Grupo Aval Acciones y Valores SA Q4 FY2024 earnings call

• Positive trends continued with market share gains in deposits and credit. Porvenir had a weak quarter but had the best year of results in 2024. 2024 was a year of challenges and achievements, with net income up 38% compared to 2023. Strengthening corporate governance, management model, and nonbanking financial services. 2025 strategy focuses on customer experience, financial diversification, synergies and efficiencies, digital transformation and innovation, corporate culture, and sustainability. ESG achievements include improved CSA scores, social impact programs like Mision La Guajira, sustainable loan portfolio of COP23 trillion, and environmental initiatives like tree planting.

Grupo Aval's assets grew 8.9% in 2024 and 2.3% for the quarter to COP328 trillion. Gross loans reached close to COP200 trillion, growing 7.3% year-on-year. Commercial loans and mortgages drove annual growth, while consumer loans began to recover. Deposits grew 10.4% in 2024 and 2.5% quarter-on-quarter, accounting for 73.4% of funding. The risk-adjusted NIM on loans for the quarter was the highest in the last seven quarters, but NIM on investment was weaker due to market performance.

• Expect loan growth in the 10% area with commercial loans growing in the 9% and retail loans in the 11% area. NIM expected to be around 4.15% with NIM on loans in the 4.6% area. NIM of the banking segment expected in the 4.9% area with NIM on loans in the 5.4% area. Cost of risk net of recoveries expected in the 2% area, cost to assets in the 2.75% area. Income from the nonfinancial sector expected at 80% of 2024 levels. Fee income ratio expected in the 20% area. Return on average equity expected in the 11% area.

• Economic, business, and interest rate changes can materially affect results. Regulatory changes like core equity Tier 1 requirements for Banco de Occidente (100 basis points increase over 24 months). Fiscal policy uncertainties and potential impacts on public finances and credit cycles.

Q: Brian Flores asks about growth confidence in the consumer segment and impact of Banco de Occidente's higher core equity Tier 1 requirements on growth prospects.

A: Diego Solano explains Aval's more predictable growth pattern and credit quality cycle compared to the system, and details the phasing of Banco de Occidente's capital requirement increase.

Q: Brian Flores follows up on guidance, asking about NIM and ROE.

A: Diego Solano states guidance factors in better cost of funds, improved credit quality, and efficiency initiatives, leading to expected 11% ROE.

Q: Nicolas Riva asks about Banco de Occidente's capital ratios and buffer.

A: Diego Solano says Banco de Occidente has room to cope with higher requirements over the transition period.

Q: Carlos Gomez-Lopez asks about capital requirements for other banks and dividend expectations.

A: Diego Solano provides details on capital requirements for different banks and mentions dividend discussions in progress.

Q: Daniel Mora asks about profitability path for ROE guidance.

A: Diego Solano states improvement in NIM will be a process, with the last quarter expected to be above the year average.

Q: Julian Ausique Chacon asks about stable funding ratio and pension reform impact.

A: Diego Solano discusses preparation for stable funding ratio requirements and notes pension reform impact not fully included in guidance yet.