Some Observations on 360 Day Certificates of Deposit (CDTs).

According to information from the entity responsible for supervising financial institutions as of january 20 of this year, AV Villas leads in CDT issuance with 27% of the total, followed by Banco Popular with 24%, then Davivienda with 17%, and in fourth place Bancolombia with 15.4%.

Interest rate offered by AV Villas is 12.42%, Banco Popular 10.5%, Davivienda 9.88%, and Bancolombia 10.61%.

However, AV Villas' latest reported profit and loss statement, from november 2.025, shows a loss of 53 thousands of millions pesos (mm). Meanwhile, Banco Popular has profits of 13 mm pesos, Davivienda 1.500 mm pesos, and Bancolombia 5.687 mm pesos.

Regarding equity, AV Villas bank has 1.5 mm pesos, Banco Popular 2.5 mm pesos, Davivienda 15 mm pesos, and Bancolombia 25 mm pesos.

As mentioned earlier, the most profitable bank is Bancolombia with 5.700 mm pesos, followed by Davivienda with 1.500 mm pesos, Banco de Bogotá in third place with 1.200 mm pesos, and Banco Sudameris in fourth place with 980 mm pesos.

In contrast to the above, besides AV Villas, other banks with losses include Bancoomeva with 8 mm pesos, Lulo Bank with 45 mm pesos, and Banco Pichincha with 147 mm pesos.

The total profits of the banks as of november were 12.000 mm pesos, meaning that Bancolombia alone accounted for 5.700 mm pesos in profits, representing 48% of the total. This bank also has the largest equity of all.

However, 360 day Certificates of Deposit (CDTs) are not led by Bancolombia; other banks with minors profits than Bancolombia, including AV Villas, which is even operating at a loss, are ahead of them.

In the near future, analysts and think tanks project an increase in the Central Bank's interest rate (Banco de la República) 1/ , which will be necessary to contain the expected rise in inflation this year. This will cause a lag of six months to a year after the Central Bank's rate increase, leading to a rise in CDT interest rates. Therefore, investors in these securities who remain cautious during the time it takes the Central Bank to raise rates 2/ and the subsequent lag in the upward effect on CDTs will be able to renew or open their investments at the higher rates that will be available in the market 3/ (mentioned at the beginning of this note ).

Contrary to projections made two years ago regarding interest rate cuts due to the supposed control of inflation, CDs will continue to be preferred assets in the market for several more years, until the Central Bank's interest rates decrease. This will not occur until inflation and inflation expectations stop rising and begin to decline, but with a sufficient drop to firmly move towards the inflation target of 2% to 4%. 4/

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1/Estimates indicate that the Central Bank will raise rates from the current 9.25% to 11% by the end of the year, as inflation is expected to rise from 5.1% in 2025 to 6.4% this year.

2/ There are differing opinions. Some estimate that at the first meeting in january, the rate will rise by 0.25 or even 0.50, and that there will be further increases of 0.25 throughout the year. They say the Board will anticipate the january inflation increase, which will be 5.3%, a figure that will be released on february 9.

3/ Historically, and especially in the years prior to the pandemic, Certificates of Deposit (CDTs) have offered average interest rates of 5% or 6%. However, since 2.024, and particularly in 2.025 after overcoming the effects of the pandemic, the country had lowered these rates to 10%, where they currently stand. Present year, and with the expected increase for next year, CDTs will once again test the market at rates above 10%.

4/ Within the Board, the majority position has been to prioritize inflation with a contractionary rate, aiming to reach the target range of 2% to 4%. However, another group of Board members has a different position with a vision of economic reactivation that would stimulate a reduction in the interest rate.