Earnings name: Grupo Aval posts blended Q1 2024 outcomes amid financial challenges

May 15, 2024 | blog

Grupo Aval Acciones y Valores S.A. (AVAL), the Colombian monetary conglomerate, reported its first quarter 2024 outcomes, revealing each challenges and development within the banking sector. CEO Maria Lorena Gutierrez Botero offered insights into Colombia’s macroeconomic surroundings, expressing issues over low mounted funding charges and potential development decline.

Despite these challenges, Grupo Aval confirmed a rise in market share throughout key lending classes and expects continued mortgage development to surpass the banking system’s common in 2024. The firm additionally introduced a board discount and a dedication to attaining carbon neutrality for its direct subsidiaries by 2024-2025.

Key Takeaways

  • Grupo Aval’s consolidated outcomes point out a pickup in price danger, with different metrics assembly expectations.
  • The firm’s market share elevated in all principal lending classes.
  • High price of danger and above-average delinquency metrics persist within the banking system.
  • Assets and loans confirmed development, with property reaching COP307 trillion and gross loans rising by 2.2%.
  • Grupo Aval’s consolidated web curiosity margin on loans expanded, however complete NIM fell as a consequence of a contraction in NIM on investments.
  • The Board will probably be decreased from 14 to 9 members, enhancing the ratio of unbiased members.
  • Bancolombia (NYSE:), a part of Grupo Aval, goals for carbon neutrality for its direct subsidiaries by 2024-2025.

Company Outlook

  • Grupo Aval expects mortgage development to proceed outpacing the banking system’s common in 2024.
  • Projected mortgage development between 7.5% and eight%, with NIM round 4%.
  • Cost of danger web anticipated to be within the 2.2% space, with return on common fairness round 6.5%.
  • The firm is engaged on decreasing the double leverage ratio to 120%.
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Bearish Highlights

  • Delinquency metrics stay excessive, with 90-day late loans at 4.15% and 30-day late loans at 5.85%.
  • Net curiosity margin on investments contracted, negatively impacting complete NIM.
  • The price of danger stays elevated, notably pushed by shopper loans.

Bullish Highlights

  • Grupo Aval elevated its market share in complete loans, industrial loans, shopper loans, and mortgages.
  • Assets and mortgage development are constructive, with deposit development additionally exhibiting a good development.
  • Net charge revenue grew by 5.6% quarter-on-quarter.


  • Total web curiosity margin fell 49 foundation factors to three.4% quarter-on-quarter.
  • Loan portfolio high quality ratios deteriorated, with will increase in each 90-day and 30-day late loans.
  • Total different bills elevated by 0.8% year-on-year.

Q&A Highlights

  • The firm didn’t buy bonds from Banco de Occidente however famous the financial institution’s market entry.
  • Grupo Aval is contemplating the decision of the AT1 bond subsequent yr, with a related chance given fee developments.
  • The price of danger is predicted to enhance, trending again to sub-2%.
  • The firm is monitoring slight deterioration in industrial loans and expects higher NIM on investments over the yr.
  • No additional questions had been addressed, concluding the decision.

Grupo Aval’s monetary efficiency and strategic strikes point out a cautious but proactive strategy in navigating the financial headwinds. With a give attention to bettering board governance and environmental duty, the corporate goals to take care of its aggressive edge whereas addressing the challenges posed by the present macroeconomic state of affairs.

InvestingPro Insights

Grupo Aval Acciones y Valores S.A. (Grupo Aval) has demonstrated resilience within the face of financial challenges, as mirrored in its latest monetary efficiency. InvestingPro knowledge and suggestions supply extra context to the corporate’s place out there and its future outlook.

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InvestingPro Data:

  • The firm at present holds a Market Cap of two.86 billion USD.
  • With a Price/Earnings (P/E) Ratio at 14.75 and an adjusted P/E Ratio for the final twelve months as of This autumn 2023 at 15.22, the valuation displays the earnings potential of the corporate.
  • The Dividend Yield as of the present yr stands at 4.08%, which is noteworthy for income-focused buyers.

InvestingPro Tips:

  • Analysts predict that Grupo Aval will stay worthwhile this yr, which aligns with the corporate’s personal expectations for mortgage development and market share improve.
  • The firm has been constant in sustaining dividend funds for 26 consecutive years, showcasing a dedication to returning worth to shareholders even amidst financial fluctuations.

For buyers searching for a extra complete evaluation, there are extra InvestingPro Tips out there at These suggestions present deeper insights into Grupo Aval’s monetary well being and market efficiency. For a restricted time, use the coupon code PRONEWS24 to get a further 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a complete of seven InvestingPro Tips that may help in making knowledgeable funding choices.

Full transcript – Grupo Aval (AVAL) Q1 2024:

Operator: Welcome to Grupo Aval’s First Quarter 2024 Consolidated Results Conference Call. My identify is Regina and I will probably be your operator for at present’s name. Grupo Aval Acciones y Valores SA Grupo Aval is an issuer of securities in Colombia and within the United States SEC. As such, it’s topic to compliance with securities regulation in Colombia and relevant U.S. securities regulation. Grupo Aval can also be topic to the inspection and supervision of the Superintendency of Finance as holding firm of the Aval Financial Conglomerate. The consolidated monetary info included on this doc is introduced in accordance with IFRS as at present issued by the IASB. Unconsolidated monetary info of our subsidiaries and the Colombian banking system are introduced in accordance with Colombian IFRS as reported the Superintendency of Finance. Details of the calculations of non-IFRS measures akin to ROAA and ROAE, amongst others, are defined when required on this report. This report consists of forward-looking statements. In some circumstances, you’ll be able to determine these forward-looking statements by phrases akin to could, will, ought to, expects, plans, anticipates, believes, estimates, predicts, potential or proceed, or the adverse of those and different comparable phrases. Actual outcomes and occasions could differ materially from these anticipated herein as a consequence of adjustments basically financial and enterprise situations, adjustments in curiosity and foreign money charges, and different dangers described now and again in our filings with the Registro Nacional de Valores Emisores and the SEC. Recipients of this doc are liable for the evaluation and use of the data offered herein. Matters described on this presentation and our data of them could change extensively and materially over time, however we expressly disclaim any obligation to assessment, replace, or right the data offered on this report, together with any forward-looking statements, and don’t intend to offer any replace for such materials developments previous to our subsequent earnings report. The content material of this doc and the figures included herein are supposed to offer a abstract of the themes mentioned, somewhat than a complete description. When relevant on this doc, we discuss with billions as 1000’s of hundreds of thousands. At this time, all contributors are in a listen-only mode. Later, we’ll conduct a question-and-answer session. I’ll now flip the decision over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you could start.

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Maria Lorena Gutierrez Botero: Good morning to you all. I’m delighted to be internet hosting this primary quarter 2024 convention name. Before we start, let me introduce myself. My identify is Maria Lorena Gutierrez Botero. I joined AVAL in 2018 having the privilege [indiscernible] with this extraordinary staff along with monetary useful resource and proud to have managed to place Corfi as one of many Colombian main corporations in providers and deal. Last yr, we generated 883 billion pesos in web earnings as a part of turnover 13.5 trillion pesos in worth generated to our stakeholders. I’m captivated with contributing to Colombia’s development. Before coming to AVAL, I served a number of management roles within the Colombian authorities between 2010 and 2018 and beforehand I had been Dean of the Business School at Universidad de Los Andes. I wish to take this chance to acknowledge Luis Carlos Sarmiento Gutierrez or Luis Carlos Sarmiento Angulo for his or her excellent management of the years they served as CEO and Chairman of Grupo Aval and wish to congratulate Mr. Sarmiento Gutierrez for his new function as Chairman of Grupo Aval. It is an honor to succeed him as CEO and to work beside him. I count on to consolidate Grupo Aval’s place because the main monetary conglomerate within the Columbian market, acknowledged for its sound profitability, sustainability, innovation and its contribution to key financial sectors maximizing worth for our buyers and different stakeholders. Before Diego goes over our numbers for the quarter, I’ll summarize my view of Colombia’s macro state of affairs, discuss with some key occasions on the ESG entrance, and end with some highlights of our monetary efficiency and our total views for 2024. The world financial system has carried out higher than anticipated. Fears of a recessionary state of affairs for developed nations have dissipated and now appear unlikely. Resilient financial knowledge within the United States sustained a delicate touchdown state of affairs in line with the next extended rate of interest stance. U.S. inflation, accelerated to three.5% in March, remains to be removed from the brief time period goal of two%. The Federal Reserve’s plans on reducing fee later within the yr with a most as much as 25 foundation level cuts this yr, down from the six cuts beforehand anticipated by the tip of 2020. Commodity costs are and are projected to remain excessive as a consequence of ongoing geopolitical tensions and provide chain disruptions benefiting commodity exporting nations in Latin America, Colombia included. On the home entrance, we preserve Colombia’s development projections of 0.75% to 1.25%. The financial exercise index elevated by 2.5% year-over-year in February 2024, surpassing consensus projections. Peer evaluations recommend that the Colombian financial dip on the finish of 2023 and have since began to bounce, fueled by the momentum in agriculture, and mining sector and coverage administration. Nevertheless, a main problem persists in sustaining the trajectory of recovering the secondary sectors to make sure constructive annual development within the months forward. Inflation has decelerated from 9.3% in December 2023 to 7.16% in April and is predicted to proceed declining to the 5.75% space by the tip of 2024. This inflationary course of could face headwinds within the second quarter as a consequence of transitory results like El Niño on costs of perishable meals and electrical energy. However, a good portion of anticipated inflation, notably in service and controlled sectors, has raised the inflation and Colombian inflation is anticipated to proceed trending downward within the coming months. Moving to the financial coverage the Central Bank’s Board has reduce its coverage fee from 13% to 11.75%, with decreases of 25 foundation factors in January and 50 foundation factors within the subsequent two conferences. The Central Bank may need been too cautious within the magnitude of its fee reduce, contemplating the absurd and anticipated this inflation. Imposing a tolerant financial velocity, the actual rates of interest have remained contractual by this yr, standing at 7% on the finish of April, when contemplating a 4.7% yr forward anticipated inflation. We adapt the market to room for a extra decisive rate of interest response part. In line with the constructive evolution of inflation, we estimate our yr finish fee of 8.5% space by the tip of 2024. There has been a considerable weakening since 2022 of gross mounted capital funding in infrastructure, constructing development, and mining sectors which have a substantial contribution on the provision facet of GDP. We count on that these developments will proceed to underpin a longtime financial efficiency in 2024. The restoration of GDP development in Colombia that adopted the COVID-19 pandemic was pushed by family consumption. Even although it’s nonetheless robust, family consumption, the important thing driver to GDP dynamics during the last two years, has moderated considerably and is forecast to expertise modest development into 2024. Looking past 2024, there are issues that if the present low mounted funding fee persists, Colombia’s potential development will decline to a variety between 2.2% to 2.5%, down from 3% and three.5% earlier than the pandemic. Total funding that features inventories however near 25 in 2023. Reaching the funding degree of 2022 would require substantial development in gross mounted capital formation. Immediate and decisive public motion supposed to stimulate funding in vital sectors akin to infrastructure and vitality is of the impact. In this context, we spotlight the federal government’s function because the orchestrator of Colombian regulation. As such, environment friendly public spending will probably be essential in boosting its multiplier and counter-cyclical impact. However, public funding attain an underwhelming 14% of execution, the bottom in at the very least eight years. In addition, low gross home financial savings hinders a considerable pickup in funding and GDP development over the next years. The put up COVID-19 consumption rebound in Colombia that contributed to inflationary pressures related to a rise within the monetary burden of family, each by their indebtedness and better rates of interest. The postponed consumption of sturdy items and providers was encompassed by a marked enchancment in employment figures properly under pre-pandemic degree, leaving households properly positioned to devour. Consistent with the contraction of retail within the Colombian banking system noticed because the finish of 2022, the monetary burden on households reported by the superintendency of finance has already obtained the pandemic degree. This habits favors an enchancment within the Linux charge of our shopper mortgage portfolio. However, the sharp financial slowdown because the final quarter of 2022 and a weaker labor market since mid 2023 have contributed to an growing delinquency throughout the banking system. We count on the yearly common nationwide unemployment fee to be 11% in 2024, up from 10.2% in 2023. In the fiscal time period, with out extra spending prices, it’s projected that Colombian central authorities deficit will rise to five.6% of obligation, exceeding the 5.3% allowed by the fiscal development. This shortfall is a software to decrease financial development, impacting tax income and changes in anticipated income as a consequence of enhanced tax administration and litigation effectivity. To meet the fiscal rule, a further reduce in main spending of COP14.2 trillion will probably be needed. We are watchful on the latest dialogue regarded eventual adjustments to the fiscal world, even signally concerning future fiscal self-discipline, with an eventual implication on rate of interest degree invested confidence and nation with premiums. The discount in foreign money demand as a consequence of a weak home demand has led to a considerable appreciation of the change fee, with the greenback falling under COP3,750 in early April, its lowest ranges in June 2022. Nonetheless, the Colombian peso has been totally adjusted within the latest decline in macroeconomic fundamentals. Risk related to fiscal accounts, long-term development projections, oil manufacturing and a narrower rate of interest hole in comparison with the United States may doubtlessly set off a depreciation of the U.S. greenback. Colombia peso change fee to degree above 4,000 pesos within the latter half of the yr. On the social entrance, we launched the Misión La Guajira undertaking in December 2023. This is a joint effort between ourselves, the federal government and the group, meaning to convey potable water, meals safety and vitality to over 80 communities on this extraordinarily poor area within the nation. We count on this to be an preliminary part of a undertaking that we as half may have a broader lengthy lasting impression on this determine. This undertaking will impression 5 of the sustainable improvement objectives, together with no poverty, good well being and properly being, clear water and sanitation, reasonably priced and clear vitality, and scale back inequality. Regarding our abilities amongst a number of of our subsidiaries that had been licensed by great spot to work, I’m proud to focus on that Banco’s Misións acknowledged as the most effective place to work for ladies in 2023 in corporations with over 1,500 staff. On the federal government entrance, adjustments had been applied all through the Group’s Board of Directors supposed to refresh them and to stick to worldwide requirements. We elevated the proportion of unbiased members and the variety of girls in our Board. At Grupo Aval, the final shareholder assembly accredited the Board to be decreased from 14 members, seven principal and 7 attending to solely 9 principals and improve the ratio of unbiased Board members of two-third. In the environmental entrance, Bancolombia are carbon impartial and we’ll proceed working to realize this standing within the remaining direct subsidiaries between 2024 and 2025. In addition, our most related monetary subsidiaries are at present engaged on constructing the respective local weather change danger matrices in accordance with the CCFC ideas. Regarding our monetary outcomes, Diego will refer subsequent intimately to our monetary efficiency through the first quarter of 2024. However, I’ll spotlight as follows. This quarter’s lengthy lasting efficiency was pushed by a pickup in price danger. Other key enterprise metrics akin to development, web curiosity margin and value to asset effectivity fell largely in step with our expectations and final quarter’s steering. Despite the challenges surroundings for our banking actions, our restricted commerce origination insurance policies that these claims in 2021, we improve our market share in all principal lending classes. During this quarter, we gained 32 foundation factors in complete loans, 39 foundation factors in industrial loans, 42 foundation factors in shopper loans and 17 foundation factors in mortgages. We gained 32 foundation factors in complete loans, 39 foundation factors in industrial loans and 42 foundation factors in shopper loans. In the primary quarter of the yr, 10 banks out of a complete of 28 put up losses, when excluding fairness strategies, dividends and no recurring revenue from varied organizations, this quantity will increase to 13 banks on a consolidated foundation, though nonetheless depressed, we’ve begun to see a restoration of the web curiosity margin on loans and count on this to proceed because the Central Bank maintains, if fee reduce cycles by the yr. The slower anticipate a lower within the benchmark fee has determined restoration path than what we’ve initially anticipated. In addition, value competitors has elevated within the company phase surroundings of decrease than anticipated development of the banking system. Cost of danger within the system stays excessive regardless of having proven indicators of stabilization in new enterprise. Notwithstanding a excessive ratio of charts off from a few of our rivals, delinquency metrics stay properly above historic ranges. Our lower cost shopper mortgage combine differentiates us from our principal rivals with the next ratio of payroll lending and decrease share of unsecured shopper lending and has favored us on this credit score cycle relative to the remainder of the banking system. Finally, we count on the chance administration actions taken all through these credit score cycles. The assessment of our banks methods and value management initiatives deployed all through our financial institution. We replicate on our leads to the latter a part of the yr. The velocity of enchancment will probably be decided by the decisiveness of the central financial institution to cut back charges and the actions taken by the federal government to stimulate restoration of financial velocity. Headwinds from greater price of danger and has been gross web curiosity margin will proceed to undermine our efficiency inside the following quarters. I thanks to your consideration and now I move the presentation to Diego who will clarify intimately our enterprise outcomes and supply steering for 2024.

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Diego Fernando Solano Saravia: Thank you. Maria Lorena. Before shifting into our outcomes, I want to take a second to focus on some elements that characterize our banking operation that differentiate us from others within the Colombian banking system and clarify our efficiency all through the put up pandemic cycle. Pages 9 and 10, you will discover a number of charts concerning the standard and development fee of our mortgage portfolio. For comparability causes, these figures are unconsolidated below Colombian IFRS as printed by the Superintendency of Finance. As talked about prior to now, Aval’s portfolio composition is skewed in direction of decrease danger shopper lending merchandise and in step with our underwriting requirements, who’re a extra cautious tempo through the increase that adopted the put up pandemic rebound. Consistent with this danger profile, our banks have skilled a milder impression of the credit score cycle and regardless of tightening underwriting insurance policies, we’ve been in a greater place to develop on this difficult surroundings. As a end result, our banks in Colombia have gained market share in all main mortgage classes of the 12 months interval ending on February. While experiencing a greater evolution of the credit score high quality of the patron portfolio and complete loans. I’ll now transfer to the consolidated outcomes of Grupo Aval below IFRS. Starting on Page 11, asset grew 2.7% over the yr and 1.9% over the quarter to COP307 trillion. The yr marked a 17.3% year-on-year appreciation of the Colombian peso that had a adverse impact on yr finish development metrics, notably of web loans and leases. For the quarter, the peso appreciated 0.5% and had no materials impression on development metrics. Dollar denominated loans account for 16.6% of our complete portfolio. These are contributed primarily by MFH in Panama by the U.S. businesses of Banco de Bogotá, our commerce finance actions and offshore subsidiaries of Banco de Bogotá and Banco de Occidente. The backside of the web page, gross loans grew 2.2% over the yr and 1.5% through the quarter. Our peso denominated loans elevated 5.1% and 1.3% respectively, whereas U.S. {dollars} denominated loans grew 8.6% and a pair of% in greenback phrases, respectively. We continued to outgrow our friends throughout all mortgage classes regardless of having tightened our origination coverage a number of instances over the cycle. This yielded on the finish of February year-on-year market share positive factors of 89 foundation factors in complete loans, 138 foundation factors in industrial loans, 110 foundation factors in shopper and 28 foundation factors in mortgages. Commercial loans grew 3.1% year-on-year and a pair of.3% over the quarter. Peso denominated industrial loans grew 7.1% and a pair of% year-on-year and quarter-on-quarter whereas U.S. greenback denominated industrial loans grew 10.5% and a pair of.5% in greenback phrases, respectively. Consumer loans contracted 0.2% year-on-year and grew 0.1% over the quarter. Peso denominated shopper loans grew 0.6% year-on-year and remained flat quarter-on-quarter whereas U.S. greenback denominated shopper loans grew 6.4% and 1.7% in greenback phrases, respectively. The sluggish dynamics of shopper loans have been pushed by excessive rate of interest surroundings and tighter underwriting insurance policies in step with the sluggish financial exercise and softer macro outlook. Consumer mortgage development was sluggish throughout all principal merchandise. Several loans that account for 55% of our shopper loans contracted 1.7% year-on-year and grew 0.6% of the quarter. Demand for this product has gained traction because the discount in funding charges permits for decrease rates of interest and new discretions. Personal loans that account for twenty-four% of our shopper e book grew 1.7% of the yr and contracted 0.1% through the quarter. Credit playing cards that account for 12%, grew 4% year-on-year and contracted 1.6% quarter-on-quarter. Automobile loans that account for 9% of our shopper loans decreased 1.5% year-on-year and grew 0.4% quarter-on-quarter. Finally, mortgages grew 4.6% year-on-year and a pair of% over the quarter. Peso nominated loans grew 11.1% and a pair of.4% respectively, whereas greenback denominated mortgage loans booked by MFH grew 2.5% and decreased 0.8% respectively in greenback phrases. We count on our 2024 mortgage development to proceed exceeding the banking system, albeit remaining delicate throughout merchandise and segments. Dynamics within the system will fall largely in step with sluggish home demand and funding dynamics. Loan development charges within the system are anticipated to choose up later through the yr and into 2025 pushed by the normalization of the financial coverage and its constructive results on GDP development. On Page 12 we current funding and deposit evolution. Total funding elevated 2.8% year-on-year and three.1% through the quarter. Peso nominated funding grew 11.5% year-on-year and three.6% through the quarter. U.S. denominated funding decreased 1.4% in greenback phrases year-on-year and elevated 1% through the quarter. Deposits account for 74.1% of our funding, rising 4% quarter-on-quarter and 6.1% year-on-year. Peso nominated deposits elevated 8.9% year-on-year and three.9% quarter-on-quarter. U.S. denominated deposits elevated 11.7% and 4.1% in greenback phrases, respectively over 12 and three months. Time deposits that stay probably the most wanted sort of funding continued driving total deposit efficiency and achieve share in our combine. Time deposits grew 7.1% year-on-year and 5.3% within the quarter. Our deposits to web loans ratio stood at 106%. On Page 13, we current the evolution of our complete capitalization, our complete shareholders’ fairness and the capital fairness ratios of our banks. Our complete fairness decreased 1.4% over the quarter and elevated 2.8% year-on-year. Our attributable fairness decreased 2% over the quarter and elevated 1.7% year-on-year. Dividends of COP570 billion had been declared to our shareholders through the quarter. In addition, minorities at our subsidiaries obtained dividends of COP623 billion. Lower core fairness Tier 1 ratios in Banco de Bogotá and Banco de Occidente correspond to dividends declared through the quarter. Lower Tier 2 ratios in these banks replicate the lower in capital contributions debt in accordance with regulatory amortization schedules. As a latest occasion not but mirrored in these figures, on May 7, Banco de Occidente issued its inaugural COP175 million Tier 2 notes with a maturity of 105 years non-corporate, which we estimate may add roughly 150 foundation factors to complete solvency. Banco Popular and consolidated ratios had been 12.7% for complete solvency and 11% for core fairness Tier 1. On Page 14, we current our yield on loans, price of funds, spreads and NIM. The consolidated NIM and loans expanded 16 foundation factors quarter-on-quarter to 4.3%. NIM and industrial loans predominantly floated over IBR decreased 14 foundation factors to three.9%, whereas NIM on retail loans, predominantly priced at mounted charges, expanded 58 foundation factors to 4.9%. Despite of the above talked about constructive leads to NIM and loans, complete NIM fell 49 foundation factors to three.4% quarter-on-quarter as a consequence of our sharp contraction in our NIM and investments to minus 0.2%. Focusing on our Banking phase, NIM and loans of our Banking phase improved 8 foundation factors quarter-on-quarter to five.1%, nonetheless considerably decrease than historic ranges. This incorporates a NIM and industrial loans that decreased 16 foundation factors to 4.7% and an NIM and retail loans that expanded 41 foundation factors to five.6%. The complete NIM of our Banking phase contracted 21 foundation factors to 4.2% because of the similar dynamics that affected our consolidated NIM. The lower of our NIM on investments is defined by two drivers. First, a softer quarter-on-quarter, but nonetheless double digit NIM on investments from our Pension and Severance Fund Management phase. And second, a adverse end in our Banking and Merchant Banking segments that mitigated by its robust leads to FX and derivatives below our revenue in reference to hedging methods. Interest breaking dynamics of our loans and funding are pushed by the actions within the common benchmark fee in Colombia. On a consolidated foundation the common yield on loans for the quarter decreased 54 foundation factors to 13.7% over three months, whereas the common Central Bank fee decreased 42 foundation factors to 12.8% in first quarter 2024, and common three month IBR decreased 64 foundation factors to 12.3%. Commercial portfolios decreased their yield by 84 foundation factors to 13.3% over the quarter. In addition to decrease IBR, a desire for low danger sectors has implied decrease spreads on new loans. The common yield on shopper loans decreased 22 foundation factors over the quarter as a consequence of a pointy lower in Colombia’s lending fee cap after adjustments in calculation methodologies applied by the regulators. This change decreased the charges of some unsecured shopper lending merchandise, primarily bank cards. It was partially offset by a continued repricing of loans with longer maturity, akin to payrolls. On the price of funding facet, our banks recorded a 68 foundation factors quarter-on-quarter lower in price of funds. Average charges on time deposits and saving accounts fell 53 foundation factors and 88 foundation factors quarterly respective. As we’ve to say in earlier calls, final yr, time deposits had been issued at abnormally excessive spreads to the sovereign triggered by adjustments within the web secure funding regulation. A portion of these will mature over the next months, contributing to the downward development in price of funds. And Pages 15 by 17, we current a number of mortgage portfolio high quality ratios. On Page 15, 90 day PDLs had been 4.15% at 17 foundation factors deterioration relative to final quarter and 70 foundation factors deterioration over 12 months. 30 day PDLs elevated to five.85%, a 39 foundation factors change over three months after which 99 foundation factors deterioration over 12 months. Loan charges between 30 days and 90 day PDLs stay contained on account of the gathering methods developed by our banks, 90 day PDLs formation elevated 5% quarter-on-quarter after an 18% improve 30 day PDL formation 1 / 4 earlier. Commercial 30 day PDLs had been 5.1% and 33 foundation factors elevated over three months. 90 day PDLs had been 4.48%, 8 foundation factors deterioration over the quarter. We recorded a 53 foundation factors improve in customers 38 PDLs to six.81%, whereas 90 day PDLs elevated 35 foundation factors to three.91%. Mortgages 30 day PDLs and 90 day PDLs elevated 33 foundation factors and eight foundation factors, respectively, and 120 day metrics PDLs had been 3.5% or 11 foundation factors greater through the quarter. Finally, the ratio of charge-offs to common 90 day PDLs was 0.62 instances. On Page 16, the share of our mortgage portfolio labeled as Stage 1 portfolio fell barely over the quarter, principally pushed by a light deterioration in retail loans. Regarding protection, the allowance for Stage 2 and Stage 3 as a proportion of loans labeled as Stage 2 and Stage 3 was materially secure through the quarter for loans. The protection for industrial loans continued growing through the quarter. The allowance ratio for shopper loans and mortgages barely elevated over the quarter, reflecting an enchancment within the mixture of possibilities of default inside Stage 2 loans. On Page 17, as we anticipated in our final earnings name, the price of danger remained excessive through the quarter, pushed by a excessive price of danger for shopper loans. Cost of danger web for shopper loans improved 4 foundation factors to 7.5% regardless of a slight contraction in common balances. The price of danger of bank cards and private loans improved quarter-on-quarter falling 63 foundation factors to fifteen.2% and 237 foundation factors to fifteen.4%, respectively. The growing price of danger on industrial loans is especially defined by robust finish of interval mortgage development within the quarter. On Page 18, we current web charges and different revenue. Net charge revenue grew 5.6% quarter-on-quarter and three.9% year-on-year. Net charge revenue elevated to 16.3% and 5.9%, respectively. Net pension and severance charges grew quarter-on-quarter and year-on-year, pushed by efficiency based mostly charges that includes a robust capital market efficiency on the finish of 2023. As guided revenue from the non-financial sector was round 70% of that recorded in first quarter 2023 as some toll street concessions transitioned from the development to the operations part. In distinction, the vitality and gasoline sector outperformed through the quarter because of the favorable impact of [indiscernible] companies because of the greater consumption. Finally, on the underside of the web page, the quarterly improve in different working revenue is especially defined by greater derivatives and FX positive factors that as talked about earlier than, partially compensate decrease leads to NIM on investments. In addition, even seasonality additional provides to the advance relative to fourth quarter of 2023. On Page 19, we current some effectivity ratios. As a results of our price management initiatives, complete different bills elevated 0.8% year-on-year and fell 3.8% quarter-on-quarter. General and administrative bills grew 0.2% year-on-year and contracted 7.9% quarter-on-quarter. General and administrative bills are decided by working taxes and deposit insurance coverage that now account for 41% of those bills. These line objects grew 8.1% and 9%, respectively, year-on-year. Other common and administrative bills decreased 4.8% year-on-year. Cost to property for the quarter was 2.76%, bettering 15 foundation factors quarter-on-quarter and 4 foundation factors year-on-year. Our quarterly price to revenue improved to 50.4% of the quarter and deteriorated year-on-year, primarily as a consequence of a decrease NIM on investments and revenue from the non-financial sector. Finally, on Page 20, we current our web revenue and profitability ratios. Attributable web revenue for the quarter was COP114 billion or COP4.8 per share. Return on common property and return on common fairness for the quarter had been 0.6% and a pair of.7%, respectively. Before we transfer into questions and solutions, I’ll now summarize our common steering for 2024. We count on mortgage development between 7.5% and eight% with industrial loans rising between 9% and 9.5% and retail loans rising between 5% and 6%. NIM within the 4% space with NIM on loans within the 4.75 space. NIM of our banking phase within the 4.75 space with NIM on loans between 5.25 and 5.5. Cost of danger web of recoveries within the 2.2% space. Cost to property within the 2.7% space. Income from the non-financial sector up 70% of that for 2023. Our charge revenue ratio between 20% and 25%. Finally, we count on our 2024 return on common fairness to be within the 6.5% space. We at the moment are out there to handle your questions.

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Operator: We will now start the question-and-answer session. [Operator Instructions] Our first query comes from the road of Nicolas Riva with Bank of America. Please go forward.

Nicolas Riva: Thanks very a lot, Diego and Maria Lorena, for taking my questions. I’ve a couple of questions. So the primary one on provisions for mortgage losses, which had been up 72% year-on-year and 10% quarter-on-quarter. Cost of danger at 2.9% within the quarter. If you’ll be able to talk about any ideas by way of the outlook for provisions for mortgage losses for the remainder of the yr. That’s my first query. And then I’ve a couple of questions in your standalone stability sheet for the holding firm. Diego, you talked about the Tier 2 elevate from Banco de Occidente after the tip of the quarter, the $175 million. I wish to verify that transaction is just not going to have any impression on the standalone stability sheet of the holding firm. I assume that Grupo Aval on this case didn’t purchase any of the Tier 2 situation. But in case you can verify there, and in addition in case you can inform us what is the quantity of the AT1 situation from BAC’s Central America that’s owned by Aval and that’s included within the double leverage that the holding firm studies of 123% on the finish of the quarter. And lastly, Diego, you gave us steering for 2024 on a consolidated foundation. Can you share your projection for double leverage for the holding firm by the tip of the yr? Thanks.

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Diego Fernando Solano Saravia: Okay, Nicolas. Let me take it a type of. Regarding provision bills, price of danger, you may need observed that we raised our expectation price of danger for the yr. Basically, what we’re reflecting right here is the credit score cycle has been longer than what we anticipated. If you take a look at what has occurred, you will see that that there is been enchancment as we had guided into earlier than, however we have not but seen a turning level, notably for shopper loans. From the macro facet, there may be a variety of positives happening. We see the numbers reported by the superintendents of finance of family leverage bettering. So that correlates to the contraction in shopper and retail loans that we have seen earlier than. But we nonetheless have some warning on what’s going to occur with unemployment. So that is maybe the principle change within the steering for this name is the next price of danger with an expectation to development to raised numbers because the financial system recovers. Even although it is knowledge dependent, we see positives happening, on the inflation entrance. We see constructive positives on the central financial institution entrance, and in addition from the expansion – the GDP development perspective. So though cautious, we see an enchancment in that space and that may assist us to development again to the sub-2% price of danger that we’re extra aware of. Regarding our standalone stability sheet, sure, Aval did not purchase bonds from Banco de Occident, notably small situation and we needed this to be the inaugural bond for a Banco de Occident. It was not benchmark a measurement transaction due to the wants of the financial institution, however nonetheless they had been in a position to faucet the market. Regarding the AT1, we will probably be trying on the name of the financial institution of the bond throughout subsequent yr. At this level, I’d say the chance of that decision is related given the development of charges happening. And we’ve to attend a couple of months to see that occuring however it’s a doable state of affairs that will probably be chilly. Then you had a couple of different questions.

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Nicolas Riva: In that case, Diego, so once more, assuming it is referred to as what could be the – so proper now what is the quantity of the [indiscernible]?

Diego Fernando Solano Saravia: Your query on double leverage, it is a very related occasion. What we’re engaged on is trending down that to 120%. That is principally a ratio that score businesses have pointed to. And the AT1 represents near 11 proportion factors of double leverage. So if the bond known as and we doing nothing else, we’d be round 110 or below that quantity.

Nicolas Riva: Okay, thanks very a lot, Diego.

Operator: [Operator Instructions] And your subsequent query will come from the road of Julián Ausique with Davivienda Corredores. Please go forward.

Julián Ausique: Hi everybody and thanks for having my questions. I’ve a number of questions. The first one, in case you can possibly repeat the steering, as a result of I could not get the road while you had been giving the steering? And my different two questions are concerning; the primary one is concerning the company deterioration phase, like how are you trying the deterioration for the yr by way of the company. Because right here within the quarter that we’re seeing some deterioration within the company sector. So what are your expectations and when you have some like sensitivities or sensibilities in regards to the MPLs, each in 30 and 90 days for this phase? And my second query is concerning the NIM on funding. I used to be trying just like the P&L and I noticed that through the quarter you’ve a rise on curiosity and investments in debt securities of 11%. So, I may perceive why the NIM on investments had a adverse efficiency through the quarter and in addition to grasp why the NIM on loans have some lower, like some improve, as a result of when so P&L, I noticed a deterioration on the revenue of mortgage portfolio of 4% and in addition. But I noticed an lower in the price of loans. So, I want to perceive somewhat bit extra in regards to the NIM on funding and the NIM of loans. Thank you.

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Diego Fernando Solano Saravia: I’m undecided I understood totally your questions. Could you repeat what a part of the steering you want?

Julián Ausique: It like in case you can provide the mortgage NIM quarter on ROE. That’s the primary one.

Diego Fernando Solano Saravia: Okay. So a price of danger of two.3% and ROE within the 6.5% space may need some upward bias. But at this level we’re cautious on the price of danger facet. And concerning a industrial loans. The segments wherein Aval is concentrated are far more of a bigger industrial corporations and corporates, subsequently, we have seen some slight deterioration, but it surely’s fairly gentle at this level. If you take a look at that by phases, on the phases entrance, you even see some bias to an enchancment there. So we’re watchful of the deterioration and industrial, but it surely hasn’t actually proven, not in numbers but. And it’s associated to the sort of prospects that we’ve. There could be extra concern in case you go to smaller industrial loans and SME loans. But in our case, we’re extra on the level of constructing certain that all the pieces retains below management. You may think that we been trying into segments which can be extra delicate than others. And maybe at this level, one thing to say is we’re very properly diversified throughout sectors and inside sectors, throughout prospects. So we aren’t anticipating any massive shock. On the NIM and investments entrance. Yes, it was maybe one of many issues that affected our total NIM. We noticed enchancment in NIM on loans. However, a decrease NIM on funding nonetheless have an effect on us. Part of that, as I discussed by the decision, is offset with derivatives within the different revenue line. Having stated so, the tip of March was not that constructive for the market. We’ve seen a greater evolution through the second quarter on returns on mounted revenue investments. Therefore, we expect to see a greater end result over the yr than what we noticed for the quarter.

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Operator: There are not any additional questions right now. Ms. Maria Lorena Gutierrez Botero. I flip the decision again over to you.

Maria Lorena Gutierrez Botero: Okay, thanks to you all and see you quickly within the subsequent name. Good day.

Operator: Thank you, girls and gents, this concludes at present’s convention. Thank you for collaborating. You could now disconnect.

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