Banco de Bogotá S.A. (BOGOTA) Earnings Call Transcript

Good morning. Welcome to Banco de Bogota's Third Quarter 2025 Consolidated Results Conference Call. My name is Karen, and I'll be your operator for today's conference call. [Operator Instructions] Please note that this conference is being recorded. We also advise you to read the disclaimer available on Slide #2. When applicable in this webcast, we refer to trillions as millions of millions and to billions as thousands of millions. Thank you for your attention. Mr. Cesar Prado, CEO of Banco de Bogota, will be the host and speaker today. Mr. Prado, the floor is yours.

Thank you, Karen. Good morning, and welcome to the Banco de Bogota's 2025 Third Quarter Conference Call. Colombia's economic growth continues to be driven by household consumption and government spending with a 2.8% GDP growth during the first 3 quarters of 2025. In addition, private investment remains low, awaiting greater clarity on political and fiscal developments. Political uncertainty will remain during the first half of next year, keeping investment at similar levels to the current ones. Inflation rose to 5.5% in October with inflationary pressures still present and limited chances of reaching the Central Bank's target in the short term. Additional pressures may emerge next year, particularly if the minimum wage increases beyond current expectations. The combination of stable growth, persistent inflation and fiscal vulnerability has left the Central Bank with limited room for further rate cuts, reaching a point where the possibility of rate increases has begun to be discussed. We expect the reference interest rate to remain at its current level of 9.25% through the end of this year and part of 2026. Banking loans grew 6.4% year-on-year as of September, 1.1% in real terms. Consumer loans continue to decrease in real terms, given the low levels of future rates. Loan quality continues to improve across the system as 30- and 90-day PDLs decreased both year-over-year and quarter-over-quarter. We can also see this trend in the cost of risk, which has decreased its level by more than 1 percentage point this year for banks in general. This week, we held an extraordinary shareholders' meeting to discuss the divestment of Multi Financial Group, or MFG, the holding company of Multibank. The buyer will be BAC International Corporation, a company of the BAC Credomatic Group and the seller will be Multi Financial Holding, a holding company fully owned by Banco de Bogota. Both buyer and seller have Mr. Sarmiento Angulo as beneficial owner. We estimate this transaction will be done at a price relatively close to book value, within the fair value range provided by a third party's furnace opinion. The transaction would allow the bank to free up resources, increasing its overall consolidated capital adequacy levels to figures close to the stand-alone levels. These resources would further allow the bank to expand loan market share in Colombia. Furthermore, this transaction would allow the bank senior management to focus more on the local market. MFG has had low profitability in recent years, namely between 1% and 5% in the last 3 years. It also lacks the size to take advantage of economies of scale and scope. Therefore, we believe relocating resources to strengthen the local banking operation would result in greater efficiency and greater value to shareholders. We expect this transaction to be approved by the Panamanian financial regulator in January, and we hope to reach closure by February 2026. Another corporate reallocation will be in Fiduciaria Bogota. Indeed, this company jointly with Fiduoccidente and Fidupopular will spin off assets and operations in favor of Aval Fiduciaria. As a consequence, Aval Fiduciaria will become the largest asset manager in the country with over COP 200 trillion in assets under management. Banco de Bogota will hold a 41.2% stake in Aval Fiduciaria in exchange. Aval Fiduciaria will be able to capture important synergies while remaining operationally integrated to the Group's banks and other companies. Aval Fiduciaria will manage a wide array of mutual funds and more than 5,000 trusts and will offer products and services for retail, SMEs, corporate and institutional clients. In the short term, we don't expect this operation to have a significant impact for Banco de Bogota's profits. In the longer term, we expect Aval Fiduciaria's efficiency and profitability to have a positive impact on Banco de Bogota's results. Moving on to Banco de Bogota, this quarter results have continued in a positive trend, benefiting from improvements in loan quality, greater efficiency and higher equity method income, which we will further discuss. Here is a summary of Banco de Bogota's third quarter 2025 results. Net income attributable to shareholders was COP 390 billion, 3.3% higher than last year, but 9.2% lower than in the previous quarter. This resulted in a return on assets of 1% and a return on equity of 9.1%. NIM for the quarter remained at 4.3%, the same as in the second quarter of this year. Fee income ratio reached 24.9%, 65 basis points lower than in the previous quarter. Efficiency measured as cost to income stood at 48.7%, improving by 2.6 percentage points in the quarter. Cost to assets also improved from 2.7% last quarter to 2.6%. Consolidated gross loans reached COP 109.4 trillion, increasing 2.5% in the quarter or 3.4% excluding FX effects. Deposits totaled COP 106.1 trillion, decreasing 0.8% in the quarter. Excluding the peso revaluation deposits increased 0.2% this quarter and 9.8% on the year. Funding reached COP 134.8 trillion, up 2.4% in the quarter, while the deposit share of total funding decreased slightly to 78.8% due mainly to lower balances in checking and savings accounts down 3.6% and 2.7%, respectively. Loan quality continued to improve as 30-day PDLs decreased by 15 basis points to 5.1% and 90-day PDLs decreased by 21 basis points, reaching 3.6%. Net cost of risk stood at 1.9%, increasing 40 basis points compared to the previous quarter. Now I will turn the presentation over to Sergio Sandoval, Banco de Bogota's, CFO.

Thank you, Cesar, and good morning. Let's move on to Slide 4. In the third quarter of 2025, we achieved substantial progress in the implementation of our digital strategy. With particular emphasis on the successful completion of the initial phase of Bre-B, focused on the registration of digital keys. This milestone enables us to offer our clients a more agile, intuitive and secure experience across our digital channels. We also strengthened our product portfolio aiming to increasingly align our solutions with customer needs and expectations, thereby reinforcing our leadership in financial innovation. Throughout this period, we consolidated key functionalities in our digital channels, enhancing the user experience and driving greater adoption of digital services. By the end of September, we recorded over 3.9 million active keys, 68% of which correspond to Tag Aval keys. Around 400 million digital transactions were carried out during the quarter. Immediate transfers continue to gain relevance with more than 18.3 million operations driven by our free interbank transfer service. Furthermore, Tag Aval surpassed 2 million transactions, reflecting a robust 64% quarter-over-quarter growth. We have simplified the use and speed of credit card payments through PSE across our digital channels. This functionality has provided customers with a more digital, accessible and convenient way to manage their financial obligations. Since July, clients have been able to automatically adjust the number of installments for their credit card purchases through digital channels, a functionality that has recorded over 18,000 transactions, offering enhanced control and flexibility over their personal finances. Our digital strategy also consolidated key advancements across our product portfolio, driving efficiency, scalability and a multiproduct experience. Cuenta Facil continued its steady growth, reaching over 119,000 new accounts opened, a 43% quarter-over-quarter increase. In time deposits, we achieved a record in cumulative openings for the year, totaling COP 842 billion. Personal loans maintained solid momentum, reflecting a 20% increase quarter-over-quarter driven by targeted commercial campaigns. In the multiproduct initiative, we are progressing with pilot programs that enable the disbursements of up to 5 products online, streamlining processes and enhancing the overall customer experience. In the Vehicle segment, we increased the maximum financing percentage from 90% to 100%, boosting the scalability of the business while maintaining a moderate risk profile. In the Corporate segment, we continue to drive digital transformation and operational efficiency, reducing approval times and enhancing the business client experience. Since June 2025, we have implemented automatic approvals for commercial loans through a digital flow for new clients, reducing approval times from 2 days to just 10 minutes. Our digital promissory note solution recorded over 2,500 disbursements, a 26% increase in dispersed value compared to the previous quarter. This growth was driven by higher disbursement limits for businesses. In cash management, we continue to strengthen our value proposition for corporate clients. Through our collection and payment API solutions, we facilitated payments totaling COP 54 billion versus COP 2.5 billion in the previous quarter and collections of COP 7 billion, representing 29% quarter-over-quarter growth. Moving on to Slide 5. In terms of sustainability, we have made significant progress in the development of our strategy during this quarter. Among the most notable achievements are: over the past few months, we have received several prestigious awards. We were acknowledged by Forbes as one of the 50 leading companies in sustainability in Colombia for 2025. Also, we were awarded by the Bogota's Mobility Bureau in recognition of our sustainable mobility program developed over the past 5 years. This program includes free share bicycles, electric charging stations and a carpooling app called Try My Ride. As of September 2025, our green portfolio exceeded COP 6.3 trillion, representing a 32.5% growth compared to its value at the end of December 2024, which stood at COP 4.7 trillion. In terms of the social portfolio, it also experienced growth during this quarter, reaching COP 15.1 trillion by the end of September. Considering the green and social portfolios, our sustainable portfolio reached COP 21.4 trillion as of September, representing 23.8% of the bank's total portfolio. On the financial education front, more than 20,000 individuals benefited from training and financial education initiatives throughout 2025, this included the mobile classroom, which visited 9 departments and 53 towns, accumulating 573 hours of volunteer work, in-person workshops, webinars and digital content aimed at diverse audiences such as young people, retires, clients, non-clients and micro entrepreneurs. Participation in industry events such as Global Money week and direct training for over 500 individuals through advisory sessions with partner companies. This quarter, we also released several publications, among which we highlight the first report on nature related risks and opportunities, aligned with the recommendations of the global TNFD framework. With this publication, we became the first bank in the region to issue a report of this kind. Additionally, we published the impact and use of funds reports for the sustainable ordinary bond issued in 2024, and the latest report for the green bonds issued in 2020, both available on our Investor Relations website. Finally, we participated in the Carbon Disclosure Project assessments, responding to the climate change, forests and water questionnaires. We have been present in key forums to promote sustainability and climate action. We participated in Biodiversity Week, an event that emerged following the COP16 on Biodiversity held in 2024, where we share our perspective on nature-related opportunities. We were panelists at the 2025 electric sector contractors convention, where we emphasize the importance of energy transition. We joined the Bioeconomy networking roundtable organized by the National Planning Department, strengthening strategic alliances for sustainable development. Lastly, we took part in the Colombia and LATAM Climate Summit 2025, contributing as panelists in the session, real strategies to accelerate corporate climate action, reaffirming our commitment to decarbonization and innovation. Moving on to Slide 6. Let me summarize the local macroeconomic context. In the third quarter, the Colombian economy extended its upward trend to such an extent that the annual growth rate was 2.8%, a high since 2022. Domestic demand continued to explain the strong performance of local activity. Consumer confidence returned to positive territory and has now been trending upwards for more than 2 years. While the national unemployment rate reached its lowest level ever for a third quarter, averaging 8.5%, coupled with solid household income, both from employment and nonemployment sources. Colombians continue to increase their consumption, especially of goods, which has also been supported by credit. Consumer loans reached their highest annual growth rate since 2023 in the third quarter. Furthermore, the increased domestic demand has also been supported by a high influx of tourists. With more than 7 million visitors so far this year through August, a record high. In this context, the best-performing economic sectors continue to be those most dependent on demand from both residents and nonresidents, as well as the public sector, such as commerce, entertainment, transportation, accommodation, manufacturing, food services and finance. Given this context, but acknowledging global risks and the local electoral cycle, the growth projection is 2.8% for both 2025 and 2026. On Slide 7, turning to prices. There is inflationary process installed in the third quarter, with inflation reaching 5.5% in October. Inflationary pressures have persisted in food due to higher input costs goods due to increased domestic demand and on rental services due to higher labor costs resulting from the minimum wage adjustment, the implementation of the labor reform and the reduction of working hours. In this scenario, inflation is expected to end 2025 around 5.3% above the 2024 level. As a consequence and pending the definition of the 2026 minimum wage, the Central Bank has kept its benchmark interest rate stable at 9.25%. This level could remain for much of 2026, if inflation and its expectations do not show significant improvements. On the fiscal front, favorable global financial conditions for emerging economies. Debt management operations and stronger nominal GDP growth would reduce interest payments to between 3.2% and 3.8% of GDP, compared to the 4.7% of GDP projected in the medium-term fiscal framework. However, the primary deficit, which excludes interest payments would approach historical highs, exceeding 3% of GDP, above the 2.4% projected by the government, despite the challenging state of public finances between the end of June and September, the exchange rate fell from COP 4,070 to COP 3,924 following the global weakening of the dollar. Given that the government still has dollar reserves and expects to issue new bonds for up to EUR 5 billion and obtained direct credit from international banks for $1 billion. Monetization would continue to impact the exchange rate. Ultimately, these flows could offset the effects of electoral uncertainty, which is expected to increase as the elections approach. Finally, the current account deficit is expected to widen from minus 1.8% of GDP in 2024 to minus 2.6% of GDP in 2025, driven by a stronger recovery in imports than exports, both in goods and services, where the terms of trade will be affected by lower commodity prices. It is important to note that for the first time ever, remittances surpass oil exports as the economy's main source of foreign currency. This further strengthens the diversification of the dollar inflow basket. Now I will turn over the presentation to Javier Dorich, Head of Investor Relations and Corporate Development.

Thank you, Sergio, and good morning, everyone. Starting on Slide 8. We present the highlights of the bank's balance sheet in the third quarter of 2025. Total assets reached COP 156 trillion, a 6% year-on-year increase and a 1.8% growth in the quarter. The loan portfolio continues to be the largest asset category with 67.2% of assets being net loans followed by 14.3% of fixed income, 7.8% of equity investments and other assets 10.7%. Gross loans reached COP 109.4 trillion, which implies a 2.5% quarterly and a 4.8% yearly increase. Excluding the effect of the peso revaluation, yearly growth would have been 6.3% and the quarter's growth would be 3.4%. The loan breakdown is the following: 62.9% are commercial loans, 22.5% consumer loans and 14.6% mortgage loans. Mortgages are the fastest-growing segment at 16% year-on-year or 17.8%, excluding FX and a quarter's growth of 3.7% or 4.5% excluding FX. Commercial loans are starting to pick up their pace with a growth of 2.7% this quarter or 3.6% excluding FX, where general purpose loans and overdrafts are picking up. Consumer loans increased by 1.3% this quarter or 1.9% excluding FX, driven by personal loans supported by solid household consumption. We expect loan growth to be between 4% and 5% this year or around 7% excluding FX. For 2026, we forecast loan growth between 9% and 10%, excluding multibank on a pro forma basis, that is excluding it both for 2025 and 2026. In Slide 9, we present the bank's funding. Total funding reached COP 134.8 trillion this quarter, which represents a 6.4% year-on-year increase and a 2.4% quarterly increase. Deposits make up 78.8% of funding followed by banks and others with 8.7%, bonds with 6.9% and interbank loans with 5.6%. Banks and others increased by 9.5% this quarter or 25.3% year-on-year. Deposits decreased this quarter by COP 880 billion or 0.8%. The deposit to net loans ratio stands at 1.02x close to target. Without the effect of FX movements, deposits increased by 0.2% this quarter. Deposits reached COP 106.1 trillion and are comprised of time deposits with 53.5%, savings accounts at 32.5%, checking accounts at 13.5% and other accounts with 0.5%. Savings accounts stand at COP 34.5 trillion, having decreased by 2.7% this quarter or 2.4% excluding FX. Checking accounts decreased 3.6% this quarter or 2.2% excluding FX, to a level of COP 14.3 trillion. Demand deposits were offset by time deposits which increased by 1.2% or 2.5% excluding FX, and stand at COP 56.8 trillion. On the top right, we show the 30-day liquidity coverage ratio and the NSFR ratio. As you can see, the 30-day liquidity ratio has increased 1.6 percentage points while the NSFR ratio decreased 1.6 percentage points, closing at 109%. Let's move on to Slide 10, where we present equity and capital adequacy levels. Shareholders' equity reached COP 17.4 trillion, increasing by 5.3% year-on-year and 2.8% this quarter. Growth is mainly explained by the positive results in P&L, which amounted to COP 390 billion this quarter, and increases of COP 87 billion in other comprehensive income. Minority interests amounted to COP 62 billion, a 4.9% increase. Therefore, total equity amounted to COP 17.5 trillion. On the right, we observed leverage measures for the bank. The equity of our assets ratio and the tangible capital ratio increased by 11 and 13 basis points this quarter to levels of 11.2% and 10.2%, respectively. Both of these figures are within normal past ranges. On the bottom, we observed the consolidated capital adequacy by components. CET1 capital reached COP 15.1 trillion this quarter, a 6.2% year-on-year increase, and a 4.2% increase this quarter, driven by net income and other comprehensive income. Additional capital decreased by 4.6% this quarter to COP 1.7 trillion, which is mostly explained by the peso revaluation. On the denominator side, total risk-weighted assets decreased by 1.1% this quarter, mainly explained by a lower density of credit risk-weighted assets. The CET1 and Tier 1 ratios stood at 14%, increasing 70 basis points this quarter due to both higher CET1 capital and lower total risk-weighted assets. This level represents a spread of 5.5 percentage points against the regulatory minimum, including buffers. The Tier 2 ratio stood at 1.6%, decreasing 6 basis points this quarter due to the aforementioned lower additional capital due to the peso revaluation. Finally, Total capital adequacy stands at 15.6%, having increased by 64 basis points this quarter. This figure is 4.1 percentage points above regulatory minimums. Now let's move to our P&L performance ratios, starting with the net interest margin on Slide 11. Loan yields decreased 11 basis points this quarter to a level of 11.2%, most of the decreases in loan yields came from commercial loan yields, where rates decreased by 13 basis points on average. Consumer yields decreased by 7 basis points while mortgage yields increased by 2 basis points. Investment NIM reached 2%, an increase of 53 basis points in the quarter and 1.9 percentage points year-over-year. This improvement reflects higher bond rates due to turnover within the investment portfolio. The cost of funds remained fairly stable, having decreased by only 1 basis point during the quarter to a level of 6.3%. The cost of funds decreased in savings accounts and interbank and overnight funds, but was offset by increases in checking accounts and time deposits. Loan NIM decreased by 10 basis points to a level of 4.8% as loan yields decreased by 11 basis points and cost of funds by 1 basis point. Total NIM remained at 4.3%, the same as the past quarter and 15 basis points more than past year. In this case, investment NIM offset the slight decrease in loan NIM. We expect total NIM to be around 4.2% for 2025 and around 4.6% for 2026. Moving on to Slide 12. We present loan quality ratios by geography. In Colombia, 30-day PDLs improved by 24 basis points to a level of 5.2%, with improvements in commercial and consumer segments. In Panama, 30-day PDLs deteriorated by 37 basis points to a level of 4.6%, showing deterioration in commercial and mortgage segments and some improvement in the consumer segment. Consolidated 30-day PDLs improved by 15 basis points to a level of 5.1%. In Colombia, there was a 24 basis points improvement in 90-day PDLs to a level of 3.8% with improvement in all segments. In Panama, there was a 4 basis points improvement with all segments remaining fairly stable. Overall, 90-day PDLs decreased by 21 basis points to a level of 3.6%. On Slide 13, we present the loan portfolio quality by segments as well as PDL formation and coverage. As can be observed in the graphs to the right, the loan book shows improvement in commercial and consumer portfolios, both in 30-day and 90-day PDLs. Mortgages show increases in 30-day PDLs of 20 basis points, ending at a level of 6.8% close to average levels of 2024. 90-day mortgage PDLs decreased 3 basis points and remain at 3.8%. On the bottom left, we can appreciate that the formation of new 30-day PDLs was COP 620 billion, which increased this quarter but remains below the average since Q1 2024. New 90-day PDL formation was COP 521 billion, the smallest figure since June 2022. The 30-day coverage ratio remained stable at 0.88x, while the 90-day coverage ratio increased to 1.24x. Finally, allowances over gross loans decreased to 4.5% as gross loans increased at a faster pace than delinquent loans. On Slide 14, we present gross loans by stages and segments as well as their coverage ratios. On the top left, one can observe that consolidated Stage 3 loans decreased by 15 basis points to 6.2% of total loans. Stage 2 loans decreased their share by 31 basis points to 4.7%, and thusly, Stage 1 loans increased by 46 basis points to 89.1%. This was led by commercial loans where both Stage 2 and 3 loans decreased their share against stage 1 loans. For consumer loans and mortgages, both Stage 1 and 3 increased their share of total loans while Stage 2 loans decreased. In the bottom left, we can observe the coverage by stages. Stage 1 coverage decreased by 6 basis points to 1%. Stage 2 coverage decreased by 61 basis points to 14.5%. Conversely, Stage 3 coverage increased by 54 basis points to 46.6%. As previously stated, total coverage or allowances over average gross loans decreased by 16 basis points to 4.5%. On Slide 15, we present the net cost of risk and charge-off ratios. Net cost of risk for the quarter was 1.9%, having increased by 40 basis points this quarter. The net cost of risk of the previous quarter was lower than expected, and this cost of risk is in line with our 2025 expectations. Cost of risk increased by 40 basis points in Colombia to 2.1% and by 36 basis points in Panama to 1%. Cost of risk improved by 41 basis points for mortgages to a level of 0.6%, reflecting better portfolio quality. Meanwhile, the cost of risk increased by 11 basis points in commercial loans where a few cases of previously deteriorated clients were further provisioned. Consumer cost of risk increased by 69 basis points to 6%, driven by increases in personal loans, credit cards and overdrafts. We don't expect a deterioration in consumer cost of risk in the near future. In fact, we foresee that we will see figures closer to 6% in upcoming quarters. Charge-offs remained at a similar levels to the previous quarter at COP 642 billion, therefore, charge-offs of our 90-day PDLs increased slightly to 63.6%, having maintained similar levels to the previous quarter in both Colombia and in Panama. Charge-offs of our average loans also remained stable at 2.4%, with little variation over time in each geography. For 2025, we expect net cost of risk around 1.9% and for 2026, our guidance is around 2.1%. On Slide 16, we present fee income structure and details on other income. Total fees amounted to COP 528 billion, representing a 5.6% increase this quarter, an 8.5% increase this year. Most of the increase in fees came from banking fees, which represent 81% of gross fees and increased by 5.2% this quarter. Logistical fees from Almaviva and trust fees from Fidu Bogota increased as well, 6.9% in both cases. Total income came in at COP 2.1 trillion, increasing 8.3% this quarter. Therefore, the fee income ratio stood at 24.9%, in line with past figure and expectations. Other income totaled COP 278 billion, up 13.5%. Equity method income increased by COP 22 billion to COP 134 billion, driven mainly by higher results from Porvenir. Other income decreased by 45.6% this quarter as the previous quarter had a one-off income from an arbitration award for MFH. Net profits from investments increased by 83.9% this quarter to COP 79 billion. Finally, derivatives and FX net expense was COP 39 billion. We expect the fee income ratio to be around 25% in 2025 and 22% in 2026, given Aval Fiduciaria's transaction. Current trust fees received from Fidu Bogota will turn into equity method income from Aval Fiduciaria starting in 2026. On Slide 17, we present efficiency ratios measured by cost-to-income and cost-to-assets. Operating expenses for the quarter amounted to COP 991 billion, which represents a 7% increase year-on-year and a 5.4% quarterly reduction. This quarter's decrease was led by general and administrative expenses, which decreased 10.5% this quarter. Total income was COP 2 trillion during the quarter a 0.3% decrease from the previous quarter, mainly due to other income. Therefore, cost-to-income came in at 48.7%, in line with expectations. Average assets increased by 2% this quarter. Cost to assets came in at 2.6%, in line with expectations and having decreased by 20 basis points against the previous quarter. We expect cost-to-income ratio to be between 51% and 52% and cost to assets between 2.7% and 2.8% for 2025. For 2026, we expect to maintain the same levels. On Slide 18, we show the bank's profitability. Net income attributable to shareholders came in at COP 390 billion. Even though the previous quarter had a net income attributable to shareholders of COP 430 billion, roughly COP 91 billion of those were one-offs. Therefore, the third quarter results represent a continuation of improvements for Banco de Bogota. The quarter's results represent a return on assets of 1% and a return on equity of 9.1%. We've had a slow and steady recovery since 2023 2nd half results with some minor outliers. We expect to further recover profitability going forward and to accelerate loan growth going forward. We still have some way to go and achieve our desired levels of profitability. We adjusted our guidance for ROE to around 8% for this year. We expect an ROE between 9% and 10% for 2026. On Slide 19, we show you the proposed transaction of Multi Financial Group or MFG. This Wednesday, we held an extraordinary shareholders' assembly in which the Board of Directors was authorized to deliberate with regards to selling Multi Financial Group, the parent company of Multi Bank to BAC International Corporation. As you may observe, the direct seller would be Multi Financial holding or MFH, which is fully owned by Banco de Bogota and which owns 99.57% of MFG. The selling price of MFG will most likely be close to book value. For this transaction to happen, we expect the approval of Superintendencia de Bancos de Panama around January 2026. Given the latter, we expect the transaction's completion by February next year. This approach would enable the bank to release capital, strengthen its overall solvency and create opportunities to expand market share in Colombia. Moreover, we believe that reallocating resources to reinforce the local banking operation would lead to greater efficiency. Another corporate operation going on is with regards to Fiduciaria Bogota, the bank's asset manager. The bank currently holds 94.99% of Fidu Bogota and fully consolidated. Fiduciaria Bogota will spin off most of its core assets and operations to Aval Fiduciaria. Several other trust companies and asset managers of Grupo Aval will conduct a similar operation. Aval Fiduciaria will, therefore, become the largest asset manager in the country, and we will deliver value through synergies and increase efficiency. Aval Fiduciaria will continue to work closely with Grupo Aval banks and companies. Banco de Bogota will hold approximately 41.2% of Aval Fiduciaria as an associate company. The bank already holds a small number of shares in our Fiduciaria and its increased ownership will be proportional to Fidu Bogota contribution to Aval Fiduciaria versus the other asset managers that will together comprise the enlarged Aval Fiduciaria. Finally, on Slide 21, I'd like to summarize the general guidance for 2025 and 2026. For 2025, loan growth is expected to be between 4% and 5% or around 7% excluding FX movements. For 2026, we expect loan growth in the 9% to 10% area. Net interest margin is expected around 4.2% in 2025 and 4.6% in 2026. Net cost of risk is expected to be around 1.9% this year, and around 2.1% next year. Fee income ratio should come in around 25% this year and 22% in 2026. Cost-to-income ratio is expected between 51% and 52% in 2025 and 2026. Cost to assets is expected between 2.7% and 2.8% this year and next year. And finally, return on average equity should be around the 8% area this year and between 9% and 10% next year. And now we are open to your questions.

[Operator Instructions] Our first question comes from our own stage from Mr. Santiago Villanueva. Our first question comes from Mr. Sebastian Gallego from Ashmore. His question says. Hello. Could you please share further details on the MFG transaction? What was the acquisition price versus selling price in terms of valuation?

Thank you, Sebastian, for your question. Relevant information regarding the transaction was revealed to the market yesterday evening, as soon as the SPA was signed. So we have here fresh information that -- because of that, we were unable to include in the documentation that we prepared for this conference call. The price agreed was $26.86 per share. That is a total price for the transaction of approximately $459 million for 99.57% of the shares outstanding of MFG. The current book value of MFG is $467 million, but we expect that by the date of closure, shareholders' equity will be around $445 million. Therefore, the transaction will be settled at a price to book value of around 1.03x. Therefore, we don't expect to have a larger impact on profitability directly deriving from the sale of Multi Bank. Regarding the acquisition price, you may recall that this bank was acquired back in 2020 and the price that was paid at that time was around $432 million.

Our second question from our Q&A also comes from Mr. Sebastien Gallego from Ashmore. His second question says, could you share market share numbers for Bre-B both in terms of transactions and amount of transactions?

Sebastien, thank you very much for your question. The last figures I have in mind, it's our market share in Bre-B is between 7% and 10%. Between that we have been -- with the service a couple of months, a little bit less than that, but that's the figure between 7% and 10% so far.

Our next question comes from Mr. Santiago Villanueva from Davivienda Corredores. He says I'm sorry, I'm having issues with my microphone. My question was related to the money that will be received from the multi-financial group transaction. Is there a possibility of distributing a portion as dividends?

Santiago, this is Javier. So right now, we don't think that the sale of MFG should have an impact on our dividend payout ratio, which, as you know, has been around 50% in the recent past. But of course, we should discuss that with our shareholders on March next year.

Our next question comes from Mr. Sebastian Gallego from Ashmore. His question is, what is the optimal level for CET? The 14% current level looks high [ pre-MFG ] transaction, what should we expect in terms of dividends?

So we don't have an exact CET1 guidance or optimum level, but as you know, in the last year, around 95% of the time, our CET1 has been at least 200 basis points above the regulatory minimum. And since we don't have any AT1s that figure should go between 10% or 10.5%. So having said that, of course, the current 14% for CET1 and Tier 1 is high. But we have big plans in terms of growth in the Colombian market. So that should support that growth. We don't know yet what we'll do with that excess capital, if you may say. We will discuss that with about in the next quarters.