruments | 3,680,218 | 6,710,364 |\ | Total Liabilities (Fair Value) | 3,680,218 | 6,710,364 | - Fair Value Hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), Level 3 (unobservable inputs, significant management judgment)[144][135][136][137][138] - Valuation Techniques: Utilizes official pricing services (Precia) for most instruments. For non-traded securities and OTC derivatives, internal valuation models (discounted cash flows) are used. Investment properties are valued by external experts using comparable prices, direct capitalization, discounted cash flows, and replacement costs[144] - Credit Valuation Adjustment: Measures the effects of counterparty credit risk and own creditworthiness for derivatives, incorporating indicative credit-related pricing (e.g., CDS) or internal credit qualifications[144] | Level 3 Fair Value Rollforward (Assets) | Balance, January 1, 2024 (Millions COP) | Purchases (Millions COP) | Settlement (Millions COP) | Transfers in to level 3 (Millions COP) | Balance, June 30, 2024 (Millions COP) | |:---|:---|:---|:---|:---|:---|\ | Total Assets | 6,254,248 | 1,153,136 | (3,756,039) | 93,859 | 3,661,292 | | Financial Instrument (Level 3) | Fair Value (Millions COP) | Valuation Technique | Significant Unobservable Input | Range of Inputs | Weighted Average | Sensitivity 100 bps Increase (Millions COP) | Sensitivity 100 bps Decrease (Millions COP) | |:---|:---|:---|:---|:---|:---|:---|:---|\ | Debt instruments (TIPS) | 63,854 | Discounted cash flow | Yield | 0.00% to 9.67% | 3.33% | 61,838 | 65,966 |\ | Derivative financial instruments (Forward) | 866,551 | Discounted cash flow | Credit spread / Yield | 0.00% to 40.05% | 6.24% | 864,776 | 868,215 | Note 23. Subsequent Events The Condensed Consolidated Interim Financial Statements were approved for publication on August 9, 2024, with a notable subsequent event on July 8, 2024, involving the repurchase of USD 6.67 billion of ordinary and subordinated bonds issued by Bancolombia S.A., which were designated as hedging instruments for the net investment in Banistmo, leading to a partial discontinuation of the hedging coverage - The Condensed Consolidated Interim Financial Statements were approved by the Chief Executive Financial for publication on August 09, 2024[166] - On July 8, 2024, Bancolombia S.A. repurchased USD 2.01 billion of ordinary bonds and USD 4.66 billion of subordinated bonds, totaling USD 6.67 billion[167] - This bond repurchase resulted in a partial discontinuation of hedging coverage for the net exposure of the investment in Banistmo[167] Risk Management This section provides an overview of the Group's risk management framework, covering credit, market, and liquidity risks, alongside the ongoing transition from LIBOR to alternative benchmark rates, noting positive economic growth in H1 2024 amidst volatility from geopolitical conflicts and local sociopolitical uncertainty, with proactive risk management strategies in place across all risk types - The first half of 2024 was characterized by positive economic growth but also volatility due to geopolitical conflicts, the global electoral super cycle, and local sociopolitical uncertainty[168] - Wenia Ltd., a new entity incorporated in Bermuda, started operations, offering a stablecoin backed by the Colombian peso ('COPW'), digital asset exchange, custody, and transfers, initially for Colombian citizens[168] Credit Risk Credit risk remains the Bank's largest risk, managed through proactive monitoring, customer follow-up, and optimized collection methods, with maximum exposure to credit risk for financial instruments subject to impairment increasing for both loans and advances and off-balance sheet exposures at June 30, 2024, and the Bank utilizing external and internal rating systems to assess credit quality and maintain strict limits - Credit risk is the single largest risk for the Bank's business, managed through proactive credit risk management, monitoring, and follow-up of customers and portfolios[168][172] | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Loans and Advances | 268,108,682 | 253,951,647 |\ | Off-Balance Sheet Exposures | 44,074,762 | 39,578,738 |\ | Loss Allowance | 16,926,461 | 16,477,722 |\ | Total Maximum Exposure to Credit Risk | 295,256,983 | 277,052,663 | Credit Risk Management - Loans and Advances The Bank maintains proactive credit risk management for loans and advances through continuous monitoring, customer follow-up, and the development of tools and models to optimize collection, guided by established policies, procedures, and methodologies within its Risk Management System (SIAR in Colombia), with country risk management guidelines remaining consistent with the prior year - Proactive credit risk management is maintained through monitoring and follow-up of customers and portfolios, evaluation of conditions, and development of methods, tools, and models to optimize collection[172] - Risk management is developed through compliance with policies, procedures, and methodologies established in the Risk Management System (SIAR)[172] - Country risk management guidelines, policies, and methodologies are maintained in accordance with what was revealed as of December 31, 2023[173] Credit Quality Analysis - Loans and Financial Leases At June 30, 2024, the consolidated loan portfolio increased by 5.6% in local currency, driven by peso devaluation and increased disbursements in Commercial and Corporate segments, though the 30-day past due loan ratio rose to 5.60% (from 5.39% in Dec 2023), mainly due to deterioration in the commercial and mortgage portfolios, despite improvements in the consumer portfolio - The consolidated portfolio balance increased by 5.6% in local currency at June 30, 2024, compared to December 2023, partly due to peso devaluation and increased disbursements in the Commercial and Corporate portfolios[174] - The 30-day past due loan ratio (consolidated) stood at 5.60% as of June 2024, an increase from 5.39% in December 2023[174] - Non-performing loans are mainly impacted by deterioration of the commercial portfolio in the SME and business segments in Colombia and Panama, and the mortgage portfolio in all regions except El Salvador. The consumer portfolio showed general improvement[174] Special Customer Administration (AEC) The Bank employs proactive credit risk management through a periodic committee that identifies and manages risk situations, offering tailored client solutions, with the total watch list amount decreasing slightly to COP 27.12 billion at June 30, 2024, and a lower overall allowance percentage of 19.95% compared to December 31, 2023 - The Bank implements proactive management in monitoring credit risk through extraordinary diagnostic spaces, early warning alerts, and a periodic committee to identify and manage risk situations[175] | Metric | June 30, 2024 (Millions COP) | December 31, 2023 (Millions COP) | |:---|:---|:---|\ | Watch List - Total Amount | 27,119,863 | 27,229,184 |\ | Watch List - Total Allowance | 5,411,641 | 5,872,064 |\ | Watch List - Overall Allowance % | 19.95% | 21.57% | Risk Concentration – Loans and Advances This section details the concentration of loans and financial leases by economic sector, maturity, and past due days, showing Consumer Services, Commerce and Tourism, and Construction as the largest economic sectors as of June 30, 2024, with the majority of loans having maturities between 1 and 15 years and most being current (0-30 days past due) | Economic Sector | June 30, 2024 (Millions COP) | |:---|:---|\ | Consumer Services | 91,595,049 |\ | Commerce and Tourism | 34,817,353 |\ | Construction | 24,189,128 |\ | Food, Beverages and Tobacco | 10,432,182 |\ | Agriculture | 7,989,019 |\ | Total | 268,108,682 | | Maturity | June 30, 2024 (Millions COP) | |:---|:---|\ | Less Than 1 Year | 45,463,839 |\ | Between 1 and 5 Years | 100,802,414 |\ | Between 5 and 15 Years | 89,221,076 |\ | Greater Than 15 Years | 32,621,353 |\ | Total gross loans and financial leases | 268,108,682 | | Past Due Period | June 30, 2024 (Millions COP) | |:---|:---|\ | 0 - 30 Days | 253,093,079 |\ | 31 - 90 Days | 4,552,106 |\ | 91 - 120 Days | 1,344,931 |\ | 121 - 360 Days | 4,530,460 |\ | More Than 360 Days | 4,588,106 |\ | Total | 268,108,682 | Credit Risk Management – Other Financial Instruments The Bank manages credit risk for its other financial instruments by controlling exposure to potential losses from issuer or counterparty defaults, maintaining strict term, credit, and counterparty limits, and utilizing master and margin agreements to minimize exposure and ensure compliance with legal limits and risk appetite - The portfolio is exposed to credit risks from default in payment of coupons, principal, and/or yields/dividends of financial instruments by issuers or counterparties[185] - The Bank maintains c