Bancassurance and banking services also added to the positive results in the quarter figures and broadly, in 2023. The first one due to the good performance in insurance policy renewals, the second one mainly due to the incremental use of electronic and digital banking services by retail customers.
The higher fee expenses in the quarter were driven by a higher volume of processed data in connection with banking services and higher royalties paid to credit-debit card franchises due to the higher amount of transactions.
2.3.Other Operating Income
Total other operating income was COP 937 billion in 4Q23, up 0.5% compared to 3Q23. Income from operating leases was COP 471 billion in 4Q23, an increase of 4.4% compared to 3Q23 and 21.4% compared to 4Q22. The better performance was driven by an improvement in customer financial lease agreements at Bancolombia S.A. and customer rental contracts of vehicles at Renting Colombia and higher income in property rentals.
2.4. Dividends received, and share of profits
Total dividends received and other net income from equity method investees was COP -91 billion in 4Q23, with a balance reduction mainly by impairment charges in associates and joint businesses corresponding to TUYA S.A., following the market valuation carried out during the quarter.
2.5.Asset Quality, Provision Charges and Balance Sheet Strength
The principal balance for past due loans (those that are overdue for more than 30 days) totaled COP 12,357 billion at the end of 4Q23 and represented 5.0% of total gross loans, whereas 90-day past-due loans totaled 8,082 billion and represented 3.3%, both ratios increased quarterly largely due to a greater amount of retail clients becoming delinquent. During the quarter, charge-offs totaled COP 1,690 billion, mostly by the impact of consumer loan vintages.
The coverage, measured by the ratio of allowances for loans losses (principal) to PDLs (overdue 30 days), was 120.0% at the end of 4Q23, decreasing compared to 122.5% at the end of 3Q23. The deterioration of the loan portfolio (new past due loans including charge-offs) was COP 1,832 billion, decreasing for the first time in the year.
Provision charges (net of recoveries) totaled COP 1,724 billion in 4Q23, increasing 7.1% compared to 3Q23.
When broken down by category, SME and mid-sized segments represented a decrease in the quarter due to provision releases tied to the reduction in the portfolio following credit prepayments and new settlements with clients to honor overdue obligations. Provision for loan losses on the large exposures´ segment is explained by deterioration of some clients from construction and retail sectors. Finally, in the consumer segment there was no significant growth provided that past due loan formation is properly being contained. In the annual analysis, it is worth highlighting a higher provision expense in connection with consumer and the deterioration of unsecured loans year over year, mainly in Colombia and Guatemala.
Provisions as a percentage of average gross loans were 2.7% annualized for 4Q23 and 2.8% for the last 12 months. Bancolombia maintains a strong balance sheet supported by an adequate level of loan loss reserves. Allowances (for the principal) for loan losses totaled COP 14,833 billion, or 6.0% of total loans at the end of 4Q23, stable when compared to 3Q23.
The following tables present key metrics related to asset quality:
| | | | | | | |
ASSET QUALITY | | As of | |
(COP millions) | | 4Q22 | | 3Q23 | | 4Q23 | |
Total 30‑day past due loans | | 8,489,903 | | 12,215,401 | | 12,357,192 | |
Allowance for loan losses (1) | | 14,325,181 | | 14,961,116 | | 14,833,191 | |
Past due loans to total loans | | 3.24 | % | 4.88 | % | 5.01 | % |
Allowances to past due loans | | 168.73 | % | 122.48 | % | 120.04 | % |
Allowance for loan losses as a percentage of total loans | | 5.47 | % | 5.98 | % | 6.02 | % |
| (1) | Allowances are reserves for the principal of loans. |