Good morning, everyone. Welcome to Davivienda's third quarter 2020 earnings conference call. Today's call is for investors and analysts only, therefore, questions from the media will not be taken. Joining us today from Bogota, Colombia, are Mr. Efraín Forero Fonseca, Chief Executive Officer, and Mr. Ricardo León Otero, Chief Risk Officer. They will be discussing the results from the press release distributed yesterday. If you have not yet received a copy of the earnings report, please visit www.davivienda.com on the investor relations section, where there is also a webcast presentation to accompany discussion during this call. If you need any assistance, please contact i-advize in New York at 212-406-3693. I would like to remind you that any forward-looking statements made today by Davivienda's management are subject to various conditions and may differ materially.
These conditions are outlined on the last page of the company's press release in the disclaimer, and we ask that you refer to it for guidance. It is now my pleasure to turn the call over to Mr. Efraín Forero, Chief Executive Officer of Davivienda, who will begin the presentation. Mr. Forero, please go ahead.
Thank you. Good morning, welcome to Davivienda's third quarter of 2020 earnings conference call. Although current circumstances continue to be extremely challenging, we remain confident in our ability to adequately manage risk while helping to reactivate the economy by offering our customers opportunities so they can return to a better situation. In today's presentation, we will discuss the evolution of the economies where we operate. We will also comment on the bank's financial results, the steps we have taken in our digital reformation path, and how we are expecting our business to evolve. When looking at Colombia's economic evolution on slide three, we see that the economic activity started to show recovery signs in the third quarter of the year as most activities reopening. Along with this dynamic, Davivienda's confidence index showed positive trends joined by higher vehicle sales on oil demand.
Consumption started its rebound and there were higher needs to finance imports, the exchange rate devaluated 3% over the quarter and 11% during the year. Oil prices increased between July and September due to higher demand and reactivation worldwide. The central bank continued to decrease the monetary policy rate, taking it to a historic low of 1.75% in a strategy to boost the economy amid the COVID-19 pandemic. Moving to slide four, we can see the highlights of the macroeconomic situation in Central America. COVID-19 left a negative balance for Central America countries in the second quarter of the year, with Honduras and El Salvador GDPs being the most affected. Costa Rica was more resilient as initial restrictions were not as strong. The region was deeply impacted by lower tourist, transportation, and commerce activity as well as lower remittances levels.
In line with this behavior, the region's inflation rate and the monetary policy rate remained low through the third quarter. Available ratio for July and August showed that the region presented some recovery, registering lower annual contractions for the third quarter as well as better remittances dynamics for El Salvador and Honduras. Moving on to slide five, I would like to comment on the bank's main results. The third quarter's net profit closed around COP 48 billion, decreasing 60% quarterly. As a result, accumulated net profit reached COP 394 billion, 64% lower compared to the same period of the previous year. The bottom line remains affected by higher provision and operating expenses related to our digital strategy, pandemic-related costs, and foreign exchange. Provisioning continues to be within our priority as we are aiming to recover for potential deterioration going forward.
During the quarter, we continued to offer our customers financial support through different relief programs. Over the last month, the third wave of relief has been gradually expiring, and we are observing payments resuming both in Colombia and Central America. In the coming slides, Ricardo will go more in depth about the status of our loan book. Overall, we are permanently monitoring our customers' payment behavior and placing special attention to credit policy to support economic growth by allocating resources in line with our risk appetite. In this sense, given some improvements in confidence and disbursement dynamics, our loan book increased by 1.8% over the quarter, mainly driven by the commercial and mortgage portfolios. In terms of capital, we are comfortable with the current level.
Total capital adequacy ratio increased by 25 basis points quarterly and 10 basis points over the year. In September, we acquired $120 million in subordinated debt with IDB Invest and the Canadian Climate Fund for the Americas. These resources allow us to increase funding for SME and green projects while strengthening our Tier two. I am glad to announce that we issued Colombian first Gender-focused Social Bond for around $100 million, thereby reinforcing our commitment to promote human empowerment, benefiting women-headed households and women-owned SMEs. In this sense, since December last year, we have acquired over $600 million in resources to fund human SMEs, social housing, and green financing. Finally, in September, we announced a new credit line to enable our customers to finance electric or hybrid vehicles up to 110% of its price.
These actions allow us to advance in our commitment to encourage and develop business models that solve economic, social, and environmental problems in line with our sustainability strategy. Please continue to slide six. We continue to advance in our digital transformation path, completing our mobile portfolio and delivering solutions for our customers in Colombia and Central America, thereby connecting more people to the financial system and promoting economic recovery. I'm glad to share that we have become the first bank in Colombia to offer all of our retail banking portfolio through digital channels. Today, all our services of credit, savings, investment, insurance, and payment methods are accessible through a mobile device. We recently enabled four digital products to reach our customers with new, agile, and friendly experience, joining them in important moments as buying their first car or their dream house.
Today, they can apply and get credit in 5 minutes to buy a car, and they can also get digital loan approval to buy their home. We are also offering them the opportunity to open payrolls accounts and consolidate their outstanding credit balance in Davivienda without leaving their homes. On the right side of the slide, you can observe our progress in transforming our traditional banking service. We now have around 1.5 million digital deposit accounts with an outstanding balance of COP 0.8 trillion, increasing 110% annually. Our digital loan portfolio reached COP 2.7 trillion, increasing 60% over the year. In less than 3 years, our digital loans have become around 11% of Colombia's consumer book, and digital saving accounts represent about 8% of Colombian retail deposits.
We are glad to share this result with you, showing you how we are transforming into a digital bank where our customers can enjoy the simplicity of managing all their finance in one place, getting loans, making easier transactions or deposits anytime and anywhere without the need to go to a physical branch. Moving on to the DaviPlata section. By the end of October, our native digital bank reached 11.2 million customers in Colombia, enrolling a new 5.5 million customers this year. Out of this, 36% didn't have any financial product before and have been included into the system. 44% are other financial institution customers, and 20% are shared with Davivienda's customer base. Nowadays, almost 30% of the adult population in Colombia are DaviPlata's customers. On the right side of the slide, you can see some remarkable results compared to 2018. Transactions are growing more than four times.
The outstanding balance in deposits reached COP 425 billion, increasing 270%, and income transaction fees were double, reaching almost COP 50 billion. I am also proud to share with you that our platform was recognized as best mobile money offering, best digital wallet and fastest-growing payment solution in Colombia in the framework of the Future Digital Awards and the Global Banking & Finance Awards for being at the forefront of innovation and making significant progress in financial inclusion. As you can see, we continue to gain traction consolidating DaviPlata, our native digital bank, and we continue to strengthen our platform by attracting the best talent and increasing its operational capacity. There is still a lot of uncertainty about the pandemic's evolution, and there are remaining challenges to overcome in the coming quarters.
However, we will keep managing through this environment in the best possible way, aligned with our business sustainability strategy. Now, let me turn the call over to Mr. Ricardo León, our Executive Vice President of Risk, who will provide you with further details on the bank's financial results.
Thank you for the introduction, Mr. Forero. Good morning, everyone. Please move on to slide number eight, where we will analyze the asset evolution. Total assets grew 15% over the year. We generate annual devaluation expense, 4% of this growth. We maintain solid liquidity levels. Although we have been reducing the excess of liquidity, we have built up in previous quarters to face the market volatility. In Colombia and El Salvador, the regulator increased the legal reserve requirement but increased mandatory investments. As a result, the investment portfolio showed an increase of three percent compared to the last year. Gross loan portfolio increased 15% on an annual basis and 1.8% compared to the previous quarter. Regarding credit risk, our loan loss reserves reached COP 6.2 trillion as we continued to increase provision across all segments.
In this end, loan loss reserves to gross loans reached 5.5%, increasing over 120 basis points during the year, reflecting our provisioning effort to cover the underlying risk of the portfolio. Colombia's assets showed annual growth of 15.1% due to higher growth loans, investments, and derivatives. Our international subsidiaries, which account for 25% of the total assets, grew 6% over the year in dollar terms, mainly driven by the increased investments and the loan portfolio. Move on to slide nine, please. Loans have increased by 1.8% during the quarter and 15% over the year. I would like to recall that annual growth results from the dynamics of previous periods on the commercial and consumer portfolio, as well as foreign exchange effect, which accounts for around 4% of the increase. Regarding the quarter's growth, it was driven by dynamics in commercial and mortgage portfolios.
Within, profile align to our appetite and partially supported the National Guarantee Fund program. The growth in consumer is mainly explained by a base effect in the second quarter where the portfolio contracted. As for the annual growth, the consumer portfolio continues to show lower levels compared to previous quarters. In the international operation, mortgage and consumer loans grew mainly in El Salvador and Honduras, and the commercial portfolio decreased by lower originations in Panama and El Salvador. For this year, we expect a loan growth between 10%-12%. Our expectation for 2021 is to have an expansion of around 10%, mainly driven by the commercial sector and strong contribution from the retail segment. However, this dynamic might impact the financial margin due to the mix change and the low interest rate environment. Moving on to slide number 10.
You can observe how relief and collection has been evolving since the beginning of the pandemic. By the end of September, around 7.3% of Colombia's loan portfolio was under some kind of relief, either with active deferral of the first wave or under the PAD program. It is important to note that this number has been increasing since it peaked in April, and since relief period progressively ends. Regarding Central America, loans under some kind of relief were around 5% by the end of September. As you may see, most programs for the region expired in June, while others remain active over multiple years, as in the case of Panama. As of today, around 86% of our consolidated loan portfolio is up to date, in line with retail portfolio collection dynamics almost reaching the pandemic levels, with Colombia getting to 83% of previous collection and Central America to 86%.
Although collections may show positive trends and loans under relief are decreasing, there is still uncertainty regarding customers that are already entering into early PDL ratios, customers who are in the process of being admitted to second relief, and payment behavior after exiting this program. Please move on to slide 11, where we can see the evolution of past due loans, cost of risk, and loans by segment. On the first table, you will see the 30-day delinquency ratio is starting to show the pandemic effect closing at 4.9%, mainly driven by increasing risk levels in the consumer and commercial portfolio, although still lower than pre-pandemic levels.
Given the deferral programs and flexible loan terms offered during the last two quarters, PDL ratios over 90 days are not yet showing the risk situation of the portfolio. In this sense, we will continue to see increases in past due loans during the coming quarters, with 90-day PDLs beginning to react by the end of the year and the beginning of the next one. At the bottom of the slide, you can see the consistent behavior of our cost of risk during these periods of high levels of uncertainty and the deterioration of the economic variables. The cost of risk for the last 12 months closed at 3.22%, and the annualized quarter ratio closed at 4.15%. This quarter's provision expense results from the following measures. We update our forward-looking parameters based on more recent estimates of potential deceleration in the countries where we operate.
This measure drove most of the quarter's expenses. We also recalibrate our customer Stage classification based on newly available information regarding the payment behavior after the expiry leave, second leave request, and delinquency. During the second quarter, we increased Stage two in line with the volume of release granted at that time. However, as payments resume, our Stage two increased to 8.9%. Our Stage three increased to 4.5%, reflecting customers whose payments capacity is still affected. In any case, our coverage of all the stages has increased over the quarter, as you can see at the bottom right of the slide. Finally, we individually analyze mainstream corporate customers in diverse affected sectors and adjusted their provision accordingly.
Our credit management has focused on monitoring the evolution of the loan book, improving the collection process, and adapting origination to this new reality through analytics strategies and provisioning policies, ensuring the bank's sustainability in the long term. We are still going through an uncertain period, and our perspective for the next quarter is to maintain similar provision levels, aiming to absorb potential credit losses. In this sense, we should be ending 2020 with a cost of risk between 3.5%-3.8%. For next year, we expect cost of risk levels between 2.9%- 3.4%, with higher provisions during the first half of the year. Please take into account that this outlook depends on several variables, such as the evolution of our loan book, how the pandemic continues to develop, and the potential resurging of the loans. Now, please move on to slide number 12.
Funding sources grew 17.2% over the year and increased over the quarter. The exchange rate evaluation explains around 4% of the annual growth. Demand deposits continued to increase, reaching 34.6% annual growth due to customers preference for liquidity instruments. In this sense, term deposits decreased compared to the whole period. Bonds had a normal increase of 5% annually and almost 2% quarterly. In terms of credits, growth reached 25% over the year, in line with the transaction mentioned in previous calls with foreign entities, multilaterals, and second floor banks. Our funding structure continues to be stable, with deposits representing 75% of total funding, and our loan-to-funding ratio closed at 94.7%. I would like to invite you to slide number 13. Total equity ratio closed the quarter at 11.3%, 225 basis points above the regulatory minimum.
In December of the year, we have acquired $505 million in subordinated debt with foreign agencies to diversify our funding and strengthen our capital ratio. Total capital adequacy ratio increased 25 basis points, explained by increases both in T1 and T2, as a result of our capital maintaining strategy, lower asset growth, and higher provisions. Total equity increased 5% over the year and around 1% over the quarter. On slide number 14, the gross financial margin for the two quarters compressed due to lower financial income. The low interest rate environment, higher competition, lower growth, increase in Stage three, and portfolio mix change were the driver for the loan income growth. Investment income fell quarterly as most valuation effects were captured in the second quarter of the year when the financial market recovered.
The raw financial margin still shows resiliency on an accumulated basis, increasing by 12.6%, helped by faster repricing of liabilities. 12-month net interest margin ratio growth at 6.36%, contracting compared to both periods, mainly by higher growth in performance assets versus the growth financial margin. We should continue to see compression in margin this year and part of 2021 due to lower rate effect and changes in asset mix. The new quarter provision expenses reached close to COP 1.2 trillion, increasing 17.6% quarterly. Accumulated provision expenses reached over COP 3 trillion, increasing 62% over the same period in 2019. The accumulated net financial margin had an annual decrease of 15.8%. Please continue to slide number 15.
The three quarters expenses decreased by 1.2%, in line with our last call guidance due to lower administrative expenses in Colombia and personnel expenses in Central America, and as most COVID-related costs were executed in the previous quarter. Accumulated OpEx continued to be impacted, increasing 13.2% at the first half of the year, and a part of this quarter was highly charged with pandemic costs, data transformation, and personnel expenses. However, when excluding foreign exchange depreciation, COVID and data transformation expenses over accumulated OpEx growth around 1%. 12 months cost to income ratio growth at 47.2%, increasing over the year. We expected to end this year with an OpEx growth between 9%-11% and our cost to income ratio to remain around current levels, as income levels are expected to be lower.
To finish the presentation, I would like to go to slide number 16 to analyze the bank's profit. During the third quarter of the year, operating income showed recovery, increasing 12.3% as we resume the charge of . However, we expect operating income to remain pressured by lower economic activity. Net profit for the quarter closed around COP 48 billion and accumulated net profit at COP 394 billion. Our return on average equity for the last 12 months closed at 6.1%, while the return on average assets was 0.6%. In general, these are the results we have prepared for you today. At this time, we can move on to the question and answer session. Thank you for your attention.
Thank you. At this time, we will open the floor for your questions. First, we will take the questions from the conference call and then the webcast questions. If you would like to ask a question, please press the star key followed by the one key on your touchtone phone now. Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, just press the pound key. Again, to ask a question, please press star one now. For the webcast viewers, simply click the question mark button on your webcast player. A pop-up window will appear, and then simply type your question in the box and click send. We will pause momentarily to compile a list of questioners. And we'll take a question from Olavo Artuso of UBS. Your line is open.
Okay. Thank you very much. Thank you for taking my question. I have two. The first one, I just wanted to understand the bank's view related to the scenario for the unemployment rates in the country and the impact on overall delinquency. As you may know, a large number of economists is expecting for Colombia to post one of the highest unemployment rates among the Latin American countries for this and also the next year. My question is: how does the bank see such an impact on delinquencies? Will the cost of risk continue trending high for the next year? If so, at what levels could we expect it to reach? Thank you.
My name is Andrés Langebaek. I'm the Chief Economist of the Banco Davivienda. I would like first to address the question regarding the interest rates. Definitely, we expect the central bank to have very low interest rates for the coming months, even more than one year. It could be probably two years. You have to take that into account. I would not answer the questions related to the bank, to the effect of the interest rates on the bank. I will leave that question for Ricardo. The second question is regarding the unemployment rate. I think you have to look at the change in employment, not the unemployment rate.
The thing is that, yes, the participation ratio in Colombia increased very much as a result of the pandemic. If you look at the comparison of the variation in employment, and you compare that with other countries, especially Peru or even Chile, you will find out that the situation in Colombia is not so different. The very high unemployment rate is the result of the very high participation rate, which is somehow related to the size of the informal sector in the economy. As I mentioned before, if you adjust for the participation rate, you will find out that the unemployment situation in Colombia is not as high as the unemployment rate shows. Ricardo León will answer the second part of your question. Thank you.
Thank you for your question. Associated to the forecast that we have related to the GDP and inflation and unemployment, we use a model to estimate the behavior of our customer, and consequently estimate the cost of risk. However, it's important to explain the behavior of the PDL. Our 30-day PDL ratios are already showing some of pandemic effect, with the consumer commercial portfolio having more pressure. However, our 90-day PDL are still affected by relief. They will be starting to react by the end of the year and beginning of the next year, as our relief programs end. The peak in the ratios might be by the first semester of 2021, second half of 2021. It is still too early to determine the levels they could reach, as it depends on several variables of the economic evolution, the pandemic, and the potential resurging of the virus.
At the end of 2020, we estimate the PDL around 4%, and in 2021, the peak will be around 4.5%. In terms of cost of risk, we have been consistent in the provision expenses through the year incorporating adjustment to macroeconomic variables. As I said before, new information about our customer risk profile and obviously the behavior of our customer when they have been returning to their habit to pay their obligation. As we are still under uncertain period, we will maintain similar provision level for the rest of the quarter of 2020. Ending the year with a cost of risk between 3.5%-3.8%. For 2021, we expect level of 2.9%-3.5%, with a very important effort in provision during the first half of the year. That is our forecast related to the cost of risk for the end of the year, and for 2021.
Okay. That's very helpful, those guidelines. My second question, if I may, it's related to the profitability levels for the future. Very straight to the point. During these nine months of this year, the bank reached an ROE of 4.1%. What is the sustainable ROE the bank believes as feasible to achieve, and what should be the main drivers for that?
Thank you. Our profitability level has been affected by the COVID-19 situation and at the same time, by the increase in provisions in 2019 and lower operating income. For this year, we expect an ROE around 3%, and in 2021, an ROE between 7%-8%, and to return to level of 14% in 2023. These are preliminary figures, so you have to understand that there are a lot of uncertainties still. That are our figures for 2021 and obviously for 2022.
Sorry, if you could repeat, what is the expectations for 2021, because I just missed it?
Okay. For 2021, we are expecting a ROE between 7%-8%.
Okay. That was very helpful. Thank you very much again.
once again, that is star one if you would like to ask a question, star one. We'll move next to Carlos Gomez-Lopez of HSBC. Your line is open.
Hello and good morning. Thank you for the presentation. Could you give us some details about how both activity and asset quality are evolving in the different geographies where you operate? Do you see considerable differences between Costa Rica and the rest of Central America versus the Colombian market?
Carlos, it's Enrique. We have a statement that shows a - 5% and a negative mainly Honduras and El Salvador and Panama around 10% negative. Costa Rica being around - 5%-- 6%. The asset quality in all of those countries are very similar. We have around 5%-7% for portfolio to the first payment plan. We expect to have also reason for this year and 2021, as Carlos mentioned, and [inaudible] , as you mentioned before.
Thank you. Can you repeat again? The cost of risk, you expect it to increase next year, as you have explained. You already have reserves to loans of around 5.5%, I think. Where do you think you need to go?
In terms of cost of risk?
In terms of reserve accumulation, reserves to loans.
In terms of loan loss provision, we expect to end this year with around a 45% increase, and we expect to have loan loss expense for next year about the same amount for the sum of the whole country for next, 2021.
To the same amount in absolute terms, in terms of provisions that you have to create to the income statement. Thank you so much.
Once again, to ask a question via the phone lines, that is star one on your touch tone phone. As a reminder, webcast viewers, simply click the question mark button on your webcast player. A pop-up window will appear, then simply type your question in the box and click send. We'll pause momentarily to compile a list of questioners. There are no further lines. Actually, we do have a follow-up on the telephone line. Olavo Artuso of UBS, your line is open.
Yes. Thank you again for taking my question. It is a very quick question related to the fintech risk and especially when talking about Nubank, because as we know, the bank are starting to focus on Colombia. I just wanted to understand the bank's view related to the start of the operations of Nubank, with the offering of credit cards free of charges and no payments for maintaining the checking accounts, et cetera. I just wanted to hear from you guys, what is your view related to the debut of Nubank in the country? Thank you.
Thank you very much for the question. I think that we will have here in Colombia, Nubank and many other player digital banks very soon. We have been working in our bank, making big effort to become a digital bank and to have a very important allies to develop the strategy. That is a sample of Rappi as well, and we are working with them with a very successful result so far. We expect to be willing to work with them. As well, we are working with others like Apple, we are the players in several countries, we are offering our customers with different type of products in their stores. In the other hand, we have DaviPlata. We have developed this platform that today has about 11.2 million customers.
In this pandemic time, we have got 5 million new customers. It has about 1 million debit digital cards. We are offering actually these products, all of these products, with no cost for customers. They don't have to pay for the debit card or for paying for the account that they are opening, for digital account. What we have now is a set of different strategies that will make that we end up becoming a very good competitor to these new players or be able to make different types of alliance with them. Nubank announced that it's going to start in Colombia with no banking license at the beginning. They are offering, they announced that they will offer credit card, but I think that we have the chance to be finally very good competitor to those new players in Colombia.
Finally, we will be able as well to increase our market share in the personal and retail banking in the country.
We welcome them. We know they are going to be very good players, but we think that we have been working these 5 years very hard to become this digital player that is going to be an important player in the future.
Thank you very much for your comments. Appreciate it.
We'll take our next question from Joana Castro of Itaú. Your line is open.
Hi. Thank you for taking my question. I was just curious because I was wondering, I guess you manage a lot of big data from your SME clients for a large history, and I was wondering if you can share with us if you have had any sort of analytics that you can share about the volume of the transactions, the interactions on payments between the SMEs that you can actually use as an anticipated indicator of how the SMEs are behaving in the economy as a whole and as clients of yours. I was just wondering if you can share any data from the bank, operational data that you can tell us, just to be a little bit ahead of what's going on in the payments and in the SME portfolio.
Joana, thank you for your question. Actually, we have been working in analytics to identify or to define different clusters to analyze our customers, not only in SMEs but also in retail bank. When we started this process, we used an analytics define in the case of SMEs, more than 14 different clusters to analyze. In simple terms, we define customers in red, orange, yellow, blue, green, et cetera. Depends on the cluster, we define different policies to define what kind of situation request any customer. With that definition, we define with the credit area, the structure of the liquidity of each customer. I define what kind of relief each customer can take.
In terms of the quality of this portfolio, obviously in the smaller SMEs, the behavior is a little bit different to other SMEs because many sectors of the economy have been growing, especially in that level. We have been analyzing each elements, not only since the credit area, but also a joint effort with the commercial area. Now we don't have any different explanation related to a small business, more than that the level of relief has been right now around 7%. Obviously, the most important portfolio that has been incorporated in this process are the retail business and also the small and medium business in that segment, the most small and medium business. I don't know, Reinaldo, you have another comment about that?
Well, I was more asking about volume transaction, if you can follow up, if your SME clients are actually paying their providers, but like in big data, consolidated numbers, like if you compare quote, unquote, if they pay or not on the third-party providers, not to you directly, but I guess you manage a lot of the payment systems of these SMEs. I was just wondering if you could share some of that third-party kind of information, but it's fine.
Yes, absolutely. We use all information related to different kind of transaction, the behavior in the past. With a lot of information, we estimate the probability of default of the company, and obviously, if it's possible to give a release or not. If you want, Joana, we can explain a little bit more in another scenario by email. Okay?
Sure. Thank you. Thank you very much.
Thank you.
There are no further questions over the phones. I'd be happy to return the call to i-advize for any webcast questions.
Thank you, Leo. We have a couple of questions on the webcast. The first one is from Piedad Alessandri from Credicorp Capital. Hi, could you give us a bit more detail on your NIM expectation for 2020 and 2021? Regarding asset quality, do you see any segment in commercial book at high risk of corporate cases?
Thank you, Piedad. Your first question will be answered by David Pedraza, and the second question by Reinaldo Romero. First answer
Thank you, Piedad. This is David Pedraza. In terms of NIM, we're expecting the margins and NIM in general to decrease, considering the following elements. The first one is that we are operating under a lower interest rate environment, as the central bank rate is at historical lows, and is expected to remain stable for the rest of this year and perhaps at least the first half of the next one. Second element to take into account is the lower income that we are receiving due to the economic activity slowdown. On the other hand, changes in our portfolio mix, given the commercial segment growth, which is growing a little bit extra than the other two segments. Finally, the increase in the Stage three loans.
With all of this mixed together, what we are expecting is that the NIM for 2020 should be around 6%-6.2%, and for 2021, we should be expecting a NIM between 5.8% and 6%.
Piedad, good morning. My name is Reinaldo Romero, Davivienda Corporate Vice President. We are permanently and closely monitoring the different sectors in the countries where we operate. We continue to evaluate the different sectors affected by the pandemic, we have classified them according to how long the recovery can take. For example, in the long-term recovery, transportation, the hotels, touring services, travel agencies, restaurants and entertainment. Our exposure in this sector is less than 2.5 of our portfolio, and we don't have behavioral of situation that we learn about. In the medium-term recovery, we have some sectors, real estate, phones, health. Our exposure in this moment is near to 10% of the portfolio. The short-term recovery, energy, infrastructure, and another sectors, is more or less the 6.5 of the consolidated exposure.
In this moment, we are proactively holding conversation with all these customers, try to get a more precise diagnostic of their current situation, anticipating to more complex situations. As we needed, defend with them a condition for the credit. In general terms, we think that the portfolio is a good situation. We have to measure the level of the risk continually in this process.
We have another question from Diego Galván, from Global X. Do you expect any changes in 2021 tax code affecting the Colombian financial sector on the brink of a new tax reform?
David, thank you for your question. Juan Carlos Hernández, please.
Okay. Hello, Diego. My name is Juan Carlos Hernández, accounting and tax vice president. Okay. According to the government explanation in 2020, Colombia will not have any tax reform. Own analytics consider it's not proper for the country to do a tax reform regardless of our revenue impact. The initiatives depends on the legislation process evolution and the recommendation on the government and the third group that advise. As of today, there is nothing concrete about it. In this condition, until now, we don't have information regards on any tax reform in 2020. If we have any evolution, we comment in our next conference call. Thanks.
At this time, I'm showing no further questions. I would like to turn the call over to the operator.
Once again, those on the phones, if you'd like to ask a question, that is star one on your touch-tone phone. Star one. There appears to be no further questions at this time. I would like to turn the floor back over to Mr. Forero for any closing remarks.
Thank you very much for everybody for being with us today. We will keep working very hard to handle this difficult situation that we have in all of our countries. We feel optimistic that we will have a better new year, 2021, in which we'll be willing to recover the economies in the countries in which we are actually. We expect to have better results in the coming year, and we are optimistic about evolving in the difficult situation. Thank you very much for your attention and support