Feb 18, 2015
Executives
Jaime Velásquez - Chief Strategy and Financial Officer José Humberto Acosta - Chief Financial Officer Juan Carlos Mora - Chief Operating Officer Rodrigo Prieto - Chief Risk Officer Jorge Humberto Hernández - Chief Accounting Officer Alejandro Mejia - Investor Relations Manager Juan Pablo Espinosa - Chief Economic
Analysts
Philip Finch - UBS Thiago Batista - ITAÚ BBA Tito Labarta - Deutsche Bank José Barria - Bank of America Saúl Martínez - J.P. Morgan José Restrepo - Serfinco David Santos - Compass Group Boris Molina - Santander Carlos Macedo - Goldman Sachs
Operator
Good day, ladies and gentlemen. And welcome to Bancolombia’s Fourth Quarter 2014 Earnings Conference Call.
My name is Lorraine, 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 the future filings and press releases or verbally, address matters that involve risk and uncertainty. Consequently, there are factors that could cause actual results to differ materially from those indicated in such statements, including changes in general, economic and business conditions, changes in currency exchange rates and interest rates, introduction of 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 the SEC.
With us today is Mr. Jaime Velásquez, Chief Strategy and Financial Officer; Mr.
José Humberto Acosta, Chief Financial Officer; Mr. Juan Carlos Mora, Chief Operating Officer; Mr.
Rodrigo Prieto, Chief Risk Officer; Mr. Jorge Humberto Hernández, Chief Accounting Officer; Mr.
Alejandro Mejia, Investor Relations Manager; and Mr. Juan Pablo Espinosa, Chief Economic.
I’d now like to turn the presentation over to Mr. Acosta, Chief Financial Officer of Bancolombia.
Please proceed, sir.
José Humberto Acosta
Thank you. Good morning.
And welcome to our fourth quarter 2004 (sic) [2014] results conference call. It is a pleasure to be with you, who 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 at our Investor Relations website.
We want to start this conference call summarizing the path that Bancolombia has improved over the last five years. In order to improving perspective the current situation on the fore coming steps in our business plan.
Perhaps, the most relevant part of our strategy since early 2010 has been the focus on growth. The size of our assets grew 2.4 times over that timeframe and our loan portfolio is 2.6 times that amount at the end of 2009.
This remarkable growth has come along with some changes in the microeconomic, competitive and regulatory environment. In one hand, the lower inflation rates in the Colombian economy have increased the level of liquidity, which has made the competition tougher.
The outcome of this mix of factors has been the compression of margins from high single-digit five years ago to around 6% today. On the other hand, in [post-banking] [ph] network we required more capita to-date to generate the same amount of net income.
The growth that we experienced in 2010 and ’11 consumed capita that we replenished in 2012 and since than the base of growth has been around 20% CAGR. Additionally, we did a significant acquisition, the Banistmo operation in Panama.
We completed the cycle with replenish of capital in early 2014. With the forecast of more moderate economic growth in Colombia and low double-digit loan expansions in 2014, we switched to our strategic focus on profitability and more moderate growth.
We want to extra the value of the assets that we have originated and the research of demand are going to be in line with these interest rates. Regarding, Banistmo, 2014 was a year [falling to bearing] [ph] this situation under Bancolombia’s control.
We integrated several IT applications included the core banking system. During the year we also posted some early gains in the new operational model.
We achieved a reduction of historical past due loans from 9.94% to 1.66%, which means that we released $120 million in allowances. This was possible due to a setup of our local collections area in Panama, working on the brand and achieving recognition was another progress we did in Banistmo in 2014.
Today, the bank is well regarded by both corporate and retail clients and that will needed to grow the loan portfolio after several accused of reduction in client. Despite having a full year of Banistmo expenses, there is only two months in 2015 operating expenses only grew 13%, with a more moderate growth forecast.
Our efforts are now focusing been able to grow revenues faster than expenses and therefore, improving the efficiency or cost to income ratio. This will be the trend in 2015 and 2016.
Case information was another front where we put our efforts in 2014 and plus continue doing so in the next coming years. Remember how fees were only growing at a pace of 6% in 2013 and how at the beginning of 2014, we were forecasting 8% to 10% growth.
During the year, we put in place some specific initiatives to generate more fees. The first was to promote the utilization of our channels and products to purchase goods and services.
These include the issuance and use of debit and credit cards in merchants. Second, we did some adjustments to our pricing decision on fees which also contributed to real growth.
And third, we launched new and improved solutions for our corporate clients, in particular, cash management, corporate trust products and international trade financing. These ways fees grew 17% during the year, much better than we forecasted.
Our intention is to keep growing this line between 10% to 12% in 2015. Having said these about the main companies of our business, I would like to present now the net income of 2014, 1.89 trillion Colombian pesos, which represents an increase of 24% from compared to 2013 and a return of shareholder’s equity of 12.5%.
This return on equity was generated despite of capital increase at the beginning of the year, that was $1.3 billion. All the operating trends of this year were positive and reflect the materialization of our strategic focus on profitability and efficiency.
The operating income grew 24% during the year while operating expenses grew only 15%. In particular, our lengthy business now including our full year of management resource, followed a path of consistent growth as NIM expanded and volumes increased.
Now, we would like to continue with a brief discussion about the economic environment. For these purposes, we have Juan Pablo Espinosa, Bancolombia Chief Economist who will elaborate more on these moderates.
Juan Pablo?
Juan Pablo Espinosa
Thank you, José. Now I will ask you to go through slide #3 in the presentation.
As you can notice in 2014, Colombia grew at an estimated rate of 4.7% well above the average of 0.2% for Latin America but the pace of growth has moderated recently reflecting a slower expansion of consumption and a more pronounced negative contribution from net experts. We expect that these moderations will intensify this year because the lumping commodity prices will translate into lower national income and a slowdown of investments.
However, the diversification of the Colombian economy, the resilience of internal demand and the execution of infrastructure project will serve as buffers against the shock. Hence we forecast the growth rate of 3.4% in 2015 and 3.7% in 2016.
Lower oil prices will of course affect the country’s external position given that it accounts for more than half of Colombian exports. We anticipate that the current account deficit will widen from 5% of GDP last year to 6.1% in 2015.
Going forward, a real depreciation of 13% this year reduce demand for imports and an eventual change in the trends of oil prices could lead to a correction of this deficit to 4% of GDP in 2016. In terms of the exchange rate, we expect an average of 2,400 for this year.
Public finances are also quite sensitive to the reduction of oil prices because almost 20% of Central Government revenues are related to our activity. We estimate that the decrease in public revenues will be greater next year, leading total Central Government deficit to 3.3% of GDP, 1% higher than the structural deficit path set in the fiscal rule.
Regarding prices, we expect that the acceleration of inflation that we’ve seen in the past few months will start to lose ground in the second quarter of the year. But this process will be slow in part because we think that the transmission of currency depreciation to consumer prices has not concluded yet.
Therefore we forecast that inflation will move gradually from 3.8% by the end of this quarter to 3.4% in December. In the monetary policy front, we think that the repo rate will be in whole this and the next year.
Our call is based on the fact that inflation will remain top of its target and that the Central Bank will be especially cautious that inflation expectations do not deteriorate. Also because we consider that the oil price shock has permanent effect on the economic performance which should not be compensated with monetary stimulus.
In addition, our moral commodity policy would stimulate demand for imports which made the current account deficit even worse. Let me conclude this section by saying that prospect of lower oil prices over the medium term is a new challenging reality to which Colombian economy is already adjusting.
But despite the risk that this entails, today the countries will equate to face these shocks and its external demand remains the main engine of growth. This is why we think that Colombia will continue to have the least volatile business cycle and will display one of the highest growth rates across major Latin American economies.
After this quick review of the economic context, let me turn the presentation back to José Acosta, who will discus the bank’s result.
José Humberto Acosta
Thank you, Juan Pablo. Now on slide four, we see the evolution of assets and its composition.
During the quarter, the proportion of loan as a percentage of the total asset was 69% as we continue focusing in our lending business. The securities portfolio was 9%.
The size of the securities portfolio is 1% lower than one year ago and deterioration remains low at a level of 19 months. We continue originated loans with a strict underwriting standards in order to maintain the high credit quality of the loan portfolio, especially in the consumer segment.
The loan growth in Colombia pesos reached 5.4% during the quarter and 13.1% during the year, driven by financial leases and commercial loans. The quarterly growth is explained by seasonal demand of loans, in particular, small and medium-size companies that require working capital for the last months of the year.
We focused our growth in the less risky products as we want to maintain a very healthy balance sheet. On the other hand, U.S.
dollar denominated loans grew 3.7% during the quarter driven by commercial loans in our operation in Banistmo. The 18% depreciation of the Colombian peso versus U.S.
dollar during the quarter caused the growth of U.S. dollar loans to be higher when it’s measured in Colombian pesos.
Let’s remember that Bancolombia balance sheet is fully matched in terms of currency which reduced the impacts of FX valuations on the shareholders’ equity. Today loans denominated in dollars represent 36% of the total loan book.
During the last year, the overall loan portfolio grew 12% but the depreciation of the Colombian peso during the quarter caused the overall growth in pesos was 20.2%. As we have shared with you in the past, Bancolombia loan book in Colombia is a proxy of the overall economy.
Nevertheless, oil and gas represents today around 2% of the total loan book due to the recent developments with international oil prices. We oversee that sector in order to prevent any deterioration of the notes.
We’d like to emphasize the fact that the net interest income grew 22% more than the growth of the loan portfolio. Finally, we expect the loan growth target for 2015 at around 10% to 15%.
Now in slide five, we present the snapshot of the credit quality at the end of the quarter. In general terms, we see the portfolio with a healthy quality, well covered by allowances and with past due loans under control.
The 30-day past due loans total to total loans ended in the quarter at a level of 2.9%, lower from the September ratio. The 30-day coverage ratio increased to 154%.
We forecast to have a 30-day coverage ratio of around 150% in the medium-term. We believe that is more than enough to offset potential credit losses that the bank will eventually have.
Similarly, past due loans of 300%, 3% to 4% of gross notes. As we have a significant component, 30% of our loan portfolio is outside Colombia.
The 90-day threshold for maturing past due loans gains more relevance, that’s why in the next slide we will underline the 90-day past due loans. In slide #6, we compare the evolution of 30-day past due loans, which is the Colombian standard of the 90-day past due loans, which is a better indicator of credit quality, as we have a significant portion of our assets in countries that use their standard.
90-day past due loans has been very stable over the last two years, as a result of our growth credit origination process. We continue seeing a positive performance of the credit quality of Banistmo, product of a more proactive and disciplinary maintenance and collection process, which we put in place in the first months of the acquisition.
At the beginning of the year in 2014, Banistmo 90-day past due loans represented 1.94% of total gross loans. But today, they represent only 1.5%.
This means that today Banistmo has the lowest 90-day past due loan ratio among all subsidiaries of Bancolombia. Overall, the 90-day coverage ratio is 274%, which we believe is more than enough to absorb potential credit losses.
Slide #7 shows the evolution of provision charges, which were 378 billion Colombian pesos during the quarter. It was 1.48% of average gross loans when analyzing.
For the whole year 2014, the cost of credit decreased less 1.47% of gross loans, lower than the 1.6% of 2015. In the shaded row of the table at the bottom, we present the amount of loans that become 30-day past due during the quarter, a 342 billion pesos reflects a lower deterioration compared to the third quarter.
The most important thing regarding loan quality is that bills that were originated over the last year represent today a very good performance as a result of the three credit underwriting standards and they should not present abnormal deterioration in the next coming months, as we must focus in commercial loans and risks, which are the less risky products in our portfolio. We feel comfortable with the evolution of the loan portfolio and forecast to have provision charges between 1.5% to 1.8% of gross loans during 2015.
Moving on slide #8, we see the evolution of net interest income and funding costs and its composition. NII for last quarter of last year was 1.69 trillion Colombian pesos, the highest record in Bancolombia’s history and 25% above the same quarter of the previous year and 25% above the same quarter of the previous year.
Even more important is the fact that the NII for the whole year 2014 was 22% higher than in 2013. This is a combination of two factors, more volume of loans and higher NIMs in existing loan portfolio.
The reduction of the funding cost in 2014 played the key role in expanding the net interest income and the NII. You can see on the bottom of the left-hand side table how Bancolombia reduced the overall funding costs by 12 basis points in 2014, even when interest rates of the Colombian Central Bank went up by 125 basis points.
During this year, we focus our efforts not only on keeping the funding costs as low as possible, but also in increasing the average time to maturity of the stock of liabilities, in particular CDs and long-term debt. Our goal is to keep funding cost as low as possible while maintaining a conservative approach to liquidity risk management in an effort to defend or expand the net interest income and growth in NII.
We have in our favor the asset sensitive condition of our balance sheet, which is beneficial for NIMs in a sluggish environment. Slide #9 shows the evolution of the net interest margin.
During last year, we saw a favorable evolution of NIM, as the yield on assets improved and we reduced the funding costs. These trends also contributed to the growth of NII.
The NIM from loans ended at a level of 6.2% in the last quarter of last year, stable as compared to the third quarter and expanded 20 basis points as compared to the first, to the last quarter of 2015. The NIM expansion that we achieved during the year is more remarkable when we consider that last year we had that greater proportion of the loan portfolio, denominated in U.S.
dollar and those loans tend to have a lower NIM. And that was mainly explained because of the acquisition of Banistmo.
The securities’ NIM was 3.2%, due to the gains of Colombian government securities at the end of the quarter. As we mentioned at the beginning of this presentation, the Colombian Central Bank increased the repo rate 125 basis points to 4.5% in the meetings held this year.
We capture a positive impact of these hikes and forecast that NIM should be around today’s level in the next coming quarters. Fees are presented in the slide #10.
During last year, fees grew at a very healthy pace. They expanded 70% for the whole year, a historic record in these components of our revenues.
Additionally, fees grew 4% during the quarter and 12% compared for the fourth quarter of 2013. We continue experiencing more credit and debt card transactions during this quarter, product of our effort to promote the use of plastic to pay in stores and increase the number of credit cards in new segments, in particular online purchases and more cards outstanding contributed to the annual growth.
Seasonal factors also contributed to a sound performance of these fees. As typically in the last months of the year, people intend to use more plastic for their holiday purchases.
Additionally, we saw a sustained level of insurance distribution fees, which generated 212 billion Colombian pesos during the whole year of 2014. Finally, we saw a good performance of our asset management and investment banking business, product of our greater volumes of assets under management and more deals during the quarter.
We forecast the fee growth of 10% to 12% during 2015. In slide 11, we present the evolution of expenses.
The efficiency improved during 2014 as operating income grew 24% while operating expenses only grew 13%. The expenses in our operation in Colombia, which represent 70% of the business, only grew 4%.
Those are very commitments with efficient in Colombia. The expenses that we have in U.S.
dollar represent more pesos due to the 2014 depreciation of the Colombian pesos. We had 13% growth in expenses during 2014.
It’s also a number that includes 12 months of operations compared with only two months in the previous year in 2013. Seasonal factors and the way we reflect expenses in the income statement as we are including them impacted the evolution of OpEx during this year.
This seasonality caused the cost of income to go up during the quarter. Something relevant during the quarter is the change in the amortization period of the goodwill that we have in our books.
We changed from 20-year to 10-year amortization scheme and this increased the goodwill amortization charges. The goal of this change was to align the financial treatment of goodwill with the fiscal treatment.
During previous quarters we were charging around 50 billion Colombian pesos per quarter, but in the last quarter of last year, we charged 242 billion Colombian pesos. Our guidance for this year is lower than the 8.5% at the end of September.
The decrease was the result of the growth of assets. It is necessary to highlight the treatment of ongoing earnings under the new Colombian capital regulation.
The earnings of this year are not considered in Tier 1 until shareholders are prepared them and become retained earnings. As a result of the 1.89 trillion Colombian pesos of earnings generated during last year are not included in the Tier 1 calculation.
After the first quarter of this year numbers, the reported Tier 1 will increase as a result of impairment of earnings, maintaining that level at the level that we designed which is 8% to 9% Tier 1. For the Tier 2 ratio we raised additional subordinated bonds in pesos in September 2014.
This contributed to increase the overall BIS ratio to 13.3%. Slide #13 shows the return on assets and return on equity of the bank.
Return on equity for 2014 was 12.5%, a number that is in line with our expectations, especially where we consider the faster goodwill amortization in the fourth quarter and the capital raise at the beginning of this year. Return on assets was 1.4% and the trend is that this metric should continue growing towards 1.4% to 1.5% in 2015.
After presenting these slides with the fourth quarter numbers to you, I would just like to highlight where we stand today on our plans for the near future. First, all the operating metrics of the business are moving in the right direction, in particular, the operating income, which is the sum of the net interest income and commissions.
Second, the performance of deposit loans and our level of provisions in the last quarter reflects healthy and strong grown portfolio and prudence in the origination standards. And third, our balance sheet reflects a moderation of growth of the loan portfolio.
The focus today for Bancolombia is to increase the profitability of our assets. Having said these, we are happy to take any questions that you might have.
Thank you.
Operator
[Operator Instructions] And our first question comes from Philip Finch from UBS. Please go ahead.
Philip Finch
Good morning, everyone. Thank you for the presentation.
My question is related to the goodwill amortization that you’ve fastened. You broke how -- broke down just about when you’re saying your guidance for 2014 was that you expect it to come down to -- and related to that -- so could you repeat that please?
And related to that, the tax rate, corporate income tax rate obviously was very low in the fourth quarter. I assume that’s related to this.
Could you confirm that? And going forward, what you think is the sustainable level?
Thank you.
José Humberto Acosta
Thank you, Philip. Yes, the level of taxation that you see which is 8%, is basically the result of that that include that an increase of the goodwill amortization to 10 years that was the reason one the level of taxation is very low.
And other point is again we want to align the treatment of financial account with tax accounting and remember that the taxation in Colombia that will take us a big -- take base numbers at the end of 2014. They are not taking into consideration for the next four years the numbers on their IFRS.
That’s the reason why we decided to do that, to align that.
Philip Finch
Thank you. That’s very helpful.
So in terms of the -- my first question, the goodwill amortization charge outlook for 2015, should we assume that to be closer to zero?
José Humberto Acosta
That will not be reflected in our financial statements, because it not takes into consideration under IFRS. Remember that goodwill amortization only were under Colombian GAAP.
So that means that the next coming years under the financial accounting system you will not see it reflected the amortization of the goodwill.
Philip Finch
Understood. Thank you.
And in terms of the effective tax rate going forward, please?
José Humberto Acosta
Yes. Based on the new regulation of the new taxation in Colombia, we are expecting an increase of our tax from 27% that around to 32%, 33% in 2015.
Philip Finch
Thank you very much indeed.
Operator
Thank you. And our next question comes from Thiago Batista from ITAÚ BBA.
Please go ahead.
Thiago Batista
Yes. Hi, guys.
Thanks for the opportunity. I have one question regarding the ROE.
Last year in 2014, your ROE was 12.5% and you had commented that the focus of the banks from now is on the profitability. So my question is what is the level of profitability you believe is feasible for the next two or three years and what will be main lines that would lead to this better profitability?
José Humberto Acosta
Thank you, Thiago. Yes, the reason why return on equity this year or last year was 12.5% is because again we increased the level of capital at the beginning of this year, but this is relevant because this is one of the use in which the NII increased a lot.
So we expect to go back the levels in the next coming years at around 14% to 14.5% in the next coming two, three years using the total capacity of capital that we raise in last year will reduce the next coming two years basically [2017] [ph].
Thiago Batista
Okay. If I could ask the second question about asset quality, could you comment about your expectation on delinquency ratio and also the level of loan provision expenses in ‘15?
José Humberto Acosta
Yes. Thiago, in terms of cost of credit, we are not expecting a big change because as we mentioned during the presentation, we don’t foresee any specific concern regarding the [indiscernible] or regarding the corporate clients.
So we -- our guidance is to maintain cost of credit 1.4% to 1.6%. And again, we will talk about past due loans at a level of 3%, at around 3% area, meaning that the 30-day past due loans.
Thiago Batista
Okay. Thank you.
Thank for the answers.
José Humberto Acosta
Yes, Thiago.
Operator
Thank you. And our next question comes from Carlos Macedo from Goldman Sachs.
Please go ahead. Pardon me, Carlos, your line is now open.
We’re going to go to the next question. Sorry, the next question from Tito Labarta from Deutsche Bank.
Please go ahead.
Tito Labarta
Hi. Good morning.
José Humberto, thank you for the call. My question is in terms of your net interest margin.
We saw a good expansion in the quarter mainly due to the securities portfolio and you mentioned partially due to the devaluation of the currency in a quarter? But could you quantify how much of that was due because of the currency depreciated and you also mentioned that you expect margins to remain around current levels?
Is that including near the spike we saw in the securities margin or how should we think about the total net interest margin and the securities margins going forward as the currency kind of stabilizes? Thank you.
José Humberto Acosta
Thank you, Tito. Basically, yes, last quarter, the NIM of the securities portfolio went up and because of the volatility of the market.
But, again, 70% of our assets are non-portfolio now that was mainly the reason why NIM increased and they were focused last year on producing funding costs. What we expect this year regarding the loan portfolio, we expect that at least to sustain the NIM based on the assumptions that the DTF will increase and as you know very well we are asset sensitive, so we probably will assume a little bit increase of the NIM on the loan portfolio basis.
On the securities portfolio we don’t expect need of big changes for the first quarter of this year, depends on the level of volatility. But again, the NIM impact was mainly reflected because of the loan portfolio, because of the reducing of funding costs and because of the high level of quality of the loan portfolio.
Tito Labarta
But so just to follow up, if you look at the loan net interest margins was actually flat in the quarter and you saw a big spike in the securities margin? So just trying to understand little bit more kind of what drove that in the quarter, because I know the number can be volatile a bit, but it's been close to zero, some of the last few quarters?
Yeah, so I'm not sure I understand why you're saying that the loans drove the increase in margin this quarter?
José Humberto Acosta
Loan sustained the same level. The NIM of the loan portfolio today is 6.2%.
What we expect in the next coming quarters, an increase of the funding costs, because the interest rate of the Central Bank has increased. But on the other side, we also expect an appreciation of the DTF, so that will be also reflected in the better NIMs.
So at the end of the day, if the loan portfolio, we don't expect a big change. So we expect to maintain the level of 6% to 6.2%.
We expect maybe as you said, the volatility of the securities portfolio, but that would be 2% to 4%. But we are not sure about what will happen with that and that is only 9% of the total assets.
Tito Labarta
Okay. So the securities margin should be between 2% and 4% you are saying?
José Humberto Acosta
Yes.
Tito Labarta
All right. Thanks, José Humberto.
Operator
Thank you. And our next question comes from José Barria from Bank of America.
Please go ahead.
José Barria
Hi. José Humberto and team, thanks for taking my question.
Just a follow-up on operating expenses, the line was disconnected when you were talking about the guidance for 2015, so if you repeat that, that would be great? And then on the expenses, what was the main driver, I mean, I am looking at the fourth quarter is a big jump in operating expenses, obviously, a lot of that had to do with the currency?
But I wanted to try to strip that out and understand what is driving such a big increase other than seasonality in operating expenses, when I look at the bonus provisions and when I look at administrative expenses, the growth in the fourth quarter was very high? So can you just comment on that and then also on the guidance?
José Humberto Acosta
Thank you, José. Yes.
I have to say that we feel so proud about the performance of operating expenses in Bancolombia, because if you don’t agree with 4%, that means we are doing our job in terms to maintain under controlled expenses. But remember in our previous conference, we change the way we reduce total expenses.
In the previous years, we maintain a kind of provision for expenses every month, based on the assumptions that it has some seasonality. But last year we decided to align with the IFRS standards, which means now we reduce the real expenses that we are doing.
And if you check the numbers, there is a clear seasonality in the last quarter of that year, because all the stakeholders of the bank tend to increase the level of expenses at the end of the year and that is compensate with the first quarter than you see a very low level of expenses. Probably, this year we will experience the same.
So, expenses under IFRS, it couldn’t be flat, that will be very seasonal and that’s a reason why they are high a the other one is very clear because of a devaluation.
José Barria
Okay. Can you give us a rough idea more or less what percentage of the expenses are in U.S.
dollars, is it similar to …
José Humberto Acosta
20%
José Barria
Sorry, go ahead.
José Humberto Acosta
At around 25% to 30%, 70% on the local currency and the 70% grew 4%, and rest grew because of the FX.
José Barria
Okay.
José Humberto Acosta
And remember that during the year the devaluation was 466 pesos, but in the last quarter it happen 370. So, around 75% of the devaluation happens during the last quarter, impacted in a very strong way all the numbers of the bank.
José Barria
Okay. Thanks.
And then on the guidance for operating expenses for 2015?
José Humberto Acosta
The 8% to 10% and the main rational behind that is remember that we are in the middle of the process with Banistmo implementing IT platform, so that we expect to end at the end of the third quarter of 2015.
José Barria
Got it. Thank you very much.
Operator
Thank you. [Operator Instructions] And our next question will come from Saúl Martínez from J.P.
Morgan. Please go ahead.
Saúl Martínez
Hi, guys. My question is on capital, 7.7% Tier 1, I understood this quarter you had to move, you also had a bit of an impact of the currency inflating up the risk-weighted asset growth and obviously, more than capital grew and you have the absence of capitalized earnings?
Can you just give us a sense or if adjusting for the capitalization of earnings, where you're Tier 1 stands at, by my rough calculation, it should be about 8.5%, is that right? And is that a level that you feel comfortable with right now because on the surface of Core Tier 1 of 8.5% to a lot of folks in the investment community does not seem to be excessively comfortable?
José Humberto Acosta
Thank you Saúl. Yes, as you remember our guidance to be comfortable in terms of Tier 1 is 8% to 9%.
As you can see, we have the lowest level in past due loans in 90 days and the lowest level in 30 days. So we have a very strong coverage in terms of provisions that help us a lot for difficult times.
And you are right, probably on March our level of Tier 1 could be at the highest eight, which mean 8.8% to 9%. So that’s the number that we have been discussing with you guys with the rating agencies.
And again based on the assumptions that we are maintaining a very strong level of past due loans, very well capitalized because our dividend payout is -- that would be one third of our net profit. We are able to sustain the growth.
And the other thing is we are expecting to grow only 2 or 2.5 times the GDP growth. So you saw the numbers this year, we only grew 13% on that yield [indiscernible] effects.
But we are expecting to grow this year 12% in line with our expectations as same as we did last year, Saúl.
Saúl Martínez
Okay. Thank you so much.
Operator
Thank you. And our next question comes from José Restrepo from Serfinco.
Please go ahead.
José Restrepo
Hi. Good morning.
Congratulations on the results. I want to know if you can give us like a broad view which will be the bigger effects of the adoption of IFRS in the coming quarters?
José Humberto Acosta
Yes we are -- of course, we are right now running and trying to release the first among -- under our IFRS. We did the calculations last year.
And we have to say that we don’t have a major impact under IFRS. Obviously we are shaking the leasing business, we are shaking on a specific profits now we are having but at the end of the day based on the numbers that we were around last year.
On the pervious quarter, we are not expecting a big change in our disruptor of our balance sheet. May be the big one change will be the amortization of goodwill and that will be reflected in our numbers this year because the profits come from the operation we go directly to our P&L
José Restrepo
All right. Thank you.
Operator
Thank you. And our next question comes from David Santos from Compass Group.
Please go ahead.
David Santos
Yes. Thank you.
I want to ask about the wealth tax and the impact it might have on the results for -- results in ‘15 and how it will be treated under IFRS?
José Humberto Acosta
Yes. The impact will be relevant because that will be an increase of 9% of the total tax -- taxation.
And obviously we will let you know in the next coming quarter how the things are going but obviously that would be -- that would be an impact on the P&L and that is because of the marginal taxation. It’s around 9% in terms of our taxes.
You know very well, it’s 1.15 that obviously -- that would be impacted in our financial statements under IFRS, you have to register in the month of January.
David Santos
Okay. Thank you.
Perfect.
Operator
Thank you. And our next question comes from Boris Molina from Santander.
Please go ahead.
Boris Molina
Yes, I wanted to elaborate a little bit more on the wealth tax. There was a debate about where the wealth tax would be charged as a one charge at the beginning or was it going to be phased in over time?
And do you need to record the first tax assets to record the full amount of the tax given that’s it’s calculated on the basis of the year-end equity? And we say this because at the end of the day, the charge is going to be pretty big.
And you already have a substantial impact on your capital ratios and under Colombia regulation, your base of fee is not fully implement, so you still have to do charges for operating risks for instance. So, we would like to see, kind of like the fully loaded base of free capital for Bancolombia is going to look like once everything is fully applied in that sense.
We think it’s pretty weak. So could you repeat again what is the specific treatment of the wealth tax under IFRS?
Is it going to go through the income statement or charge versus equity and do you need to create a deferred tax asset?
José Humberto Acosta
Okay, Boris. Thank you.
Yes, we have to do it every year in the month of January and we have the possibility to do it through P&L or to do it through a balance sheet. So, I mean, we are double checking the possibility to go directly to our P&L.
But that would be reflected in the month of January and depend on the condition of each bank.
Boris Molina
So, it could be the month of January. You have to reflect the full impact of the one-time charge for 2015?
José Humberto Acosta
Yes, Boris. Under IFRS, base fees taxation goes directly to our P&L.
Under the Colombian regulation, we’ll have the possibility to go to the P&L or to go directly to the balance sheet. So, we have to align both under P&L at the first quarter of this year under IFRS treatment.
Boris Molina
Okay. Wonderful.
Thank you.
Operator
Thank you. And our next question comes from Carlos Macedo from Goldman Sachs.
Please go ahead.
Carlos Macedo
Good morning, gentlemen. Hopefully, you can hear me now.
A lot of the questions have been answered. I have a question on -- sorry, on Panama and Banistmo.
You gave us a little bit of insight, when you expect to roll out the platform, the IT. Can you talk a little bit about the profitability of the bank, how it’s coming long, if you are seeing integration work out, what are your targets or profitability there in the short to medium-term?
Thank you.
José Humberto Acosta
Thank you, Carlos. Yes, as we mentioned during the presentation that Banistmo operation is running very well.
We are increasing the assets at a base of 10%. We are expected to close the IT platform at the end of this year.
We expect to go back to the level of return equity in that operation at around 12%. So, again, the business in Banistmo is going back growing, return equity 12%, past due loans under control.
On their operating point of view, the things are running as expected and the most relevant point is the profits that have from Banistmo that would be reflected directly on the P&L of the Bancolombia.
Carlos Macedo
Okay. So just to get it right directly in the sense that they will not incur additional taxes in Colombia?
José Humberto Acosta
No, the taxation is basically -- we are paying the tax based on the resource of the banks. So that will be paid here in Colombia, once you incorporate the numbers of Banistmo operation.
Carlos Macedo
Okay. And so through the end of the third quarter, you’ll be running the integration of systems.
How will profitability be affected once that comes off?
José Humberto Acosta
The idea is -- the IT platform will be reflected in the performance of the bank in 2016 and ’17, mostly on the retail business, mostly on the liability side. Today, Banistmo operation is growing at a very healthy pace on the asset side because we are focusing on corporate and the way we are funding that is through international bank and through international markets.
The next coming two years because of the IT platform will be implemented and the customer service will be a very good opportunity to increase the customer base. We will do see an increase of the liability side funding the growth of the business in Banistmo.
So that’s what we are expecting in the Banistmo operation. The first two years focus on oriented on asset growth under our standards and the next coming years focus on oriented on the liability side in order to provide funding for this growth.
Carlos Macedo
Okay. Perfect.
Thank you so much.
Operator
Thank you. And our next question comes from Edgar Romero from [EBUBA] [ph].
Please go ahead.
Unidentified Analyst
Hi. Good morning.
And thanks for the call. I have two quick questions.
The first one is a -- I don’t know, if you can give us a little more color on the Banistmo’s ROE in 2014 and maybe you can give us some guidance for this year? And the second question is, do you have guidelines for the efficiency ratio for this year?
Thanks.
José Humberto Acosta
Yes. Again, going back to Banistmo, we expect this year 2015 at around 12%, last year it was below 10%, because as you already know, this is grand operation for us so we are just making the adjustments.
We are spending a lot of money on IT platform. And regarding your second question, our efficiency is improving a lot, so we expect to go -- go back to the level of 15% in the next coming two years, because you saw the performance and it’s growing at a half base of the NII growth, which means that we are in the right direction and this is one of our main focus in the next coming two years, again to go back to the level of -- efficiency level of at around 50%.
Unidentified Analyst
Okay. Thanks.
Operator
Thank you. And our next question comes from Saúl Martínez from J.P.
Morgan. Please go ahead.
Saúl Martínez
Hi. Just a very quick follow-up, guys.
The IFRS, obviously you’re not going to take goodwill amortization on an ongoing basis but rather take have an annual impairment test for your goodwill. You have about $4 billion of goodwill, most of which is for Banistmo, but you still have about -- I forget maybe 500 billion or 600 billion pesos from prior acquisition -- the Guatemalan acquisition as well.
Is there any concern there that you will have to take impairment charges on any of those given what were somewhat lofty valuations on some of the acquisitions paid, obviously the El Salvador has struggled as a country? Can you just comment on how your level of comfort on whether there would need to be any sort of annual -- whether as of this stage you would need to see or expect that to take any impairment charges on your intangibles because of IFRS?
José Humberto Acosta
Okay. Saúl, no, we don’t have any specific concern regarding the Banistmo operation.
We know that under IFRS that will not affect the goodwill and we have to check the performance of the bank today based on the assumption that the things are running as we designed. We don’t have any specific concerns of change in valuation of the Banistmo operation.
Saúl Martínez
What about Banagricola?
José Humberto Acosta
Banagricola is one of our most profitable operation that we’re having with the highest level of return on equity on the base and the optimum level of past due loans. So we don’t have any specific concern with the Banagricola operation.
Saúl Martínez
Okay. Great.
Thanks so much.
Operator
Thank you. At this time we have no further questions.
I would now like to turn the call over to Mr. José Humberto Acosta for closing remarks.
Please go ahead.
José Humberto Acosta
Okay. Thank you very much for your time.
Hope to see you in the next conference call. Thank you again for your questions and hope to see you soon.
Thanks.
Operator
Thank you. And thank you, ladies and gentlemen.
This concludes today’s conference. Thank you for participating.
You may now disconnect.