The Bank’s capital position was strengthened; basic capital (tier 1) increased Ps. 573 billion, or 11.5%, as compared to the previous quarter due to higher appropriation of legal reserves and retained earnings, and additional capital (tier 2) increased Ps. 519 billion, or 40.7% as compared to 4Q08, driven by the successfully issuance and offering of subordinated notes in the local market for an aggregate principal amount of Ps. 400 billion on March 4, 2009. As a result, technical capital reached Ps. 7,337 billion while capital adequacy (Tier 1+ 2 Capital ratio) finished 1Q09 at 12.7%, up from the 11.2% presented the previous quarter.

The balance sheet was strengthened as allowances for loan losses increased to Ps. 2,351 billion by the end of 1Q09 (5.1% of total loans), while coverage, measured by the ratio of allowances for loans and accrued interest losses to past due loans (overdue more than 30 days), ended 1Q09 at 131.7%.

BANCOLOMBIA continued experiencing a favorable evolution of deposit growth during the quarter, strengthening its solid liquidity position. As of March 31, 2009, BANCOLOMBIA’s deposits reached Ps. 43,515 billion, increasing 7.7% as compared to 4Q08 and 30.7% as compared to 1Q08, while the ratio of net loans to deposits (including borrowings from development banks) decreased, reaching 92% at the end of 1Q09.

The Bank’s efforts have resulted in market share gains in most of its operations. According to ASOBANCARIA (Colombia’s national banking association), BANCOLOMBIA’s market share as of March 31, 2009, was as follows: 21.7% of total loans, up from 21.4% compared to March 31, 2008, and 19.1% of total deposits, compared to 18.3% market share at the end of 1Q08. According to ABANSA (El Salvador’s national banking association), the market share of BANCOLOMBIA’s subsidiary Banco Agricola as of March 31, 2009 amounted to 30.1% of total loans, up from 28.6% as of March 31, 2008, and 30.4% of deposits, compared to 29.6% as of March 31, 2008.

Loans and financial leases, net

Investment securities, net

Other assets

 

 

 

Non-interest bearing

Interest bearing

Shareholders’ equity

 

 

 

Interest income

Interest expense

Net provisions

Fees and income from service, net

Other operating income

Total operating expense

Goodwill amortization

Non-operating income, net

Income tax expense

 

 

Net interest margin ⁽¹⁾

Return on average total assets ⁽²⁾

Return on average shareholders’ equity ⁽³⁾

Operating expenses to net operating income

Operating expenses to average total assets

Shareholders’ equity to total assets

Technical capital to risk weighted assets

Net income per ADS (USD)

Net income per share $COP

P/BV ADS ⁽⁴⁾

P/BV Local ^{(5) (6)}

P/E ⁽⁷⁾

ADR price ⁽⁸⁾

Common price ⁽⁸⁾

Shares outstanding ⁽⁹⁾

US Dollar exchange rate (quarter end)

As of March 31, 2009, BANCOLOMBIA’s assets totaled Ps. 64,944 billion, representing an increase of 5.1% and 25.5% as compared to the figures presented at the end of 4Q08 and 1Q08 respectively.

Asset structure presented small changes during 1Q09 as follows: net loans and financial leases decreased its participation in assets to 67.0% from 68.8% in previous quarter, while net investments securities increased to 12.7% from 11.8%, and cash and equivalents increased to 10.0% from 9.1% as compared to 4Q08.

As of March 31, 2009, BANCOLOMBIA’s gross loans totaled Ps. 45,844 billion, increasing 2.7% as compared to 4Q08 and 20.4% as compared to 1Q08, primarily driven by the Colombian peso (“COP”) depreciation presented during 1Q09 (COP depreciated 13.4% against the U.S. dollar in 1Q09). As U.S. dollar denominated loans represented 30% of the loan book by the end of 1Q09, COP depreciation significantly impacted the COP conversion of the U.S. dollar denominated loans.

In fact, the slower pace of economic activity in the economies where the Bank operates, combined with a more selective approach towards lending,, offers a more precise explanation behind the forces driving the dynamics of the loan book. COP denominated loans remained stable in 1Q09 slightly decreasing 0.2% as compared to 4Q08 while increasing 13.7% as compared to 1Q08. On the other hand, U.S. dollar denominated loans decreased 3.1% compared to 4Q08 and slightly increased 0.6% compared to 1Q08when measured in U.S. dollars.

Likewise, loan growth per segment figures were affected by the COP depreciation in 1Q09. In particular, no significant loan growth was recorded in the Corporate and Retail and SMEs segments when measured in their original currency. However, COP denominated mortgage loans and financial leases increased 2.4% and 2.3% in 1Q09 as compared to 4Q08 respectively. The mortgage loans increase takes into account securitized mortgages as the Bank continued to sell mortgages for securitization purposes (Ps. 218.8 billion in mortgage loans were securitized in 1Q09).

Working capital loans

Loans funded by domestic development banks

Trade Financing

Overdrafts

Credit Cards

 

 

Working capital loans

Personal loans

Loans funded by domestic development banks

Credit Cards

Overdrafts

Automobile loans

Trade Financing

 

 

 

 

 

As of March 31, 2009, BANCOLOMBIA’s net investment securities amounted to Ps. 8,269 billion, representing a 13.6% increase when compared to the figures as of December 31, 2008, and an increase of 40.2% when compared to the figures as of March 31, 2008. Net investment securities are primarily comprised of investments in debt securities which represented 97.6% of BANCOLOMBIA’s net investment securities portfolio by the end of 1Q09 and 12.4% of total assets, increasing its relative size from the 11.1% of assets represented by the end of 2008.

As of March 31, 2009, BANCOLOMBIA’s liabilities reached Ps. 58,866 billion, increasing 5.7% as compared to 4Q08 and 25.7% as compared to 1Q08. Liabilities denominated in COP, which represent 67.3% of total liabilities, increased 2.0% over the quarter and 18.3% as compared to 1Q08.

During the last few months, the Colombian Central Bank has begun an expansionist monetary cycle in an effort to support economic activity given the current economic slowdown and a more favorable inflationary outlook for 2009. Specifically, the Colombian Central Bank overnight lending rate has been reduced in 400 basis points since December 2008, leaving such rate at 6.00%. As a result of these measures, the Colombian monetary market’s liquidity has been ample. Moreover, capital markets continue to grow deeper in the country as shown by an increasing number of successful bond issuances by Colombian companies. In fact, as of April 28, 2009 Ps. 4,984 billion (approximately U.S. dollars 2,1 billion) had been successfully issued in the local capital market in Colombia during 2009, increasing 307% as compared to the figure presented as of the same period last year.

As mentioned in previous quarterly reports, BANCOLOMBIA has maintained a focus on preserving a solid liquidity position. In fact, the Bank increased itsmarket share of deposits within Colombia’s banking system from 18.3% in March 2008 to 19.0% as of March 2009. In El Salvador, through its subsidiary Banco Agricola, the Bank increased market share of deposits from 29.6% as March 2008 to 30.4% as of March 2009. In particular, the Bank continued to experience a positive evolution of deposit growth in 1Q09; deposits reached Ps. 43,515 billion, an increase of Ps. 3,131 billion, or 7.7% as compared to 4Q08 and an increase of 30.7% as compared to 1Q08. COP denominated deposits, 69.3% of BANCOLOMBIA’s total deposits, increased 2.6% and 23.0% as compared to 4Q08 and 1Q08 respectively.

Non-interest bearing deposits decreased 11.4% over the quarter reaching Ps. 5,071 billion driven primarily by seasonal behavior of this type of deposit. On a yearly basis, non-interest bearing deposits increased 8.4% from the figure presented as of the end of 1Q08. On the other hand, interest bearing deposits growth was dynamic during the quarter increasing 10.9% as compared to 4Q08. Overall, time deposits increased their relative size in the funding mix to 50.9% from 46.2% in the previous quarter, while demand deposits decreased to 48.1% from 52.7% presented by the end of 4Q08.

Dollar denominated deposits increased 7.0% during 1Q09 as compared to 4Q08 (measured in U.S. dollars), as the Bank’s off-shore banking franchises continue to benefit from underlying growth, particularly from increasing client fund inflows. As a result of the solid performance of U.S. dollar denominated deposits, U.S. dollar interbank borrowings decreased US$ 257.1 million, or 27.8% in 1Q09 as compared to 4Q08.

As of March 31, 2009, liabilities in the form of bonds or notes amounted to Ps. 3,983 billion, an increase of 9.3% as compared to 4Q08 and 50.9% as compared to 1Q08, driven by BANCOLOMBIA’s dynamic activity in local capital markets. On March 4, 2009, the Bank successfully completed the issuance and offering of subordinated ordinary notes for an aggregate principal amount of Ps. 400 billion. The subscription for such notes was 1.9 times the size of the offering and their maturities were 10 years (48% of the issuance) and 15 years (52% of the issuance).

Overall, BANCOLOMBIA notes that regardless of the type of currency, the Bank has maintained a solid liquidity position.

Checking accounts

Time deposits

Savings deposits

Others

 

 

Shareholders’ equity amounted to Ps. 6,078 billion by the end of 1Q09, slightly decreasing from the Ps. 6,117 billion presented as of the end of 4Q08, due to the Ps. 491.6 billion dividend payout approved by shareholders at the annual general meeting held on March 2, 2009, although this decrease was offset by the Bank’s quarterly earnings. On a yearly basis, shareholders’ equity increased 23.5% as compared to the figure by the end of 1Q08.

During 1Q09, BANCOLOMBIA strengthened its capital position. Basic capital (tier 1) increased 11.5% over the quarter, due to higher appropriation of legal reserves and retained earnings, while additional capital (tier 2) increased 40.7% over the same period, driven by the issuance and offering of subordinated ordinary notes in the local market in March 2009, described above.

As a result, technical capital reached Ps. 7,337 billion while capital adequacy (tier 1+ 2 capital ratio) finished 1Q09 at 12.7% up from 11.2% presented on 4Q08.

Basic capital (Tier I)

Additional capital (Tier II)

Technical capital (1)

Risk weighted assets included market risk

BANCOLOMBIA reported net income of Ps. 311.1 billion for the quarter ended March 31, 2009 (Ps. 394.92 per share and U.S.$ 0.62 per ADR), representing an increase of 5.7% compared to the quarter ended December 31, 2008 and 22.6% compared to the quarter ended March 31, 2008.

Annualized ROE for 1Q09 was 19.95%, a slight increase from the 19.80% and 19.67% annualized ROE presented in 4Q08 and 1Q08 respectively.

During 1Q09, interest on loans reached Ps. 1,394 billion, decreasing 2.3% as compared to 4Q08, due to lower margins in the loan portfolio as a result of the decreasing interest rates environment in Colombia. On a yearly basis, interest on loans increased Ps. 260.8 billion in 1Q09, or 23.0% as compared to the Ps. 1,133 billion recorded in 1Q08.

Interest on financial leases reached Ps. 214.3 billion increasing 1.5% and 20.6% as compared to 4Q08 and 1Q08 respectively.

Interest on investment securities amounted to Ps 154.1 billion increasing Ps. 38.1 billion, or 32.9% in 1Q09 as compared to 4Q08 and Ps. 74.4 billion, or 93.3% as compared to 1Q08, driven by the larger debt securities portfolio (an increase of 42.0% as compared to 1Q08) and higher bond prices in Colombia which positively impacted debt securities’ mark to market valuation.

Overall, total interest income was Ps. 1,791 billion and interest expenses were Ps. 805.6 billion, remaining stable as compared to 4Q08. Consequently, net interest income for 1Q09 was Ps. 985.2 billion, remaining stable compared to previous quarter but 23.7% higher than net interest income presented for 1Q08.

During 1Q09 BANCOLOMBIA generated record net fees and income from services for a total of Ps. 367.0 billion, increasing 1.7% as compared to 4Q08, and 19.6% as compared to 1Q08, driven by the solid performance of credit and debit annual fees, fiduciary activities, collection and payments fees and commission from banking and card services and other services.

In particular, credit and debit card annual fees were Ps. 137.2 billion, up 36.5% from 1Q08. Commissions from banking services and other services were Ps. 61.7 billion, up 15.5% compared with 1Q08. Collections and payments fees were Ps. 42.9 billion, increasing 16.2% compared to 1Q08. Fiduciary activities had a solid quarter reaching Ps. 38.9 billion almost doubling the results in 1Q08 (an increase of 96.6%). Branch network services were Ps. 26.6 billion, up 11.4% from 1Q08. Pension plan administration fees were Ps. 26.2 billion, up 25.5% as compared to 1Q08. The remaining fee categories: checking, electronic services and ATM, international operations, brokerage, credit card merchant, check remittances fees had aggregated revenue of Ps. 67.3 billion, decreasing 12.2% as from 1Q08.

Fees and other service related expenses totaled Ps. 33.7 billion in 1Q09, increasing 3.1% as compared to 4Q08. On a yearly basis, fees and other service expenses increased Ps 8.6 billion, or 34.5% as compared to 1Q08, driven by the inclusion of expenses related to contact center services which used to be eliminated in the consolidation process as such services were provided by former subsidiary Multienlace S.A., a company sold during 2Q08.

The following table summarizes BANCOLOMBIA’s participation in the credit card business in Colombia.

Bancolombia VISA

Bancolombia Mastercard

Bancolombia American Express

 

Colombian Credit Card Market

 

Source: Credibanco and Redeban Multicolor

Bancolombia VISA

Bancolombia Mastercard

Bancolombia American Express

 

Colombian Credit Card Market

 

Source: Credibanco and Redeban Multicolor

Total other operating income totaled Ps. 126.4 billion for 1Q09, decreasing 33.2% compared to 4Q08 and 6.2% when compared to the figures for 1Q08.

The combined revenue related to net foreign exchange gains and derivative financial instruments totaled Ps. 19.2 billion in 1Q09 decreasing Ps. 39.2 billion, or 67.1% as compared to 4Q08 and Ps. 36.7 billion, or 65.6% as compared to 1Q08. In particular, this combined revenue was impacted by the adoption during the second half of 2008 of certain rule changes concerning valuation methodologies for derivative instruments. These changes in valuation methodologies of derivatives were required by external circulars 025, 030, 044 and 063 issued by the Colombian Superintendency of Finance and resulted in a reduction in the carrying value of derivatives which negatively impacted the income from derivative financial instruments in Ps 98.0 billion during 4Q08. An additional reduction of Ps. 59.9 billion in the carrying value of derivatives occurred in 1Q09 which negatively impacted the income from derivative financial instruments in this period.

Communication, postage, rent and others (primarily comprised of income related to operating leases and commercial discounts) totaled Ps. 36.4 billion in 1Q09, almost twice as much as compared to 1Q08. Dividend income, primarily obtained from investments in non-subsidiaries: Protección S.A. (a Colombian pension fund administrator), Titularizadora Colombiana S.A. (an entity that specializes in securitization of assets), Redeban S.A. (an entity that specializes in managing credit, debit, voucher and private label cards transactions in Colombia) and ACH S.A (an automatic clearing house) totaled Ps. 16.6 billion, down 19.1% as compared to 1Q08. The remaining other operating income categories (i.e. gains(losses) on sales of investments on equity securities, securitization income, revenues from commercial subsidiaries and insurance income) had an aggregated revenue of Ps. 54.1 billion, decreasing Ps. 42.8 billion, or 44.1% as compared to 4Q08. This decrease is primarily due to a lower income from gains on sales of investments on equity securities recorded in 1Q09 since in 4Q08 BANCOLOMBIA recorded non-recurring gains on sales of investment securities for Ps. 55.6 billion related to the sale of the Bank’s interest in Multienlace S.A, a company that provides business process outsourcing and contact center services to corporate clients. On a yearly basis, the remaining other operating income categories posted an increase of Ps. 14.3 billion, or 35.8% as compared to 1Q08 driven the solid performance of insurance income.

For explanation of the trends driving the current level of provisions charges, please see the section entitled “Asset Quality” in this report.

During 1Q09, operating expenses totaled Ps. 716.7 billion, decreasing 2.5% as compared to 4Q08, but increasing 22.7% as compared to the figures for 1Q08, due to higher administrative and other expenses and larger personnel expenses.

Administrative and other expenses totaled Ps. 366.2 billion in 1Q09, decreasing 0.7% as compared to 4Q08 and increasing Ps. 76.7 billion, or 26.5% driven by an increase in taxes (different from income tax) and increased fees paid in connection to software development and IT upgrades.

Personnel expenses (the sum of salaries and employee benefits, bonus plan payments and compensation) totaled Ps 285.5 billion in 1Q09, decreasing 2.1% as compared to 4Q08 and increasing 16.6% as compared to 1Q08, due to the wage increases that are typically undertaken during the first quarter of each year as well as a larger number of employees at the Bank.

Despite the higher operating expenses, efficiency, measured as the ratio of operating expenses to net operating income, presented a slight improvement as this ratio decreased to 49.8% from 50.2% the previous quarter. In addition, operating expenses for 1Q09 represented 4.6% of total assets, the same figure presented as of the end of 1Q08.

Total non-operating income totaled Ps. 27.2 billion in 1Q09, compared with a loss of Ps. 53.4 billion in 1Q08. The increase was driven by:

Higher non-operating income which amounted to Ps. 62.8 billion in 1Q09.

Lower non-operating expenses which totaled Ps. 30.4 billion in 1Q09, down 57.7%, due to the lower charges made in connection with pending litigation allowances.

Income tax expense totaled Ps. 117.9 billion decreasing 24.9% as compared to 1Q08. The income tax expense decreased in 1Q09 because:

In 1Q09 BANCOLOMBIA received more non-taxable dividends than in 1Q08. These non-taxable dividends were paid by BANCOLOMBIA’s subsidiaries and were taxed at the subsidiary level but not at the parent level. Additionally, during 1Q08 the Bank’s income was negatively affected by higher non-deductible charges as compared to 1Q09.

Provision charges continued to remain high due to the deterioration of asset quality. As of March, 31, 2009 past due loans (“PDLs”), that is, those overdue more than 30 days, reached Ps. 1,829.9 increasing Ps. 205.9 billion, or 12.7% as compared to PDLs by the end of 4Q08 and representing 4.0% of total loans (up from 3.6% in 4Q08), while net loan’s charge-offs were Ps. 182.8 billion in 1Q09, reflecting a weakening credit environment derived from lower economic activity.

Nonetheless, addition to reserves for loan losses during 1Q09 was crucial as Bancolombia’s management continued to focus on balance sheet strength. Allowances for loan losses reached Ps. 2,350.9 billion, or 5.1% of total loans, while coverage, measured by the ratio of allowances for loans and accrued interest losses to past due loans (overdue more than 30 days), ended 1Q09 at 131.7%a stronger coverage as compared with 115.2% for 1Q08.

As a result, provision charges for 1Q09 were Ps. 339.9 billion increasing 96.2% compared with 1Q08, although decreasing 28.4% as compared to 4Q08. Annualized 1Q09 provision charges represented 3.0% of average loans, compared with 4.4% and 1.8% presented in 4Q08 and 1Q08 respectively.

The following tables present key metrics for asset quality:

Total performing past due loans ⁽¹⁾

Total non-performing past due loans

Total past due loans

Allowance for loans and accrued interest losses

Past due loans to total loans

Non-performing loans as a percentage of total loans

“C”, “D” and “E” loans as a percentage of total loans

Allowances to past due loans ⁽²⁾

Allowance for loan and accrued interest losses as a percentage of “C”, “D” and “E” loans ⁽²⁾

Allowance for loan and accrued interest losses as a percentage of non-performing loans ⁽²⁾

Allowance for loan and accrued interest losses as a percentage of total loans

Percentage of performing loans to total loans

Commercial loans

Consumer loans

Microcredit loans

Mortgage loans

Finance lease

 

 

¨A¨ Normal

¨B¨ Subnormal

¨C¨ Deficient

¨D¨ Doubtful recovery

¨E¨ Unrecoverable

 

BANCOLOMBIA is a full service financial institution incorporated in Colombia that offers a wide range of banking products and services to a diversified individual and corporate customer base of more than 6.4 million customers. BANCOLOMBIA delivers its product and services via its regional network comprised of Colombia’s largest non-government owned banking network, central America’s presence through El Salvador’s leading financial conglomerate (Banagricola S.A.), off-shore banking subsidiaries in Panama, Cayman and Puerto Rico, as well as an agency in Miami. Together, BANCOLOMBIA and its subsidiaries provide stock brokerage, investment banking, leasing, factoring, consumer finance, fiduciary and trust services, asset management, pension fund administration, and insurance, among others.

Contacts
Sergio Restrepo

Executive VP

Tel.: (574) 4041424

Cash and due from banks

Overnight funds sold

 

Trading

Available for Sale

Held to Maturity

Trading

Available for Sale

Market value allowance

 

Commercial loans

Consumer loans

Microcredit

Mortgage loans

Finance lease

Allowance for loan losses

 

Accrued interest receivable on loans

Allowance for accrued interest losses

 

Customers’ acceptances and derivatives

Net accounts receivable

Net premises and equipment

Foreclosed assets, net

Prepaid expenses and deferred charges

Goodwill

Operating leases, net

Other

Reappraisal of assets

 

 

Checking accounts

Other

 

Checking accounts

Time deposits

Savings deposits

 

Overnight funds

Bank acceptances outstanding

Interbank borrowings

Borrowings from domestic development banks

Accounts payable

Accrued interest payable

Other liabilities

Bonds

Accrued expenses

Minority interest in consolidated subsidiaries

 

 

Appropiated

Unappropiated

 

 

 

Interest on loans

Interest on investment securities

Overnight funds

Leasing

 

Interest expense

Checking accounts

Time deposits

Savings deposits

 

Interbank borrowings

Borrowings from domestic development banks

Overnight funds

Bonds

 

Provision for loan and accrued interest losses, net

Recovery of charged-off loans

Provision for foreclosed assets and other assets

Recovery of provisions for foreclosed assets and other assets

 

 

Commissions from banking services and other services

Electronic services and ATM fees

Branch network services

Collections and payments fees

Credit card merchant fees

Credit and debit card annual fees

Checking fees

Fiduciary activities

Pension plan administration

Brokerage fees

Check remittance

International operations

 

Fees and other service expenses

 

Net foreign exchange gains

Derivative financial instruments

Gains(loss) on sales of investments on equity securities

Securitization income

Dividend income

Revenues from commercial subsidiaries

Insurance income

Communication, postage, rent and others

 

Salaries and employee benefits

Bonus plan payments

Compensation

Administrative and other expenses

Deposit security, net

Donation expenses

Depreciation