AVAL Q1 2026 Earnings Call Summary

Summary of Grupo Aval's Q1 2026 Earnings Call

1. Key Financial Results and Metrics

Attributable Net Income: COP 336 billion, down 2.3% YoY, impacted by a COP 312 billion equity tax, which reduced net income by COP 210 billion.
Return on Average Equity (ROAE): 7.4% for the quarter; adjusted ROAE excluding the equity tax would have been 12%.
Gross Loans: COP 193.6 trillion, up 6% YoY; deposits reached COP 216.8 trillion, increasing 11.7% YoY.
Net Interest Margin (NIM): Consolidated NIM at 3.34%, down 45 basis points YoY; NIM on loans decreased to 4.4%.
Cost of Risk: Net cost of risk at 1.8%, improved 36 basis points YoY.
Operating Expenses: Increased 20.3% YoY, primarily due to the equity tax.

2. Strategic Updates and Business Highlights

Divestiture: Completed the sale of 99.57% of Multi Financial Group for USD 464 million, enhancing capital position.
Corporate Strategy: Launched a new 2026-2031 strategy focusing on relevance, opportunities, and impact, with ten strategic pillars.
Acquisition: The purchase of Itau's personal banking business is expected to add significant growth in consumer and mortgage portfolios, enhancing market share.
Aval Fiduciaria: Achieved COP 198 trillion in assets under management, with a 19% market share in commissions and a 33% ROE.
GOU Payments: Secured regulatory milestones and engaged over 120 users in pilot programs, positioning for full rollout.

3. Forward Guidance and Outlook

Loan Growth: Expected at 9.5% for 2026, with commercial loans at 6.5% and retail loans at 14%.
NIM Guidance: Anticipated to stabilize around 3.9% for the year.
Return on Equity: Projected at 9.25%, incorporating the negative impact of the equity tax.
Cost of Risk: Expected to remain around 1.9% for the year.

4. Bad News, Challenges, or Points of Concern

Equity Tax Impact: The one-time equity tax significantly affected net income and ROAE.
Funding Costs: Increased funding costs due to a tighter monetary policy environment, impacting NIM.
Economic Environment: Slower GDP growth projected at 2.4% for 2026, with rising inflation and political uncertainties affecting consumer confidence and investment.
Loan Portfolio Quality: Despite improvements, the ongoing economic challenges could pressure asset quality and risk metrics.

5. Notable Q&A Insights

NIM Sensitivity: Management acknowledged a mismatch in asset and liability repricing, leading to volatility in NIM; they expect a recovery in NIM as commercial loans reprice.
Pension Reform: Management views the pension reform as a long-term balancing act, with short-term benefits but potential long-term growth reductions.
AV Villas Capital: Core capital decreased due to healthy growth; management is comfortable with current levels and can provide support if needed.
Infrastructure Segment: The lack of new projects in Colombia poses challenges, but there are plans to seek opportunities outside the country.

Overall, Grupo Aval is navigating a complex economic landscape while implementing strategic initiatives aimed at long-term growth and operational efficiency, despite facing significant short-term challenges.

AVAL — Grupo Aval Acciones y Valores S.A.