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): 4.71% for loans, with total NIM at 3.78%.
• Cost of Risk: Improved to 1.9%, down from 2.3% in 2024.
• Assets: Grew 6.4% year-on-year to COP 349 trillion.
• Deposits: Increased by 11.2% year-on-year.

2. Strategic Updates and Business Highlights:

• Mergers and Acquisitions: Completed the merger of fiduciary businesses and agreed to acquire Banco Itau's Colombian retail business, expected to add 267,000 clients and significant deposits.
• Divestment: Reached an agreement to sell Multi Financial Group (MFG) to focus on core markets.
• Sustainability Initiatives: Achieved a sustainable loan portfolio of COP 44.9 trillion, with significant contributions to social and green lending.
• Porvenir Performance: Achieved record performance with assets under management reaching USD 271.2 trillion and ROAE at 21.2%.

3. Forward Guidance and Outlook:

• 2026 Expectations: Loan growth projected at around 10%, with commercial loans at 7% and retail loans at 14%.
• NIM Guidance: Expected to be in the 4.3% range, with banking segment NIM at 5.1%.
• Cost of Risk: Anticipated to remain around 2%.
• ROE Guidance: Projected at 10.5%, factoring in potential impacts from a new wealth tax.

4. Bad News, Challenges, or Points of Concern:

• Economic Environment: Political volatility and economic uncertainty are expected to persist, impacting growth and investment.
• Inflation Pressures: Inflation closed at 5.1% in 2025, with expectations to rise to 6.2% in 2026 due to a significant minimum wage increase.
• Regulatory Challenges: New wealth tax could reduce ROE by approximately 1 percentage point.
• Investment Decline: Colombia's investment rate is at a historic low of 16.6% of GDP, raising concerns about sustainable economic growth.

5. Notable Q&A Insights:

• Tax Impact: Management clarified that the new wealth tax would affect ROE and that the effective tax rate used in guidance is around 35%, excluding emergency measures.
• Loan Growth Guidance: Adjustments were made to loan growth expectations, with a slight reduction in guidance compared to previous estimates.
• NIM and Cost of Risk: While cost of risk is expected to remain stable, the mix of loans and potential volatility in investment NIM could affect overall profitability.

Overall, Grupo Aval demonstrated strong financial performance in 2025, driven by strategic acquisitions and a focus on sustainability, but faces significant challenges from economic conditions and regulatory changes moving into 2026.