Grupo Aval Acciones y Valores SA Q1 FY2025 earnings call

Customer Experience

• Improved Net Promoter Score (NPS); implemented loyalty program with privileged access events; developed Augusta customer database; group-wide committee for best practices; internal program to embed customer-centric culture.

Financial Diversification

• Focus on retail deposits, reducing interest rate risk, and improving non-banking fee generation. Changes in sales force incentives, product base review, hedging strategies, and enhanced asset management/advisory services.

Synergies and Efficiencies

• Capturing efficiencies via centralization of procurement, facility management, etc. Migrated Banco de Bogota processes to Aval Valor Compartido; next to migrate to other entities.

Digital Transformation and Innovation

• Partnered with Microsoft for AI usage; progress in real-time payment system with 8.9 million alphanumeric keys enabled.

Corporate Culture

• Strengthening performance and customer-oriented culture; refreshing leadership teams and brands.

Sustainability

• Received Medco ESG ranking; Mision La Guajira initiatives; diversity and inclusion progress; environmental projects; enhanced ESG management model.

Net income for the quarter was Ps. 362 billion, a 28% increase from Q4 2024 and 3.2x that of Q1 2024. Grupo Aval gained market share in deposits and loans, with a 25.3% share in loans and 16.6% in mortgages (highest in history). NIM on loans saw a slight increase, NIM on investments recovered, and asset quality improved. In the banking services segment, NIM on retail loans reached a 2-year high, but total NIM on loans was flat due to price competition in commercial loans. Porvenir's returns on reserves suffered in the latter part of the quarter, while Corfi contributed strongly due to seasonal dividend, higher infrastructure income, and lower cost of funds.

• Loan growth expected in the 9% area: commercial loans ~7%, retail loans ~11% (slightly lower than prior guidance).
• Consolidated NIM in the 4% area; NIM on loans in the 4.5% area; banking segment NIM in the 4.7% area.
• Cost of risk net of recoveries in the 1.95% area (better than prior guidance).
• Cost to assets in the 2-3% area; non-financial sector income at 85% of 2024 levels.
• Fee income ratio in the 21% area; ROE expected to be in the 10%-11% range.

• Economic and business conditions, interest and currency rate fluctuations.
• Fiscal outlook deterioration, pension reform uncertainties, political uncertainty in Colombia.
• Higher-for-longer interest rates, global trade tariffs, and potential rating downgrades.

Q: Brian Flores asked about guidance and pension reform impact.

A: ROE range is 10%-11% (weaker than previous quarter expectations); pension reform could be positive if effective, but guidance is prudent.

Q: Yuri Fernandes inquired about Porvenir and cost of risk.

A: Porvenir is positive in the short term but mixed long term; cost of risk affected by Stage 2 reclassification, which is a mechanical update not a trend change.

Q: Unidentified Analyst asked about provisions and commissions.

A: Provisions tied to portfolio structure; fees affected by market volatility but retail activity pickup and active work on fees expected to improve.