Message from the President - Davivienda Annual Report 2022

On our 50th anniversary, we reaffirm our commitment to fulfill our higher purpose: enriching life with integrity. Today we have our sights aimed towards the future we want to build alongside our stakeholders. A future in which we will continue taking our transformation capacity to even more people and businesses in order to generate progress in the places where we operate, while at the same time taking care of the planet and guaranteeing sustainable business growth, leveraged in technology and our characteristic digital essence.

2022 was a year with a challenging and volatile global and regional economic environment, in which we experienced the main consequences of post-pandemic times: there were interruptions in global supply chains and decelerations in the world’s most important economies. Additionally, we observed accelerated increases in inflation levels, which led central banks to toughen their monetary policies, increasing interest rates in an accelerated manner. This situation generated direct impacts in our economies, especially in resource availability for families and businesses.

In Colombia, the annual inflation closed at 13.12%, reaching the highest level reported in the last 23 years, and the Central Bank raised its monetary policy rate by 900 basis points throughout the year, taking it to 12% in December, which is a level not seen since 1999. Uncertainty from an economic standpoint, together with the elections, and the following signals of potential reforms regarding different aspects, were reflected in the market’s behavior, impacting devaluation levels for the local currency, as well as participation, inflows and outflows of foreign capital.

This scenario inevitably had an effect on our customers, the business and our financial results. In this sense, our profits for the year closed at COP 1.62 trillion, which represented a return on average equity of 10.74%, which was impacted by higher funding costs and provision expenses.

Nevertheless, this macroeconomic environment was an opportunity to continue creating innovative solutions, maintaining our leadership in the financial sector in Colombia and Central America, and advancing in all of our strategic pillars, consolidating ourselves as a multilatin, digital and sustainable organization. This way, we got connected with new communities and reached 21.8 million customers, more than 2 times the amount we had at the end of 2018.

We remain protagonists in Colombia and Central America with market shares of 16.2% and 9.5% , respectively. Our capital and funding management kept leveraging business growth, allowing our consolidated gross loan portfolio to grow by 22.1% over the year, closing at COP 144.8 trillion, of which 10% currently funds sustainable projects. Our total capital adequacy ratio closed at 16.29%, which establishes us as one of the best capitalized banks in the country on a consolidated basis.

We are aware that 2023 will also be a challenging year, and are prepared to face it. We will work to make our operation more efficient and to offer our customers a world class service, supporting them in a better way with self management solutions that will allow us to be more productive. We will focus our efforts on actively managing our loan portfolio, we will continue participating in the ecosystems where our customers are and will continuously seek to increase our share in the transactional world, generating better results for our shareholders and investors.

The World is Our Home

We are going through a changing environment, which calls for us to reinforce our participation in the financial world’s transformation towards a more prosperous, inclusive and clean world. Today we ratify that more than having a sustainability strategy, our strategy is sustainable. We are within the top 15% of the most sustainable companies in the financial sector at a global level in S&P Global’s Sustainability Yearbook, and were included for a ninth consecutive year in the S&P Global’s Dow Jones Sustainability Index.

We seek to make the world our home by managing our business in a sustainable way. We are aware of our role as a driver for economic development by mobilizing resources. This is why we put forward actions that from a business and sustainable financing perspective mitigate climate change and generate positive impacts in society. We finance projects with a social and environmental purpose, with business lines designed specifically for sustainable housing, low income housing, women led SMEs, electric and hybrid vehicle purchases, among others. Our sustainable loan portfolio reached COP 14.8 trillion at the end of 2022, growing by 26.5% compared to 2021.

Taking this into account and being aware of our actions, we adhered to the Principles for Responsible Investment (PRI) in order to contribute to the consolidation of a more sustainable financial system, incorporating more social and environmental factors in both our and our client’s investment decisions.

Posed with the climate change challenge, we actively contributed to the transition towards a resilient and low carbon economy. From our business, we focused on measuring indirect emissions and evaluating climate change risks associated with our loan portfolios. In order to leverage this labor, we adhered to the Partnership for Carbon Accounting Financials (PCAF)and incorporated the PACTA (Paris Agreement Capital Transition Assessment) methodology, aiming to guarantee our contribution with Sustainable Development Goals and the Paris Agreement. Regarding direct emissions, we actively managed greenhouse gas emissions in our operations, which allowed us to receive the Carbon Neutral Verification for Colombia and Central America by ICONTEC, which also recognized us as the first entity in Latin America to receive the renewable energy seal.

In terms of socioeconomic development, we work together with Grupo Bolivar’s other companies and other strategic allies to boost social impact ecosystems, capable of promoting the financial inclusion and literacy of communities. Our financial literacy program has been recognized by the Financial Superintendency of Colombia (SFC) for its quality, pertinence and suitability to eliminate access barriers to the banking system and for promoting healthy financial habits. In this way, we have reached diverse population segments such as farmers markets, artisans, informal vendors, cacao, coffee and plantain producers, among other communities by giving them access to credit, transactional, saving and payment solutions, as well as offering them educational tools that leverage their businesses. In total, we reached 104 farmers markets, 66 thousand informal vendors, 23 thousand artisans and 34 thousand producers, capturing around 13.5 million transactions with a business model based on trust, the power to break cultural barriers, and the capacity of transforming cash usage and informal financing habits.

We work every day to make Davivienda a more diverse, equitable and inclusive place, in which we encourage empathy and innovation. We are proud that, on average, 30% of our boards of directors are conformed by women, and 42% of our management positions are occupied by women.

Additionally, within our role as corporate citizens, together with our Fundación Bolivar Davivienda we implemented programs that contribute to skill development in people, with the goal of encouraging talent and inspiring people of all ages to achieve their goals.

Today more than ever we are committed to keep making the world our home, a home where everyone moves forward, supported by a conscious and transformative financial ecosystem.

We are more than a bank

In Davivienda we go further than offering financial products and services. We connect with the ecosystems where our customers live in order to satisfy their needs easier with novel digital solutions and a high level of service. Additionally, we are working to involve our allies in the development of financial experiences, complementing our service offering so our customers can find what they need in Davivienda.

Thanks to the digital skills we have developed throughout the years, we supported 170 thousand small business and entrepreneurs through initiatives available on our apps such as Mi Negocio and Mi Comercio, which allow them to reach more people easily, as well as supporting their growth with payment solutions, catalog creation, inventory management, among others.

We keep demonstrating Daviplata’s potential for reaching more population segments, reaching 15.6 million customers at the end of the year and covering 99% of Colombia’s territory. This Neobank for everyone is our financial inclusion flagship, by being the only financial product of 4.1 million Colombians.

Aligned with our innovative and digital essence, we tested new technologies in order to be at the forefront of banking. In this sense, together with IDB Invest we issued the first blockchain bond in Latin America within the regulatory sandbox in Colombia. This technology seeks to generate a more transparent, agile and safe market, reducing the costs and complexity of issuances, as well as allowing the entrance of more market participants and purveying elements to evolve regulation regarding these types of technologies.

For an exciting future

As a great result of strengthening our innovation abilities, we put Efecto i at the service of the whole country. This is an initiative oriented towards promoting projects that generate a positive impact in society, strengthening available tools so that young entrepreneurs can leverage their businesses with Grupo Bolivar’s innovation methodology.

We have been learning and growing for 50 years. I would like to thank all our employees for their dedication, our shareholders for their trust, our suppliers for being key allies, and our other stakeholders for their support along the way. In 2023, we will continue working in our banks transformation, exploring new technologies, and building more and better that get us closer to the new generations.

We are enthusiastic about the roadmap we have set forth to take our service to another level and stand closer to our customers, demonstrating Davivienda's ability to remain as the organization you have believed in for the past 50 years.