Feb 23, 2022
Operator
Ladies and gentlemen, please hold the line. The conference will resume shortly.
Thank you. Please note that this conference call will include forward-looking statements, including statements related to our future performance, capital position, credit-related expenses and credit losses.
All forward-looking statements, whether made in this conference call, in future filings, in press releases or verbally, address matters that involve risks and uncertainties. Consequently, there are factors that could cause actual results to differ materially from those indicated in such statements, including changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by our target clients, changes in business strategy and various other factors that we describe in our reports filed with the SEC.
With us today is Mr. Juan Carlos Mora, Chief Executive Officer; Mr.
Mauricio Rosillo, Chief Corporate Officer; Mr. Jose Humberto Acosta, Chief Financial Officer; Mr.
Rodrigo Prieto, Chief Risk Officer; Mr. Carlos Raad, Investor Relations Director; and Mr.
Juan Pablo Espinosa, Chief Economist. I will now turn the call over to Mr.
Juan Carlos Mora, Chief Executive Officer; Mr. Juan Carlos, you may begin.
Juan Carlos Mora
Good morning and welcome to our conference call for the fourth quarter of 2021. I would like to begin this call with a brief overview of the performance of the Colombian economy.
Colombia is coming out of the COVID-19 pandemic as one of the best performing economies in the region, with an annual GDP growth of 10.6%, mainly driven by the exposure to commodity prices by the strong pace of recovery of domestic demand. The positive performance of the second half of the year set up the economy for a good 2022.
We expect growth to be around 5%, above the average of the region. The main risks to our view are the uncertainties surrounding the electoral cycle and inflation higher than the range of the Central Bank.
Let me give you an overview of the results of 2021. The loan book grew 15% over the year and net fees grew 13%.
Core equity Tier 1 closed at 11.9% and the net income for 2021 was COP4.1 trillion. Provision charges for the year were COP2.4 trillion, resulting in a historical low cost of risk of 1.2%, explained by better macroeconomic forecast, improvements in the expected loss models and the economic recovery in the countries where we operate.
Our Ecosystem strategy closed 2021 as one of the most relevant marketplaces in Colombia, with 11.5 million visits, COP87 billion in disbursements and with a coverage of our QR code in 100% of the municipalities of Colombia, with 1 million engaged merchants. This strategy not only has great potential in terms of flows and disbursements through the digital channels but it has also allowed us to deepen the relationship with our clients, generating more data.
Before getting into the details of the results, I want to highlight two relevant topics. On December 2021, we announced the legal separation of Nequi from Bancolombia.
The structure approved by the Board of Directors is intended to create the necessary vehicles for Nequi to have greater flexibility, seeking to capture the value of financial and nonfinancial businesses at a regional level. This will be implemented during 2022 and this new entity will be 100% owned by Bancolombia.
Also, yesterday, we announced the dividend proposal to be discussed in the annual shareholders meeting next March. This proposal comes with a structural change in the dividend policy since we have defined an optimal level of core equity Tier 1 to support the growth we expect.
We believe the bank has the capacity to generate capital on a sustained basis in the upcoming years. At this point, I want to turn the presentation to Juan Pablo Espinosa, who will further elaborate on the performance of the Colombian economy.
Juan Pablo?
Juan Pablo Espinosa
Thank you, Juan Carlos. Now please go to Slide number 3 in the presentation.
During 2021, the Colombian economy surpassed expectations and grew 10.6%, one of the highest rates in Latin America. Around 1/2 of this figure is explained by the low base of 2020 when GDP contracted at a revised rate of 7%.
The remaining portion represents a genuine process of recovery which has been led by private consumption. This component of aggregate demand has responded to several factors, including the spending of excess savings accumulated at the start of the pandemic as well as ample access to credit and higher mobility within the country.
Moreover, [indiscernible] is accelerating during the second half of 2021, thanks to higher commodity prices and an increase in oil and mining production. On the contrary, investment, especially in machinery and equipment, fell behind the rest of demand components.
Our leading indicators suggest that at the start of 2022, the pace of economic activity despite some stabilization has kept momentum. As we move through the year, we expect that economic activity will gradually moderate as global conditions become less supportive, policy stimulus is removed and household consumption stabilizes.
Incorporating all these factors, we are currently estimating that in 2022 GDP will grow around 5%. Another significant recent development is the increase in inflation which moved from 1.6% at the end of 2020 to 5.6% by December 2021.
This trend has consolidated recently because of both external and local forces. We expect year-on-year [indiscernible] to peak in the short term around 8% and then to decelerate and close the year around 6%.
In this context, we anticipate that the Central Bank will advance further in it's process of policy normalization. We have adjusted upwards not only the number of rate hikes but also the terminal level we operate in this cycle to 6.5%.
After this economic overview, let me turn the presentation back to Juan Carlos. Juan?
Juan Carlos Mora
Thank you, Juan Pablo. Moving to Slide 4.
I want to continue this presentation with a summary of how we faced the pandemic. During this challenging time, our main goal was to support our different stakeholders.
For those clients that needed support with their obligations, we applied the debtor support program as not all clients recover at the same rate. At Bancolombia, we continue to offer alternatives for debtors even after the program has ended.
We reduced payment terms to 30 days or less for our suppliers, given priority to those that due to their size and possibility of financial leverage needed more liquidity. Through our channels, we continue helping the government in the delivery of subsidies for vulnerable households in all corners of the country as well as companies whose operations were affected by the pandemic.
We also support the vaccination plan, accompanying the government with resources for the purchase of vaccines, donating 22,000 doses. We have also implemented a hybrid work model to keep supporting our employees.
On Slide 5, we present our ESG framework. Our ESG strategy focuses in three main topics: strengthening the productive network, promoting sustainable cities and communities and fostering financial inclusion.
In each of these aspects, we observed considerable progress comparing 2020 and 2021. In 2021, we mobilized almost COP37 trillion towards our ESG strategy, exceeding our COP33 trillion goal.
This amount represents more than 20% of the Bancolombia's disbursements. We have a commitment to promote sectors that drives the transition to a low-carbon economy, where we disbursed in 2021 close to COP4.6 trillion in activities such as sustainable construction, electric and hybrid mobility, renewable energies, circular economy, sustainable agriculture among others.
Moving to Slide 6. I want to continue this presentation by explaining the loans and deposits performance.
The recovery of the economy has resulted in significant progress in our business. We have experienced an important growth in the number of clients, reaching more than 25 million; improved our offer of products and services; and strengthened our digital strategy.
All this is clearly reflected in the performance of the loans and deposits. The loan book continued showing a steady growth across the three main segments.
This trend confirms that the bank overcame the economic shock of the pandemic without relevant implication of it's financial stability. The retail and mortgage segments showed a positive trend throughout the year, whereas the commercial segment started to improve since the second half.
In this last segment, we are seeing a good opportunity of growth in SMEs. During the first three quarters of the year, we increased the balance in savings and checking accounts and this was compensated with a decrease in time deposits.
However, as the Central Bank started the rate hiking cycle and the loan book grew at a better pace, in the last quarter, the balance in time deposits increased to support this growth. Moving to Slide 7.
I'm going to elaborate in the evolution of digital sales. During the year, digital sales represented 43% of total sales.
Digital sales have maintained a steady evolution despite the reactivation of traditional channels. During 2021, the customers accelerated the adoption of digital channels.
In Slide 8, I'm going to elaborate in the evolution of our payment services. One of the main strengths of the bank is the level of processed transactions.
As you can observe on this slide, credit and debit cards transactions volume returned to pre-COVID levels, while the net fees have already exceeded pre-COVID figures. I would like to highlight that in both debit and credit cards, our share of transaction is far higher than our share of outstanding cards, showing the power of our channels.
A fact worth noting is the composition of debit card fees. Fees generated by merchant transactions has remarkably increased during the last few years.
Indeed, the acquiring business has expanded it's share within the total revenue, leveraged on the growth of POS adoption as well as electronic payments evolution. As a result, monthly maintenance fees for individual accounts have a lower participation, showing progression towards diversifying sources of income.
Moving to Slide 9. I'm going to elaborate about Nequi.
Nequi continues showing positive trends. We closed 2021 with 10 million clients, COP1.3 trillion in deposits, high levels of NPS and low acquisition cost.
During December, Nequi reached 1 million daily active users, of which almost 30% use the marketplace. Nequi cards are going fast.
We have more than doubled the number reported 12 months ago. Bear in mind that we are not only issuing more plastics, the number of transactions and the volume of payments are increasing at a very solid pace.
As a result of the information that we have gathered from our clients, during the last quarter of the year, Nequi's loan book started showing a very positive trend, moving from an average balance of COP1.3 billion in the third quarter to COP39 billion in the fourth quarter. Now I want to turn the presentation to Jose Acosta to give you additional details on our performance during 2021.
Jose Humberto?
José Humberto Acosta
Thank you, Juan Carlos. Now turning to Slide 10, I want to walk you through the evolution of the relief program.
Trade reliefs are almost done with only 1.9% of the consolidated loan book under relief. During 2022, it will be key to follow the evolution of deterioration, restructured loans and charge-offs.
The trend in the geographies where the bank operates was similar, less provisions and better loan quality indicators when compared with 2020. In Slide 11, we present the breakdown of provisions during the quarter.
Provision charges for the year were COP2.4 trillion, mainly explained by the provision reversal due to a better macroeconomic forecast unless provisions related to COVID-19. In the slide, you can observe in different points of time the forecast of GDP we had for 2021 in each of the four countries where we have presence.
For example, we started 2021 with an estimated of 5.7% GDP growth in Colombia and finished the year with one of 10.2%. Moving to Slide 12.
We give you a snapshot of provisions and asset quality. Cost of risk for the year was 1.2%, lower than the normalized cost of risk this bank should have under normal circumstances.
As we explained in the previous slide, the main drivers were economic recovery, less provisions related to significant impaired clients and improvements in the expected loss models. During this year, charge-offs have increased 86% when compared with 2020, driven by the retail segment.
This has two important impacts. First, it reduces the balance of the loan portfolio; and second, it helps reduce the past due loans.
I want to highlight the 90-day coverage level of 231% with which we closed 2021. This response partially to the fact that after the end of the release, the amount of restructured loans increased.
And even though these loans are provisioning, they are performing or in a grace period. This shows a solid enough coverage to face 2022.
On Slide 13, we present the liquidity position of the bank. In a consolidated basis, we continue operating with sufficient levels of liquidity.
At the end of 2021, saving and checking accounts represent 61% of funding structure. This growth is mainly explained by the growth in the number of customers thanks to the bank's digital strategy.
This increase has been compensated with a decrease in time deposits and credits with other financial institutions. As we have mentioned during the call, the economic activity and the loan book are showing better trends quarter-by-quarter.
For this reason, the balance in time deposits, savings and checking accounts will increase at a similar pace during 2022 to support this growth. On Slide 14, we present an overview of Colombia and Central America.
Central America is gaining relevance in the group as we have been able to improve the stand-alone operations despite the challenges. At the end of 2021, as a region, the loan book reached $15 billion and 2.6 million clients.
2021 results were better than expected and the trend throughout the different geographies was similar: reactivation of the loan portfolio, increase in savings and checking accounts, stable margins, strong capital position, increase of expenses and decrease in provision charges. We are replicating the experience we had in Colombia in Central America.
From the digital strategy, we see the opportunity to grow in deposits, clients and fees. I want to highlight some key aspects from the stand-alone operations.
After the end of the relief program in Panama, the performance of clients of Banistmo who are coming out of their reliefs is better than expected. During the year, the retail clients reactivated, mortgage had a positive dynamic and the corporate disbursements showed a positive trend.
El Salvador is facing a challenging fiscal situation but Banco AgrÃcola keeps maintaining it's good operational metrics with a return on equity of 19% for 2021. And in Guatemala, we have positive perspective with the economic activity of the country that is reflected in the growth of the loan book.
That's why we are being more aggressive in the retail segment. On Slide 15, we see the evolution of margins and net interest income.
Net interest margin closed 2021 in 5.1% with an expansion of 20 basis points despite the low interest rate, explained by three main drivers: first, more efficient funding structure, the average in CASA deposits; second, a good performance over the year of the regional mortgage segments; and third, the beginning back in September of the rate hikes by the Colombian Central Bank. Net interest income grew 8.9% over the year because of the 26% reduction in interest expenses.
For 2022, even though we foresee an increase in the funding cost, we expect a good performance of the NII due to the loan book growth and increase in the interest generated by the loan book. And for the NIM, we are expecting an expansion of at least 100 basis points due to the rate hike.
We expect the reference rate to close 2022 in 6.5%. Remember that we have an asset-sensitive condition, where approximately 70% of our assets are floating while only 34% of our liabilities.
Slide 16 shows the evolution of expenses and efficiency. Operating expenses increased 14.6% during 2021.
In this slide, you can observe that general expenses and salaries of employees are under control. The main drivers of this valuation were: first, the variable compensation of employees.
Remember, we can sell during 2020 and because of the good results of 2021, this payment returned. This item explains almost 50% of the 14% increase.
Second, renting expenses due to the assets depreciation. Despite being registered as an operating expense for accounting reasons, this element is directly associated to the operating leasing which outstands as one of the business lines with the highest growth with the balance sheet and explains 2.4% out of 14% increase of expenses for the bank.
And third, investments related to digital transformation that shows an expansion of 38% during the year. These efforts are reflecting the higher amount of transactions and the new clients engaged that have permitted us to grow in loans and fee generation.
This component explains 1.5% of the bank's total 14% expenses growth. With that in mind, these three items together illustrated 11.4% out of the total 14.6% increase in expenses.
Slide 17 shows the evolution of fees. Net fees continued to be one of the most receding lines on the P&L, growing 13% over the year.
Payments and collections as well as banking services have added to the strong performance. And both fees from debit, credit cards and commercial establishments is the line with the largest contribution thanks to the increase in the volume of transactions and the use of digital channels.
For 2022, we expect net fees to grow between 10% and 11%. Slide number 18 shows the profitability metrics.
During all the quarters of this year, we delivered positive results, maintaining the pace of investments in digital transformation. Net income for the year was COP4.1 trillion and return on equity stood at a level of 14%.
Even though the decrease in provision charges were the main driver of this result, I want to highlight the good performance of the other lines of the P&L: stable margins, thanks to the efforts made on the funding cost and a steady growth of NII and the fast recovery of fee income. For 2022, we expect with the implementation of last year's tax reform in Colombia an effective tax rate in the 35% area.
On Slide 19, we present the consolidated and stand-alone capital adequacy. Consolidated total solvency ratio stands at a level of 15.5%, while CET1 at a level of 11.9% under full Basel III for the year.
These ratios are well above the minimum regulatory requirements, not only in a consolidated basis but in the stand-alone operations. As Juan mentioned in his opening remarks, yesterday we announced our dividend proposal from 2021.
We want to be clear that we have been preparing for this proposal in previous years but because of the pandemic we had to postpone it. Equity is the line of the balance sheet that has grown the most in recent years.
The implementation of Basel III was positive for the capital ratios and we are expecting a moderated organic growth of the balance sheet in the next three years. This is a structural change in our dividend policy and the bank has the capacity to generate capital in a sustained basis in the upcoming years.
The new dividend policy defines as an optimal core equity Tier 1 range from 11% to 12% to operate the bank in the next few years based on the current macroeconomic conditions and in our profitability and the growth expectations. Therefore, in the next years, the dividend payment will be based on this range.
Now, I want to turn the presentation to Juan Carlos for the closing remarks. Juan Carlos?
Juan Carlos Mora
Thank you, Jose Humberto. After one of the most challenging situations the world has faced in the recent history, 2021 was a transition year.
We are very proud of the results we just presented and we are quite aware of the challenges ahead. We are ready to support our more than 25 million clients and all our stakeholders in the period emerging after the pandemic with a strong balance sheet, liquidity, products and services.
I want to close this call giving our 2022 guidance. We are going to return to our normal cost of risk levels of around 1.8%.
We are expecting the loan book to grow between 7% and 9%, the cost-to-income ratio between 47% and 49% and finally, with the ROE at the end of the year between 14% and 15% which we believe is our medium-term profitability level. After elaborating on these key topics, I want to open the line for questions.
Operator
[Operator Instructions] The first question is from Ernesto Gabilondo of Bank of America. Please go ahead.
Ernesto Gabilondo
Hi, good morning, Juan Carlos, José Humberto and good morning to all your team. Congratulations on your results.
I have three questions from my side. The first one is on the Gilinski Group.
Just wondering if you can help us to understand how many board seats has Gilinski Group obtained so far? And when do you expect to have the full picture of the board's composition at SURA?
And also related to this topic, would you be evaluating a potential merger with Surameris [ph]? And then my second question is on Nequi.
As you have said in your presentation and before, Bancolombia has separated Nequi from the traditional operations. So is this with the objective to start providing some key performance indicators?
And I don't know, a specific P&L for Nequi? Is that correct?
When do you expect to start providing those metrics? How you see today as the most profitable product in Nequi?
And also it will be interesting to know if Nequi is already profitable? Or when you expect to be so?
And then my last question is on your ROE expectations. I know that you're guiding between 14% to 15%.
However, when putting all together your guidance and the new dividend payout ratio, it seems this year's ROE is more around the 15%. So you better double check if this is something reasonable to expect.
Juan Carlos Mora
Thank you, Ernesto. Let me address your third -- questions.
The first one related to the tender offer for Grupo SURA. As you know, there was a first tender offer in which the Gilinski Group now has a participation over 25% on Grupo SURA.
That's the fact. Now there is another tender offer on progress but we don't know the result yet.
The tender offer will be closed -- will end on February 28. And at that point, we will know how -- what is going to be the participation of the Group in Grupo SURA.
So far, what we know is that they have -- they already have a participation. The shareholders' meeting of Grupo SURA is scheduled to be at the end of March.
And at that moment, we will know how many seats they are going to have on the Grupo SURA board. That's what the information that we have already and we need to wait and see how things develop in the future.
Related to your second part of the question, a merger. In the tender offer documents, they express -- Gilinski Group express that they had the intention to present as a possibility to Grupo SURA to consider a possible -- a potential merger between the Grupo SURA, Bancolombia conglomerate and Grupo Surameris [ph] conglomerate.
Now that's all the information that we have. We, again, need to wait and see how that develops.
The only -- the information that we have is the one that I mentioned, that is on the documents of the tender offer. The second question regarding Nequi.
As we announced at the end of last year, we are in the process of separating Nequi. That will take, we think, the whole year.
So we are separating Nequi as an independent entity and we are in the process of creating the legal entities and asking for the regulatory -- or going to the superintendency of finance to ask for approval of Nequi as a separate entity. So during this year, we will continue reporting Nequi performance and we will increase our disclosure in -- since we are moving to be a separate entity, once it's a separate entity, we will fully report the performance and the metrics of Nequi.
We are very happy with the performance, as we mentioned -- of Nequi, as we mentioned. We ended last year with more than 10 million clients.
The pace of new customers is very, very high. Also, we are increasing the number of loans and it's also increasing at a very good pace.
We are also very happy. And that's our path to profitability.
Nequi is not profitable yet but it has all the potential to be very profitable since we already have that number of clients in which we can start cross-selling them and adding additional products, including credit which is -- we think it has a very high potential. So we will be disclosing, as I said, more information but that will probably be once Nequi is a separate entity.
Regarding ROE, as you mentioned, our guidance for the ROE of 2022 is between 14% and 15%. We think that it's a target that we can meet.
You said your models are more around 15%. You could be right.
There are some uncertainties around the ROE. One is probably and the most -- what is going to be the key element I think during this year is interest rates in Colombia and how are we going to transmit the interest rate hikes to the market.
So it could depend. We are pretty certain that we can achieve the 14% but we think there's enough of a high upside that we can reach 15%.
That's why we are -- our guidance is between 14% and 15%, Ernesto.
Ernesto Gabilondo
Super helpful, Juan Carlos. Thank you very much.
Juan Carlos Mora
You're very welcome, Ernesto.
Operator
The next question is from Jason Mollin of Scotiabank. Please go ahead.
Jason Mollin
Hello, everyone. Thanks for the opportunity to ask questions.
I have some follow-up questions related to what you've been talking about. First, I believe at the beginning of the presentation, you mentioned one risk -- one potential risk to the outlook is on the political side.
If you can give us perhaps some of the positive risk and negative risk that you see could come about in Colombia? My second question is a follow-up on what you talked about, the structural change in the dividend policy.
If you can explain the main rationale for these structural changes? You did just comment that you had been considering this kind of change in the past but COVID got in the way.
If you can talk about maybe that process of making this change. I think it's very constructive personally.
And lastly, on the ROE guidance. I believe you said ROE at the end of the year 14% to 15%.
So does that mean like just in the fourth quarter you're going to be getting to that, this is a gradual process to get there? Or -- and is this just the number that you expect in the fourth quarter rather than for the whole year?
And maybe if you can provide another line item on the tax front since that can be a large factor in hitting the bottom line? So maybe you can give us your views on taxes.
Juan Carlos Mora
Let me start with your first point about risks and the political aspects of the risks. As you all know, Colombia is facing during this first semester an election process.
Congress will be -- a new Congress will be elected 13th of March and there will be presidential elections in May and June. There -- uncertainty is related to any political process, I think, in any country.
So at this point what we know is that on the presidential one, there are many candidates and we still don't know how that is going to develop. We will have information after March 13, in which I think we will know what candidates are going to run for presidency for sure.
And at that moment, we will have a clear -- a more clear picture of the situation. But let me add that Colombia has a very strong tradition of very -- of strong institutions and democracy we think is an asset of any country.
So there are uncertainties, of course. We don't think they are going to affect materially the results of the economy and of the bank during 2022.
But the results on the positive or negative side could have some effect I think more for 2023 than for 2022. To your second question regarding the -- our change on dividend policy.
As you may remember, we announced last November a change on our dividend policy. The Board of Directors discussed the matter.
And what we have now as a dividend policy is that the payout ratio will be related with our core Tier 1 levels. So what we are setting is the optimal level of core Tier 1 that at this point we set between 11% and 12%.
And with the net income that we generate during the year, we set that target. And the portion of the net income that is not adding or is above that level of core Tier 1 will be our dividend for that year; that is a structural change.
And you mentioned that we were seeing this before the pandemic. As you also may remember, we had an extraordinary dividend during 2019.
That is what evolved to that change -- structural change on our dividend policy. So what you could expect in the future is that we set the target of core Tier 1.
Then we have the net income. And also, what we expect as the loan book growth, that is going to be another aspect that we need to incorporate into this equation to define the dividends for the next year.
So with that exercise, it's how we are going to present to the shareholders meeting next March a dividend of COP3 billion. And we expect in the future -- or what we expect in the future, keep applying this formula that I mentioned.
And ROE; I think what we see is 14% to 15% ROE for the full year 2022. It's not just the last quarter.
As you saw, we achieved a 14% ROE for the full 2021. So what we expect for 2022 is again an ROE for the full year between 14% and 15% range.
And taxes -- the next one is taxes. I'm sorry.
As you know, there was a tax reform in Colombia that increased the statutory rates for banks to 38%. So that rate will apply for our revenues of 2022.
With all the deduction and the different aspects of the fiscal loss in Colombia, we expect our rate to be between 35% and 36%. But it's good to notice that we incorporate that rate on our guidance.
So the 14%, 15% takes into consideration that tax rate, Jason.
Jason Mollin
Thank you very much.
Juan Carlos Mora
You're very welcome.
Operator
The next question is from Yuri Fernandes of JPMorgan. Please go ahead.
Yuri Fernandes
Thank you, everybody and congrats on the quarter. I have a follow-up on margins.
I guess you mentioned 100 bps potential expansion on NIM. So I guess it's on the annual NIM.
So the 5.1% year-end, right, going through to 6%. That is above the 2018, '19 levels.
And I would like to understand where this 100 bps margin expansion is coming from? I remember in previous calls you mentioned your asset sensitivity rate was around 8 to 9 bps every 100 bps.
So my first question is, are you seeing a higher sensitivity now on better funding or something like that? So my first question is, how much of this 100 bps increase on margins is coming potentially from improved rates?
And I have a second one regarding costs, right? You put in one of the slides some data showing the increase of your digital channels for sales, for transactions.
And we see branches and other physical channels not recovering as much for 2020, that I think was a very easy comp. So my question is, why not a more aggressive cost optimization plan for Bancolombia, right?
Because we saw branches being closed in the past but I don't remember seeing a very major drop in the number of employees. So why not -- given like your digital channels are growing, you are investing on digital, so why not a more aggressive, I don't know, G&A structure for the company, driving this cost-to-income not from 47% to 49% but even going to the low 40s in the coming years?
Juan Carlos Mora
Let me address your questions. I will start with the margin.
As you know and it's happening all over, central banks are increasing the rates. That's the case in Colombia.
And we are expecting rates to increase to fight inflation. And that's going to be one of the aspects that is going to improve our margin.
We are coming from very low interest rates and that increase in interest rates in the market are going to expand our margin. It's good to notice also that our -- the composition of consumer loans on our total loan book is now 22%.
And we think that, that allow us to transfer faster the increases in interest rates but also we have higher margins on that credit. So that's why -- and I'm going to pass that question to Jose Humberto to give you more color on that.
But what we believe is increasing interest rates and our loan book compositions are going to help us on the margin and that's why we are expecting an increase of 100 bps on the margin. And let me address also your second question and then I pass to Jose Humberto to complement my answer.
Yes, we are improving our digital channel presence. We are very happy with how that is developing, how our clients are adopting the new channels, new products.
But this is a path that we cannot stop. It's not that we are at the end of this journey.
And so we need to keep investing. And we are going to incorporate those -- what we are gaining on incorporating, new digital channels.
Our digital transformation, that will be incorporated in the next years. So it's going to be incorporated I am sure.
It's not going to be during 2022 yet because we need to keep investing in that transformation. If we stop that, the ability to compete of the bank is going to be affected.
So our view is we need to maintain an equilibrium between the short term and -- the short-term results and the long-term results of the bank and that digital transformation. So we started the journey some years ago but still we need to continue in the journey for maybe two, three or more years.
And the other thing that is -- I think is going to affect this -- new technologies, new behaviors of the consumers, new competitors are going to be there and we need to keep investing. It's not something that you create a plan and you end that plan and that's all done.
You need to keep working. But for me, the key point is that we at the end are returning the profitability that the investors are requiring.
And I think that 14% to 15% that we are announcing for 2022 and that is in line with our midterm guidance, it's the key point in this point, Yuri. Let me now pass the line to Jose Humberto to give you more information on margins.
José Humberto Acosta
Thank you, Juan Carlos. I think the best way to explain what is happening with the NIM expansion in the bank is through three different parts.
The first one, as explained Juan, the composition of the loan portfolio. Right now, the consumer weight is 22%.
But also we have to highlight what is going on in the commercial loan portfolio with SMEs. We are improving and we are increasing our loan portfolio in that SME section.
It is helping us with -- on the asset side. The second part is the way we are getting funding.
Now we have different ways to fund the business, because remember that checking accounts and savings accounts, it is around 70% of the total funding that we are having from our customers. So this is very low interest rates and we have only 35% of this liability in terms of floating.
Meanwhile, on the asset side, we have -- 70% of our loan portfolio is floating. So the repricing will be faster, because, again, the structure of funding is different.
And the third way -- or the reason why the NIM expansion will happen this year is because you can see interest rates coming from 3% at the beginning of this year and that will end to 6.5%, almost double. So that explains the different speed or pace of repricing of the assets.
Yuri Fernandes
That's super clear, José Humberto. Thank you.
Thank you very much, Juan Carlos for the explanation as well. And congrats again for the quarter.
José Humberto Acosta
Thank you, Yuri.
Juan Carlos Mora
Thank you, Yuri.
Operator
The next question is from Anders Soto of Santander. Please go ahead.
Andres Soto
Good morning, Juan Carlos, José Humberto. Thank you for the presentation and congratulations on the results.
My question is related to your digital strategy. In this year, 2021, you show significant progress in terms of the rollout of several services, including Nequi cards and QR payments for Bancolombia.
I would like to dig a little bit deeper on the QR side. Which clients are you targeting in this approach?
How many clients you already have? I believe you mentioned 1 million.
I would like to confirm that. And just more generally speaking, my question is how you guys plan to manage this transition, in which, as you showed in this presentation, Bancolombia has a significant share in debit and credit card transactions and now you are rolling out -- which are a very important source of Bancolombia's profitability in terms of fees.
And these alternatives, I assume, are exempt of fees. So I would like to understand how you guys are managing this transition from highly profitable products that are probably expiring, while you are rolling out these new round of products that at the beginning probably are going to cost a little bit in terms of profitability.
Juan Carlos Mora
That's a very interesting question. Let me describe a little bit how the Colombian market is on payments.
The acceptance of credit cards and debit cards is limited. Just to give you a figure, there are around 500,000 POSs in Colombia.
But the potential is very high. And our strategy is to cover those businesses, mainly small and medium businesses that do not accept cards today through the QR code strategy.
So what we are targeting is that small and medium enterprises that do not accept digital payments or cards today. So what we are covering is one part of the market that is not addressed today.
You are right, we have 1.2 million QR codes in the market now. So what we are doing is that we are enabling those small businesses to accept digital payments and they do not accept it in the future -- in the past, I'm sorry.
So at the end what we are doing is expanding the market. So that's not hurting our business, the card business.
It's adding efficiency to the payment network and to the acquiring -- or to the acquisition business. But we also know that the debit and credit card business is going to evolve.
So what we are doing is preparing for that evolution, complementing and addressing part of the market that was not served. And we have been -- we are very happy with that strategy.
And let me add that those payments are giving us very good information that we fit on our models to also address those customers with other products and do cross-selling. As I mentioned, we are very happy with the volume that we have and we'll keep evolving and I feel the numbers and the figures are going to continue growing.
That is also allowing our digital platforms to become a payment method. So Nequi and Bancolombia a la Mano and also the Bancolombia are now payment tools, that the usage of our QR codes are increasing.
So it's a very virtuous circle that is helping us a lot in our strategy, Andres.
Andres Soto
That's very clear. Do you have any estimate of the potential size of the market of QR payments considering the SMEs that are not taking credit or debit cards at this point?
Juan Carlos Mora
The whole market -- the addressable market could be around 4.5 million. We think that we can address 1/2 of that market in our strategy.
So it's a big market. And as I mentioned, it's very -- those small businesses to move into digital and accepting payments on physical stores but also on e-commerce I think are great potential and that's where our strategy is heading, Andres.
Andres Soto
Absolutely. Thank you for the answer and congratulations, again.
Juan Carlos Mora
Thank you, Andres.
Operator
The next question is from Tito Labarta of Goldman Sachs. Please go ahead.
Tito Labarta
Hi, good morning, everyone. Thank you for the call and taking my question.
My question is on your cost of risk guidance. You mentioned that you expect it to normalize back to 1.8% for this year.
But just curious, do you expect to get there immediately in 1Q and stay at those levels for the full year? Will it be more of a gradual increase to get back to those levels?
And what kind of underlying asset quality assumption do you have for the year? I mean, asset quality is holding up fairly well.
Do you expect to see some deterioration from here? Any color in terms of where NPLs can be for year-end as well.
Juan Carlos Mora
So what we expect is that during 2022, as we mentioned, there will be a normalization of the cost of risk around 1.8%. It's going to be gradual.
They were affected by what happened in 2021, in 2020 -- in 2020 and 2021. So we are -- we saw a big swing between those two years.
So now what we are moving is gradually returning to 1.8% which was, as you mentioned, our long-term guidance for cost of risk. So we expect that during this first semester, we will -- that cost will normalize and then we will end the year with that cost around 1.8%, Tito.
And let me pass to Jose Humberto if he has any additional information to complement on the answer.
José Humberto Acosta
Just -- in terms of NPLs, we are foreseeing a kind of stabilization of that level. And probably in the second half of the year, you are going to see the normalized cost of risk and normalized NPL levels, Tito.
Tito Labarta
Okay. And just any color in terms of the different segments and how the NPLs can evolve between consumers and commercial and SMEs?
José Humberto Acosta
I think commercial was one of the main segments that shows a gradual improvement in terms of NPLs. And in the last round will be the consumer loans that we are foreseeing a normalization again, beginning in the second half of this year.
Tito Labarta
Okay, great. Thanks, José Humberto.
José Humberto Acosta
Thank you, Tito.
Operator
The next question is from Carlos Gomez of HSBC. Please go ahead.
Carlos Gomez
Hello, good morning and congratulations on the results. A couple of questions.
The first one refers to your expense level. It was higher this year, we understand, because you were able to normalize the bonus payments to your employees.
Is that correct? Is this the level of expense that we should expect on a normal basis?
Or would you say it was higher or lower than average? And the second refers to your structure.
We have seen some of your peers in Colombia segregating the Latin -- the Central American assets to facilitate the capital management. In your case, would you consider at some point a separate listing for what you do not have in Colombia to make it easier to adjust the capital structure?
And finally, would under any circumstances you get involved in the offerings? I mean could you possibly justify perhaps that there is a case for Bancolombia to make an offer for the shares of SURA or any other company in the conglomerate?
Juan Carlos Mora
Let me address your second and third points and then Jose Humberto will elaborate on the expenses level. We are not considering any changes on our structure to facilitate the capital management.
I think we are comfortable on how we are doing the structure that we have. So at this point, we are not considering any evolution on our structure in the sense that you mentioned.
Regarding your third question, the answer is no. We are not -- from the regulation and -- we are not allowed to do that.
So it's a category no. And the first point, Jose Humberto?
José Humberto Acosta
Yes. Carlos, the segregation of the expenses in general terms, the 14% that you are seeing on the presentation, it explains 50% out of this 14% because of the labor cost.
As I mentioned, this is mostly because of the bonus plan. Going back to your question, we are not foreseeing a big increase in terms of labor cost for this '22 year, because it is now comparable with the 2021.
So you are not going to see a big change on that line.
Carlos Gomez
Okay, that's very clear. And by the way, thank you very much for as on SURA.
And that's a question we had to pose and it's very clear on your side. When you mention regulation, good regulation allows a merger between you and another financial institution in Colombia given that you're already the large one.
I imagine you have approached them for any possible takeover target that has been in the market. Do you think it is reasonable to expect that a merger between Bancolombia and somebody else would be considered?
Or do you think it is more likely to be rejected?
Juan Carlos Mora
Carlos, yes, it is allowed by the regulation. We can merge with other financial institutions.
There are two sides of your question. It is allowed.
It is possible. It has happened in the past.
It's part of regular business in the industry, as you know. And in Colombia, it's the same thing.
Now the other side of that is that any possible merger or other form of allowing different institutions to work together goes to the financial regulator but also the competition regulator. So we -- as you mentioned, we have around 26% of the Colombian market as a whole and the competition authority will have to have a word on any potential -- but in any case, not just the one that we have been talking about, in any other form of acquisition or merger.
Carlos Gomez
Very clear. Thank you so much.
Juan Carlos Mora
You're very welcome, Carlos.
Operator
The next question is from Alonso Garcia of Credit Suisse. Please go ahead.
Alonso Garcia
Hi, good morning, everyone. Thank you for taking my questions.
Actually, I just have a follow-up on taxes. You are guiding for a range of 35% to 36% in effective tax rate for this year.
So I just wanted to check if this is the same level you foresee for the mid- to long term? Or is there any particular reason why this year it might be a bit higher?
I don't know, if maybe in the coming years if we will see a more balanced mix in terms of earnings contribution from the different geographies which have a lower tax rate compared to Colombia and maybe the tax rate in the future could be a bit lower for the group. So I don't know if you could provide some color on that.
Juan Carlos Mora
As we mentioned, the tax reform in Colombia had now a statutory rate of 28% for financial institutions. And that's what we have now.
And we are forecasting our performance based on that statutory rate for Colombia. So we don't expect any changes unless there are changes on the -- let me add something.
That's a temporary increase on -- for three years. So after three years, we come back to 35% statutory rate.
So it's temporary. So next three years, we will have that statutory rate in Colombia.
And as you mentioned, there are different rates in the different countries in which we operate and of course the performance of those operations in Central America will affect the tax rate. But it's good to notice that Colombia is, as you know, 70%, 72% of the whole group.
So the effect will be marginal on the statutory -- or on the effective tax rate, Alonso.
Alonso Garcia
Understood. Thank you very much.
Juan Carlos Mora
You're very welcome, Alonso.
Operator
The next question is from Jose Cuenca [ph] of Citigroup. Please go ahead.
Unidentified Analyst
Hi, everyone. Thank you for taking my questions.
Just a couple of follow-ups. In terms of loan growth and loan performance in general, just wanted to get a sense from you of what you're currently seeing in terms of competition.
Do you see like, for instance, let's say, the need to perhaps offer more competitive rates in order to foster loan growth? Any comment on that would be really helpful.
And the next question. Just to -- I think you already commented.
But in terms of NPLs, if I'm understanding correctly, it would be reasonable to expect like a normalization or an uptick towards the second half of 2022 given your growth in the consumer and SME books. And in this sense, just wanted to get your opinion on what coverage level are you -- would you be feeling comfortable with?
Juan Carlos Mora
Let me address your first question and I pass your second one to Humberto. Loan growth.
We are foreseeing loan growth between 7% and 9%. We think that's reasonable.
We updated our GDP growth for Colombia for 2022 to 5.5%. So with that level of growth, I think it's reasonable to expect a loan growth between 7% and 9%.
And in the other geographies, we are also seeing a good dynamic on the economy. Expecting competition; competition is there and I think it's strong competition in Colombia.
New players are coming. But I firmly believe that Bancolombia is very well positioned to compete.
We have a coverage -- a very good network on Colombia. Our digital strategy it's I think very clear and it's producing the results.
So I don't expect that we have to affect our net income -- sorry, our net interest margin because of competition and that's going to affect the volume. It could be an upside on loan growth depending on how strong and how the economies develop during 2022.
Regarding your second question, let me pass that to Jose Humberto.
José Humberto Acosta
Yes, the 7% that we are expecting -- loan growth 7% to 9%, the main drivers will be consumer at the top with 10% and the lower bucket will be commercial, 6% to 7%. So -- and that's one of the reasons we believe that the normalization, again, will be on the second half because there is no one specific main driver of the loan growth.
There will be the three segments at the same pace. And yes, we are expecting to maintain the same level of coverage, meaning that for 30 days we will be in the area of 120% and for 90 days, we will expect our 180 to 200 basis points -- 200 percentage of coverage.
Unidentified Analyst
Great. Thank you.
Juan Carlos Mora
Thank you.
Operator
The last question is from Alonso Aramburu of BTG. Please go ahead.
Alonso Aramburu
Yes. Hi, good morning and thank you for the call.
I wanted to ask a little bit about Panama. It seems that, that's the only geography where profitability really hasn't picked up in 2021.
Can you comment what you expect in 2022 in Panama? And if you can get potentially to double-digit ROEs in that country which hasn't been the case, I think, for a few years now?
Juan Carlos Mora
And the answer to the last part of the question is, yes, we expect to go back to -- or to go to double-digit ROEs. It's good to notice that Panama -- the reliefs in Panama ended September 2021.
So still we are seeing a lag on how the customers are performing. So it's going to take we think six months to really know what is the situation of those customers, how they are going to perform.
But we are seeing very positive results or better-than-expected results so far. So we are positive on the performance for 2022.
And also, I would like to add that Banistmo is growing faster than the market in both deposits and loans. So we -- I agree with you that Banistmo is the operation in which -- it's behind the other operations in which we have a presence.
But we are positive that 2022 will evolve and Banistmo will have the results in line with our expectation which is be close to that double-digit ROE that you mentioned, Alonso.
Alonso Aramburu
Great. Thank you very much.
Juan Carlos Mora
You're very welcome.
Operator
Mr. Mora, I'll turn the conference back to you for any closing remarks.
Juan Carlos Mora
Okay. Thank you all of you for attending this conference call.
We are happy of the 2021 results. An ROE of 14% is in line with our midterm target of return on equity.
And I am -- we are positive that in 2022 we'll continue that line to giving those returns to our investors between 14% and 15%. We are confident that we are very well positioned to take advantage of the digital transformation that we are undertaking and that the results of Bancolombia during 2022 will be positive.
Again, thank you very much for attending this call. And we hope to see you on the conference call results for the first quarter 2022.
Thank you very much.
Operator
This concludes today's conference. Thank you for participating.
You may now disconnect. Thank you.