Grupo Aval Acciones y Valores SA Q3 FY2024 earnings call

• Corporate Synergies and Efficiency Program: ATH was renamed Aval Valor Compartido (AVC) to unlock value through synergies, efficiencies, and best practices. Strengthened AVC's management team with new appointments and a new board of directors. - Payments Front: Supported the central bank's BREVE initiative, launching TAC Aval for payment interoperability. - ESG Achievements: Reached a high score in the Corporate Sustainability Assessment, with a sustainable goal portfolio of 17.3 trillion pesos. Increased female participation in top management. Participated in COP16 and received multiple recognitions. - Macro Economic: Inflation trended down but faced near-term pressure; economic growth picked up, but fiscal situation was a challenge; central bank cautious on rate cuts.

The banking segment's net income is close to the levels of the third and fourth quarters of 2022, driven by improvements in cost of risk, stronger investment returns, and cost control. Foreign needs achieved the highest net income in a quarter in its history. Coffee recovery from the last quarter has a neutral contribution to net income. The bank's combined gross loans grew 0.7% over the quarter, reaching a 25.2% market share by September. Loan disbursements in the system increased during the quarter, with consumer loans showing a 18% quarter-on-quarter and 28% year-on-year growth, reaching 19 trillion pesos. Commercial loans expanded 5% year-on-year and 0.1% over the quarter, while mortgages grew 4.8% over the quarter and 13.7% year-on-year.

• 2024: Loan growth between 6.5% - 7%, commercial loans 7.5% - 8%, retail loans 5% - 6%; NIM around 3.6%, banking segment NIM around 4.4%; cost of risk net of recoveries around 2.2%; cost to assets around 2.7%; 2024 ROE around 6.25%. - 2025: Loan growth around 10%, commercial loans 9%, retail loans 11%; NIM around 4.4%, banking segment NIM around 5%; cost of risk net of recoveries around 2.15%; cost to assets around 2.8%; 2025 ROE expected around 11%.

• Changes in general economic and business conditions. - Changes in interest and currency rates. - Fiscal account pressure and challenges in public policy execution. - Political uncertainty and important relations that could hinder economic recovery.

Q: Brian Flores asked about the strategy for gaining market share in mortgages in 2025 and the driver of ROE trends.

A: Diego Solano responded that Grupo Aval is widely underweighted in mortgages and expects to continue gaining share, and ROE improvement is a combination of cost of risk improvement, cost control, market growth, and central bank rate cuts.

Q: Daniel Mora asked about the delay in improvement of the commercial segment, NIM composition, guidance for NIM, and loan program conditions.

A: Diego Solano said commercial segment lags due to consumer cycle anticipation, NIM includes trading income offset, guidance for NIM provided, and Maria Gutierrez Botero explained loan program conditions related to housing, renewable energy, etc.

Q: Marlon Medina asked about loan growth breakdown and competitive environment.

A: Maria Gutierrez Botero said consumer loan growth is driven by demand and supply factors, and the Colombian market is competitive with focus on higher quality, low rate segments.

Q: Julian Ausique asked about bond use, subcompany impacts, and long-term ROE.

A: Diego Solano responded on ROE expectations, subcompany impacts of Porvenir, Corficol, Corte Colombiana, and bond use for debt refinancing.