Bancolombia S.A. - ADR

Another strong quarter; ROE driven by NIM + asset quality + efficiency - Net income: COP 2.7T, +87% QoQ; historic quarterly ROE ~28.7% (annualized ROE ~29%). - NIM ~7.9% (up +91 bps QoQ); lending NIM improved 7.8% → 8.3%. - Cost of risk ~1.6% (quarterly annualized), reflecting solid overall credit performance. - Efficiency: operating expenses -10% QoQ (benefiting from COP 374B wealth tax recognized in prior quarter); cost-to-income ~43% consolidated (BAM improved 44.5% → 42.2%; Banco Agrícola 47.9% → 47%).

Guidance and expectations for 2H: still strong, but key “at-risk” variable is asset quality - Management expectation: 2H seasonally better than 1H; they expect performance in line with 1H and even slightly higher credit demand. - No change to full-year guidance (ROE/capital optics): - ROE guidance raised to 21%–22% - NIM guidance raised to 7.4%–7.6% - Cost of risk guidance maintained 1.6%–1.8% - Cost-to-income target ~48% - Loan growth guidance 7%–8% - Explicit risk framing: while margins/volumes look supportive, guidance could face downside from credit risk tied to macro shocks.

Macro backdrop: inflation sticky; higher-for-longer rates possible; GDP growth moderated - Colombia: economy expanding ~2.7% in 2Q; forecast 2026 GDP revised down 2.9% → 2.6%. - Inflation >6.1% by 2Q end; bank expects ~6.9% by year-end, above target through 2028. - Central Bank raised policy rate +75 bps to 12% (June); outlook implies policy rate could reach ~12.75% by end-2026, *or* a higher-for-longer regime if hikes stall. - Risks: El Niño (food/energy inflation), plus peso appreciation (~+15% YTD) affecting export competitiveness, and earthquake impacts (noted as a potential asset quality factor).