AVAL — Grupo Aval Acciones y Valores S.A.

Grupo Aval Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Net Income: COP 1.7 trillion for 2025, a 70% increase year-over-year.
• Return on Average Equity (ROAE): 9.6%, up 366 basis points from 2024.
• Gross Loans: COP 190.1 trillion, a 4.8% increase from 2024.
• Net Interest Margin (NIM): Consolidated NIM at 3.78%, with NIM on loans at 4.71%.
• Cost of Risk: Improved to 1.9%, down from 2.3% in 2024.
• Assets: Grew 6.4% year-on-year to COP 349 trillion.
• Total Deposits: Increased by 11.2% year-on-year.

2. Strategic Updates and Business Highlights

• Acquisitions and Mergers:
  • Completed merger of fiduciary businesses into Aval Fiduciaria.
  • Acquired Banco Itau's Colombian retail business, expected to add 267,000 clients.
  • Divested Multi Financial Group (MFG) to focus on core markets.
• Sustainability Initiatives:
  • Sustainable loan portfolio reached COP 44.9 trillion.
  • Achieved high scores in sustainability assessments (S&P and MSCI).
• Operational Efficiency: Continued improvements in cost management, with expenses growing below the minimum wage increase.

3. Forward Guidance and Outlook

• 2026 Expectations:
  • Loan growth projected around 10%, with commercial loans at 7% and retail loans at 14%.
  • NIM expected in the 4.3% range, with banking segment NIM at 5.1%.
  • Cost of risk net of recoveries anticipated to be around 2%.
  • ROAE guidance revised to 10.5%, reflecting potential impacts from a new wealth tax.

4. Bad News, Challenges, or Points of Concern

• Economic Environment:
  • Inflation ended 2025 at 5.1%, with expectations for a rise to 6.2% in 2026 due to a significant minimum wage increase.
  • Political volatility and fiscal discipline concerns could impact economic growth and investment.
• Regulatory Risks: New wealth tax could reduce ROE by approximately 1 percentage point.
• Market Competition: Increased competition in the banking sector, particularly in commercial loans, affecting market share.

5. Notable Q&A Insights

• Tax Implications: Clarified how the new equity tax will affect the bank's financials, indicating a potential 1 percentage point reduction in ROE.
• Loan Growth and ROE Guidance: Adjusted expectations for loan growth and ROE, with a noted reduction from previous guidance due to a combination of factors including a better loan mix and higher expected tax rates.
• Cost of Risk: No anticipated changes in cost of risk, with improvements expected from better loan portfolio management.

This summary encapsulates the key points from Grupo Aval's Q4 2025 earnings call, highlighting financial performance, strategic initiatives, future outlook, and challenges faced by the company.