Grupo Aval Acciones y Valores S.A. Q4 FY2025 earnings call

Highlights include positive evolution of results in 2025 with 1.7 trillion Colombian pesos net income, a 70% increase from the previous year. Completed important milestones like merging trust companies, acquiring Banco Itaúz-Colombia Retail Business, divesting MFG, and Corfy's acquisitions. On January 2nd, 2026, merged fiduciary businesses into Aval Fiduciaria. Banco de Bogota's acquisition of Banco Itaú and divestment of MFG. Paula presented sustainability achievements with sustainable loan portfolio at 44.9 trillion pesos, including 36.2 trillion in social lending and 8.7 trillion in green lending, received external recognitions in sustainability assessments, and achieved eco-efficiency improvements in energy consumption, renewable energy use, water consumption, and waste generation. Camilo elaborated on macroenvironment and economic outlook for Colombia, including GDP growth, investment, inflation, fiscal situation, and exchange rate

In 2025, the banking segment's gross loans ended at 190.1 trillion Colombian pesos, up 4.8% from 2024. Profitability improved with a 41 basis points expansion in the spread between loan yields and funding costs, cost of risk improved from 2.3% to 1.9%, and return on equity reached double digits. Assets under management were 271.2 trillion U.S. dollars, up 14.9%, and ROAE was 21.2%. CORFI worked on a new growth cycle with portfolio rotation and entry into high potential sectors, seeing a 16 reduction in funding costs. The banking system's loans grew 2.1% in real terms in 2025, with mortgages up 6.3%, consumer loans 1.48%, and commercial loans 0.7%. Grupo Aval's assets grew 6.4% year-on-year and 1.5% quarter-on-quarter to 349 trillion, gross loans reached 190.9 trillion pesos, funding increased 8.7% year-on-year and 1.4% quarter-on-quarter, net interest income was 59.3 trillion for the year, up 17.4% from 2024, net interest margin increased 28 basis points to 3.78% in 2025, loan portfolio quality ratios improved with 30-day PDL formation 32.8% lower than 2024, 30-day PDLs 4.37% with 98 basis points improvement over 12 months, 90-day PDLs 3.29% with 77 basis points improvement over 12 months, cost of risk net of recovery was 1.9% in 2025, net fees and other income annual gross fee income grew 6.8%, net fee increased 5.3%, cost to assets flat at 2.6%, annual cost to income improved 101 basis points to 52.2%, attributable net income from continued operations for the quarter was 474 million, total attributable net income for the year was 1.72 trillion Colombian pesos, up close to 70% from the previous year

Expect loan growth in the 10% area with commercial loans growing at 7% and retail loans at 14%. Total net interest margin in the 4.3% area with net interest margin on loans in the 4.7% area. Net interest margin of the banking segment in the 5.1% area with net interest margin on loans in the 5.4% area. Cost of risk net of recoveries in the 2% area. Cost to assets in the 2.8% area. Income from the non-financial sector 1.3 times that of 2025. Fee income ratio in the 21% area. Expect 2026 return on average equity to be in the 10.5% area. Guidance does not incorporate the recently announced wealth tax, which would impact ROE by one percentage point

Actual results and events may differ materially from forward-looking statements due to changes in general economic and business conditions, changes in interest and currency rates, political volatility and electoral uncertainty in Colombia, high levels of uncertainty leading to elevated interest rates due to persistent inflation and large fiscal deficits, and the impact of the massive minimum wage increase on the cost base and customers

Q: Regarding the new wealth tax for companies, what is understood about liquid equity and its application across banks of Aval? Also, what is the effective tax rate used in numbers considering the previous economic emergency decree being put on hold.

A: Understanding of net worth tax is similar to past, equity tax base of bank or company, attributable should be around one percentage point for group, tax calculation in guidance is around 35% without economic emergency.

Q: Update on guidance provided in third quarter regarding loan growth, cost of risk, and ROE, and confirmation on base case tax rate.

A: Slightly reduced guidance and growth, ROE guidance is in the 10.5% area compared to last call's 12% area, base case is no change in tax rate, reduction in ROE is a combination of better loan portfolio mix, Port Beneath's better performance, and other factors like NIM and investment volatility