Q1 2025 Grupo Aval Acciones y Valores SA Earnings Call
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Rob: Welcome to Grupo Aval's first quarter 2025 Consolidated Results Conference call. My name is Rob and I will be your operator for today's call.
Rob: of all Estiona C. Velores, SA, is an issuer of securities in Colombia and in the United States.
Rob: As such, it is subject to compliance with securities regulations, income, lumpia, and applicable US securities regulation. Grupo Aval is also subject to the inspection and supervision of the superintendency of finance as holding company of the Aval Financial Conglomerate.
Rob: The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the IASB.
Rob: Unconsolidated financial information of our subsidiaries in the Colombian banking system are presented in accordance with the Colombian IFRS as reported by the Superintendency of Finance.
Rob: Details of the calculations of non-IFRS measures such as ROAA and ROAE, among others are explained when required in this report.
Rob: This report includes four looking statements. In some cases you may identify these four looking statements by words such as May, Will, Should, Expects, Plans, Anticipates, Believes, Estimates, Predicts, Potential, or Continue, or the negative of these and other comparable words.
Rob: Actual results and events may differ materially from those anticipated herein. As a consequence of changes in general, economic and business conditions, changes in interest and currency rates and other risk described from time to time in our filings with the Registro Nessianau, Devilores E.M. Massores, and the SEC.
Rob: Recipients of this document are responsible for the assessment and use of the information provided herein.
Rob: Matters described in this presentation and our knowledge of them may change extensively and materially over time.
Rob: But we expressly disclaim any obligation to review, update, or correct the information provided in this report.
Rob: including any forward-looking statements and do not intend to provide any update for such material developments prior to our next earnings report. The content of this document and other figures include herein are intended to provide a summary of the subjects discussed rather than a comprehensive description.
Rob: When applicable in this document, we will refer to billions as thousands of millions.
Rob: At this time, all participants are only listening only mode. Later, we will conduct a question and answer session.
Speaker Change: With us today are Miss Maria Lorena Gutierrez-Botero, Chief Executive Officer, Mr. Diego Solano, Chief Financial Officer, Mrs. Paula Duran, Corporate VP of Sustainability and Strategic Products, and Mr. Camilo Perez, Banco de Bogota's Chief Economist.
Speaker Change: I will now turn the call over to Miss Maria Lorena Gutierrez Patero, Chief Executive Officer. Miss Maria Lorena Gutierrez, you may begin.
Speaker Change: Thank you very much. Good morning, everyone, and thank you for joining us for our first quarter of 2025 conference goal. I am here with Diego Solano, our CFO Camilo Perez, Chief Executive of Banco Bogota, and Paula Urancor for a BTO systemability and strategic
I would like to start by highlighting these parts results.
Speaker Change: Our net income was 362 billion, a 28% increase compared to the fourth part of 2024, and 3.2 times that of the first quarter of 2024.
Speaker Change: We gain market sharing the deposits and loans reaching a 25.3% share in loans are reaching 16.6% in mortgages the highest level of our history.
Speaker Change: Car business friends evolved positively during the course, despite a persistent high-interest grade environment and a full performance of the capital market during March.
Speaker Change: Neem on loans in pre-sliding during the quire, Neem on investment recover as it quite the continued improvement. Our non-financial sector was stronger than in the three previous quires that and OPEX remained on the control.
Speaker Change: During the quarter, Mimmo Victoria learns of our banking services segment reached the highest level in two years.
Speaker Change: However, total number of loans were made flat due to pressures on commercial loans from a strong price competition in the corporate segment.
Speaker Change: Even though our profitability continues to increase, the pace of improvement was slightly slower than initial anticipated. Expansed by a lower than expected nemo investment due to the poor performance of
Speaker Change: A deterioration of the country's fiscal outlook and the resignation of the Minister of Finance affected the local markets during the second half of the work.
This was clear in part when he's results of tour de court.
Speaker Change: Returns on program near the stabilization reserve were suffered during the latter part of the record, negatively impacting profitability.
Speaker Change: Garfi Contribute is strongly due to seasonal dividend, higher income from the infrastructure sector, and a reducing cost of funds which reach single digits in the quarter.
Speaker Change: Now, moving on to our comfort priorities, I would like to give you a brief update.
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customer experience.
Speaker Change: In terms of customer experience, we systemically measure the net promoter's core, NDS, across all of our entities to assess customer satisfaction and loyalty.
Speaker Change: The Consisting Promoting NTS results with legs hours from commitment to enhancing customer
Additionally, we have dippado pa gustas.
Speaker Change: Arubos, an integrated customer database that enabled us to gain deeper insights into our clients' relationships, across Havana entity, and to serve them with great precision and relevance.
Speaker Change: A key step in this effort, we are reviewing our entire voice of the customer mode and standardizing net promoters for NTS measurement in line with the highest industry standards.
Speaker Change: Additionally, we launch a comprehensive internal program to further embed a customer-centric culture.
Saravia: Saravia, Camilo Alvarez, Maria Botero, Camilo Alvarez, Maria Botero, Camilo Alvarez, Maria
Saravia: our entities, which include a K training session, a strategic communication content and technology
Saravia: On this topic, we have been working on our recent cars in tri-fronts. First,
Saravia: Improve our commercial and marketing capabilities around retail deposits. Second, to use balance efficiency, sensitivity, to interest with volatility under improved our non-banking fee generation
Saravia: As part of our focus on increasing our share of retained funding, we have made changes in the incentive structure of our sales forces.
Saravia: In addition, we are reviewing our product base to strengthen our buying process proposition for retail customers.
Saravia: First, they have increased the mix of the time deposits in their overall funding mix.
Saravia: Second, including the ten years on time, the new time deposit to lever closer to the duration of their loans. And her using her gym strategies to swap fixed rate time deposit to IBR.
Saravia: We continue strengthening our services offering and non-banking fee generation by improving our asset management and advisory services.
Saravia: As mentioned in our last poll of Avala Quad in the Son of Corfinne Cross, I'm Broker's Business.
Saravia: The first wave of synergies will leverage on the centralization through a Val Val Val or Compartee of the group's procurement, facility and property management accounting function, cyber security, payroll and recruitment.
Saravia: During the first quarter, we successfully immigrated Banco de Bogota as processes into Aval Valor Compartue. Next semester, we will immigrate these processes to Anglo-Occidente, Banco Popular, and Ave Villas.
Ford, Digital Transformation and Knowledge
Saravia: We aim to consolidate our culture of innovation and coordinate technology, capitalizing on the benefits of
Saravia: On this prong, I am proud to announce with partner with Microsoft to boost the usage of artificial intelligence in our everyday operations.
We leverage customer experience, operational efficiency, and you have that, I really have the
Saravia: We actively support the real-time payment system led by Banco de la República, achieving significant progress in the aviation and use of our alpha numeric key known as Takaval.
Saravia: As of today, we have enabled 8.9 million keys and increase of 15% since December of last year to receive near real-time transfer from other financial institutions.
Saravia: This has facilitated over 2.1 million transactions, a 70% increase compared to January .
Fifth, Corporate Culture
Saravia: to support the strategic priorities that I have mentioned. We continue to strengthen our performance and customer-oriented culture.
Saravia: As part of this process, we have been working on promoting and improving the communication of our leadership across business units and throughout our organization around our strategic priorities as a group and key initiatives.
Saravia: In addition, we are a lot advanced in the process of refreshing part of the leadership teams and our parents, combining bringing new talents that are still existing leaders.
Saravia: These changes, combined with the refreshment of our Board of Directors and CEOs of our main business units, support the alignment of our management teams to the new opportunities and challenges done with faith.
Saravia: And finally, Sustainability. We recently published our Management and Sustainability Board, a document that reflects our economic results and progress in ESG terms.
Saravia: Irvarez, the fact we have on the millions of people who carried our endorsement to foster the third prince.
Saravia: I invite you to read if you have no already done so.
Saravia: The coming months will be key to consolidate, and even more roles, E.L.G. Estrataille, a language of sustainability challenges facing the country and the world.
Saravia: Now I would like to invite Paula to go over our ESG achievements to really integrate this work.
Paula: Thank you, and I learned now. This quarter we proudly received the results of the make-bow ESG responsibility ranking, which represented the companies with the best reputation for their ESG impacting Colombia. In the ranking of Paula and Rose to search the first place, findings and team positions and positioning itself as the third largest business fund operating the country.
Paula: In the financial sector, Banco Vota, Rancers, Banco Fiend, and Banco Avalides were in the top 10 Corgi Poloviana, Rancers 8, and Corvani reached second place in the AFP sector.
Paula: One of our most significant social initiatives in La Guajira, the Advances Quarter with Registration and Documentation Programs with the National Register's Office, and with Financial Dedication Programs. During the quarter, we completed Water Solutions for 45 Communities, and Energy Solutions for 81 Communities in Manaure and Ligue.
Paula: Our commitment to diversity and inclusion continues to be an important driver for us. Today 35% of our management positions are held by women and 55% of our employees are women.
Paula: Regarding our programs and environmental issues, we continue to define our decarbonization routes together with the group's entities. And we continue to implement a co-efficient project, such as the Banco Popular Alliance with Triligas. We generate social energy, we're set in for 13 of its branches.
Paula: This initiative will allow them to generate more than 570,000 kilowatts per year and avoid the mission of those 300 tons of YouTube.
Paula: Finally, during the quarter, Wayne Handstar is the management move by developing a comprehensive reporting system that enabled us.
Paula: to establish a baseline for more than 150 indicators across our entity. This foundation has allowed us to build dynamic dashboards to track progress in the key ESG area.
Paula: We firmly believe that by working with together with our entities sharing best practices and monitoring progress, we can amplify the impact of our efforts and drive meaningful measurable change.
Speaker Change: We will continue to strengthen our initiative and our internal capabilities, advance our environmental goals, deepen our social impact programs and more accurately measure the value we generate. Thank you.
Unknown Speaker 0
Speaker Change: The Colombian Economic Post is from growth figures during the first part, driven by the public administration, entertainment and commerce sectors.
for 2025. We forecast a genetic growth.
of 2.7%.
Speaker Change: We anticipate moderation in the following parts due to the potential negative effects of
Speaker Change: that this fighter recovery global and local uncertainty will continue to take a toll on investment.
Speaker Change: Annual inflation slowed to 5.09% in March 2025, down from 5.2% at the end of 2024.
Marking its lowest levels since October 2021.
Speaker Change: This is a positive development in the case of the Central Bank's effort to establish prizes are really
However, regulated companies and food prices continue pressure reinflation.
Speaker Change: Our forecasted inflation is 4.7% for the end of the year.
Speaker Change: In this context, the Central Bank cut its policies raised by 25 basis points in the April [inaudible]
Balancing between the recovery of the economy and fiscal challenges.
Speaker Change: The duration of the fiscal firm remains as the main stopper for a more dollars' centre-back.
Speaker Change: We have taken the central bank rate to the end 2025 in 8.5 percent.
Speaker Change: The fiscal death rate for this year will exceed 60% of GDP above the government target of 5.1 percent.
Conscience in the Gordon's fiscal adjustment plan has diminished
Speaker Change: and high-glow alone certainly. We anticipate that pressure on long-term rates will continue in the coming months.
Speaker Change: Our belief is that the business sector must remain dedicated to executing their investment
Speaker Change: As we enter the electoral year, noise will continue to increase. However, we are confident in the resilience of the Colombian economy.
Camilo Willa, La Rave, or La Rave Economic Al Camilo.
Thank you, Madame Lorena, good morning.
Speaker Change: The Improving Trandek Lomen Economy Recorder in 2024 extended into early 2025.
Speaker Change: We estimate economic growth of 2.8% for the first quarter. The economy will have experienced its high-end annual expansion since mid-2022, similar to the beginning of 2034 public spending in a household consumption for domain drivers.
Speaker Change: According to autonomous committee for the fiscal rule, in the first quarter, public spending grew 21% annually, supporting the recorded phase. In fact, the best performing sector was public administration.
Speaker Change: On the other hand, the second most dynamic sector was straight transportation, accommodation, and food services, explained by higher private consumption of both food and services.
Speaker Change: Without a doubt, the strength of the labor market, which at the end of the quarter, recorded the lowest unemployment rate since May 2016 at 9.1% has been one of the major drivers of the co-ambient increase in purchasing power.
Speaker Change: Furthermore, anal growth of 24% in remittances invests us during the first quarter also contributes to this.
Speaker Change: In this context, sectors such as manufacturing, finance, and professional services also enjoyed and increasing their activity.
Speaker Change: Meanwhile, investment continues on this recovery, supported by an increase in the importance of capital goods for industry and agriculture, as well as the execution of infrastructure projects in the country's main cities.
Speaker Change: Does Amid Favourl Domestic Demand but recognize installation risks at the international front, growth for around 2.3% is expected for 2025, still below the country's potential.
Speaker Change: For its part, the inflationary process passed in the first quarter, dropping from an inflation rate of 5.2% at the end of 2024 to 5.1% in March.
Speaker Change: The high indexation and the impact of the minimum wage on services, the increasing gas rates that pressure-regulated prices, a slow but progressive transmission of the devaluation to price of goods, and a modest increase in food services explained the above.
Speaker Change: The inflation is expected to be around 4.7% by the end of 2025. Once again, outside the target range established by the central bank.
Speaker Change: Amida Describe Economic Outlook, and a company by a iteration of Columbia's country risk due to a complex fiscal situation, the Central Bank costs its recent cycle, leaving the interest rate by 9.50%.
Speaker Change: New members are appointed to the Central Bank Sport in February , with an interlocked view of the economy, have added uncertainty to the decisions. In April , an ample consensus expected at third stability decision, but the board unanimously opted to reduce the interest rate to 9.25%.
Speaker Change: Data dependence makes it difficult to fork at the interest rate. Despite this, it is expected to continue declining to around 8.50% at the end of the year, limited in part by a fiscal situation.
Speaker Change: Regarding the exchange rate in line with global developments, some prior to the burst of uncertainty, the Colombian peso has strengthened against the US dollar in the first quarter.
Speaker Change: Compared to the end of 2024, while the dollar lost 4% against G7 currencies to March, the devaluation against the Coalmean peso was 5% as the exchange rate fell from 4,405 pesos to 4,181 pesos per
However, the Columbus Festival's performance was mixed.
Speaker Change: Standard and poor gratification of the country's BB-plus rating with a negative outlook and the upward adjustment of the rate expectations by the central bank supported the currency, with the exchange rate hitting a low of 4,060 pesos in mid-February.
Speaker Change: However, the duration of fiscal outlook following the publication of the government's financial plan, questioned the compliance with the fiscal rule in 2024 and put out work pressure on
Speaker Change: By 2025, the exchange rate is expected to average 4,300 pesos against the dollar, a mean high global volatility has charged challenging fiscal balance and a widening of columnal external
Speaker Change: Indeed, we expect the current account exit to fall from minus 1.8% of GDP in 2024 to minus 2.6% of GDP in 2025, due to a stronger recovery in imports than exports, both of goods and services, where the terms of trade will be affected by lower commodity prices.
Speaker Change: Finally, the fiscal situation in 2025 does not appear far removed from that observed the previous year. In the first quarter, spending far exceeded revenue, resulting in record fiscal deficits and low cash flow levels.
Speaker Change: Given this scenario, I'm considering that the three-million rating agencies for Fitch, Standard and Sports, Moody's half a negative outlook for the country, the likelihood of a rating downward is increasingly likely.
Thank you. Back to you, Marlon.
Maria Lorena: Thank you Camilo. Since our last call we have continued to see positive trends in the consumer grade cycle which have.
Maria Lorena: Translating to lower cost of risk in the system and high profitability in the Colombian financial system.
Maria Lorena: as a February 7 out of 29 banks accumulated in net losses compared with 12 banks on February
Maria Lorena: Although the assistance provided he has improved, there is still a long way to go, even more, so as they incorporate through in the first and second part of 2020.
Maria Lorena: or the Constitution of Counter-Cycles Provision that were released during 2023 and 2024.
Diego Solano: Now, I would like to pass the code to Diego who will give the taste of our resource, Diego.
Diego Solano: Thank you, Maria Lorena. I will start on pages 9 and 10 with a few charts showing the growth rate and quality of our loan portfolio, relative to the rest of the Command-Band Banking System.
Diego Solano: for comparability reasons, these are unconsolidated figures under Colombian IFRS as published by the sprints and then see a finals of Colombians.
Diego Solano: We're the 12 months ending in February 2025, commercial knowns and mortgages for the system group 0.5% and 3.4% in real terms with consumer loans contracting 10.4% in real terms.
Diego Solano: This yielded Iranian market share gains of 32 basis points in total loans, 156 basis points in consumer loans and 109 basis points in mortgages while our share of commercial loans fell 48 basis points.
Diego Solano: For the last three months, Lonescrew 1% in the system.
Diego Solano: Morggez grew 3% and commercial loan 1.4% in nominal terms of the water while consumer loans contracted 0.9%
Diego Solano: and Page 10, loan quality for both the system and the Aval banks, short improvement during the quarter, for all known categories.
Speaker Change: Our banks continue to exhibit better-known portfolio quality in the system in all main categories. I will now move to a consolidated results of Grupo Aval under IFRS.
And thank you, Leven.
As it's close 7.5% over the quarter and 0.6%
to a
Speaker Change: 7.5% sorry over the year and 0.6% over the quarter to 330 trillion pesos.
Speaker Change: Rosloons are remaining as at 399 trillion pesos growing, 5.4% year and year, and decreasing 0.2% over the quarter, mortgages and consumer loans drove our year and year growth.
Speaker Change: Aggressive pricing competition or corporate clients remain the main challenge to achieve strongly growth in commercial loans. This has taken at all commercial loans considering our pricing
Speaker Change: Commercial loans expanded 3.6% year and year and contracted 1.8% of the quarter. Consumer loans grew 3.9% year and 0.7% in the quarter with payroll loans growing continuing to recover increasing 5.8% year and year and 1.6% in the quarter.
Speaker Change: Aralones grew 7.7% year and year and contracted 1.2% in the quarter, personal loans grew 3% year and year, and 1.4% in the quarter, credit cards contracted 5.8% year and year and 3.1% in the quarter. Finally, mortgages grew 22% year and year and 4.2% in the quarter.
Speaker Change: We expect our 2025 loan growth to be slightly lower than formerly estimated in line with a tighter monetary policy and more volatile local and global embark.
Speaker Change: On page 12, we present the evolution of funding and deposits.
Solo funding increased 8.3% year-and-year and 1% in the quarter [inaudible]
Speaker Change: deposits that account for 75% of our funding through 9.8% year and year and 3.5% water and water are deposits to net loan ratio, flowed at 109%.
Speaker Change: On page 13, we present the evolution of our total capitalization, our actual total share all due to equity and the capital acquisition ratio of our banks.
Speaker Change: Arton Lec, Equity, Decrease 1.6% of the quarter and increased 5% Iranier. A Retreatable Equity, Decrease 1.6% of the quarter and increased 4.4% Iranier.
Speaker Change: Dividence of 655 billion pesos were declared to our shareholders during the quarter. In addition, minorities at our subsidiary level received dividends of 693 billion pesos. Bancoa water and Bancoa oxygen declared during the quarter.
Speaker Change: On page 14, we present our Yolen Loan's Casa fans, spreads and news.
Speaker Change: Tony Neumann, Chris 64, bases points to 3.5% quarter and quarter, many 3.5 improvement in numerous investments to a still-soft 0.3%.
Speaker Change: Our consolidated Neiman Loans expanded 12 basis points year-on-year to 4.4% and was flat for the quarter. Over the year, Neiman Retail Loans expanded 96 basis points to 5.8% and Neiman Commercial Loans decreased 51 basis points to 3.4%.
Speaker Change: Over the quarter, Niemann retail loans expanded 19 basis points and Niemann commercial loans contracted 14 basis points.
Speaker Change: Aggressive Prize Competition on Commercial Loans, especially on the corporate segment continued to press up on the month commercial loans down.
Speaker Change: To the benchmark rate for Colombia was flat at 9.5% on the first quarter, however, as mentioned by Camilo, the Zenfro Bank unanimously caught its rate by a quarter to 9.4% in its April meeting.
Speaker Change: focusing on bank and the banking sector. One of the loans of our banking sector was materially stable over the quarter at 4.9%.
Speaker Change: These incorporates a certain basis points increasing Neiman retail loans to 60.4% and 13 basis points decreasing Neiman commercial loans to 3.9%.
Speaker Change: The total name of our banking segment expanded 53 basis points of the quarter to 4.2% due to the same dynamics that affected our consolidated need.
Speaker Change: The consolidated basis, the average yield and loans for the order decreased 38 basis points over the 3 month period to 11.6% while the average 3 months IBR decreased 5 basis points to 9.3%
Speaker Change: Consolidated cost of funds fell 37, faces points quarter and quarter to 6.8% average rates and timely positive saving accounts fell 43 basis points and 52 basis points quarterly
Speaker Change: The modest reduction, a pace of the central bank implies a longer adjustment period to that initially anticipated. In this scenario, our name will continue to expand, although at a lower pace.
Speaker Change: on page 15 to 16, we present seven long portfolio quality ratios starting on page 15, period metrics continue to improve in all categories.
Speaker Change: 38 PDFs were 5.18% at 13 basis points improvement over 3 months and 68 basis points improvement over 12 months.
Speaker Change: 90 APDLs were 3.24% at 26 basis points improvement relative to the last quarter and 41 basis points improvement over 12 months.
Speaker Change: commercial 30 APLs were 4.79% at 16 basis point improvement over three months and 31 basis points improvement year and year. 90 APLs were 4.06% at 37 basis points improvement over the quarter.
Speaker Change: 1980 affirmation, which is the lowest level of the last two years and continues to show a positive friend. 3080 affirmation for the quarter was the lowest for a first quarter since 2022.
Speaker Change: We recorded a 14 basis points decrease in consumer 30 APLs to 5.46% and 90 APLs decreased 10 basis points to 3.14%. Mortgage is 30 APLs and 90 APLs decreased 2 basis points and 14 basis points
Speaker Change: Finally, the ratio of charge-offs to average $98.8 was 0.38 times.
Speaker Change: On page 16, the share of our portfolio classified as stage 1 remains stable at 8.5, while stage 3 feels slightly over the quarter to 6.3% driven by commercial and consumer loans.
Speaker Change: Drindo Quater, we reclassified a portion of stage 1 commercial loans to stage 2 due to an increase in expected credit plus following rating updates then incorporated in this company's 2024 financial performance information.
Speaker Change: As a result, coverage measured as allowances for stage 2 and 3 as a percentage of stage 2 and 3
Speaker Change: And page 17, cost of risk net up recoveries, increase 21 basis points to 2%. We expect 20, 25 cost of risk to be slightly below this level.
Speaker Change: Costa Brisk, Network Commercial Dones, increased by 50 SS points to 0.9% for the quarter, reflecting the reclassification to stage two previously ascribed.
Speaker Change: Cost of Risk, or Consumer Loans, improved 32 Aces points to 4.5%. The cost of risk for credit cards and out loans improved quarter and quarter, falling 89 Aces points to 6.1% and 75 Aces points to 3% [inaudible]
Speaker Change: On page 18, we present named net fees and other income. Rossi income grew 6.2% year and year and 0.6% quarter and quarter. Net fee income increased 0.9% and decreased 1% respectively over this time periods.
Speaker Change: Net pension and seven fees, Gru 9.1% of the quarter, mainly due to higher performance-based fees and higher collection of mandatory contribution related to the increasing minimum wage at the beginning of the year.
Speaker Change: Animal Gross Banking Peace Group 1.4%. This incorporates 3.9% growth of commissions on banking services that was upset by 2.1% annual decreasing credit cards and debit card fees.
Speaker Change: A ringtone for the non-financial sector was around 83% of that reported in the same period for 2024 Finally, at the bottom of the page, the year and year increase in other operating income is mainly explained by higher derivatives and fx gains.
Speaker Change: Totally expenses decreased 5.2% quarter of quarter and increased 7.6% year and year. General and administrative expenses decreased 8% quarter on quarter and increased 6.7% year and year with operating taxes and deposit insurance accounting for 37% of this category.
Speaker Change: Cost 2 assets for the quarter was 2.7% into the 19 basis points quarter on quarter [inaudible]
Speaker Change: Our quarterly cost to income improved to 50.8% over the quarter. Finally, on page 20, we present our net income and profitability ratios.
Speaker Change: Attribute of net income for the quarter was to be 162 billion pesos or 15.2 pesos per share, increasing 28.5% relative to 4th quarter, 20.4 and 3.2 times that for the first quarter, 20.4.
Speaker Change: Our return on average, as it's an average equity for the quarter, we're 1% and 84% respect.
Speaker Change: Before we move into questions and answers, I will now summarize our general guidance for 2025.
Speaker Change: We expect long growth in the 9% area with commercial loans growing in the 7% area and retail loans growing in the 11% areas, like lower than our previous guidance.
Speaker Change: are consolidated in the 4% area with Niemann Lones in the 4.5% area. Niem, upper banking segments in the 4.7% area Niemann Lones in the 5.3% area affected by the central bank.
Speaker Change: Introduction Rate Expectations, Cost of Risk, Net of Recovery at 1.95% in the 95% area better than our previous guidance.
Speaker Change: Cost two assets in the two and three-quartered area, income from the non-titers of sector of 85%
Speaker Change: of that for 2024, slightly improving from our previous guidance, a fee income ratio at the 21% area better than our previous guidance. With this, our expectation for 2025, we turn on equity is expected to be in the 10% to 11% range.
Speaker Change: Thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts of Colombia and group Aval in 2025.
Speaker Change: The strength of improvement of our net income and return on equity will continue in the upcoming course.
Speaker Change: This by the challenging and economic conditions, you two are an increasing local and global uncertainty. We are focused on returning to double digits, but it's your weekly mission 25.
Speaker Change: positive, reverse, private, or our resource, interphoria, stable cause of risk, higher operational effect in that, and a strong pre-income generation from non-banking sectors of operations will contribute to positive details and results.
Speaker Change: The main headwind for a more solid improvement or return equity continues to be our neymar loans.
Speaker Change: There is co-repay of our name on loans. As I mentioned earlier, one of our corporate priorities consists in fining our Jewish education.
Speaker Change: Achievements on the strong will allow us to strengthen the mix of our deposits towards low cause and a table saw in and reduce the cause of vomit. They're managing the impact of interest as brain tankers.
Speaker Change: In addition, our guidance incorporates a stable spread of some commercial loans, which will support the persistent recovery of our road already happening in meme-on-weak clean loans.
Speaker Change: So we are now open to questions. Thank you very much.
Speaker Change: Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press star one again. If you are using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question please press star then one on your touchtone phone. If you have a question, please press star then one on your touchtone phone.
Speaker Change: Your first question comes from a line of Brian Flores from Citibank. Your line is open.
Brian Flores: Hi, Tim. Thank you for the opportunity to ask questions. I have two on my side.
Brian Flores: The first one is to be a bit on your guidance, so from what I understand…
Brian Flores: The new ROE range is 10 to 11. I think it was closer to 11 in the previous quarter. So you want to understand if this is a correct reading, which is our week would be weaker than you were expecting the last quarter. [inaudible]
Brian Flores: and then, as you mentioned, asset quality is perhaps a bit better than you were anticipating.
Brian Flores: But then, as you mentioned, the key downside risk here seems to be nim so should we understand that at some point you need to accelerate in your imagination to kind of compensate what is happening with pricing.
Brian Flores: That is the first question. And then the second one is more on the macro side. We know the pension reform starts implementation in July if you could elaborate any impacts you're seeing in Porveniz and also if this is already reflected in the guidance. Thank you.
Yeah, let me start with your reading and
Brian Flores: Now we are getting slightly lower than that in the 10-11% range.
Brian Flores: The reason that I try to highlight when going a line by line is...
Brian Flores: We've experienced two negative things and some positives, the positive view you're absolutely thinking on the spot it is.
Brian Flores: Better performance, better performance and evolution of the quality of the loan portfolio. So that's going to be a positive one. Then there's another one and it is corticolomiana. We had guided to a lower performance this year and it has already performed better during the. So that's going to be a positive one and it's going to be a positive one.
and then on the negative side, the slower pace of the central bank does affect our name and loans, particularly of consumer loans specifically.
Speaker Change: So that's what we're bringing into these guidance and then we had a slower first quarter in don't grow then what we were initially for seeing.
Speaker Change: Then you said, should you guys be accelerating origination? I think that's something we're evaluating very carefully at us. Part of the reason why we didn't grow as as we expected was that we saw very aggressive pricing from some of our peers.
in a particularly large, corporate loans.
Speaker Change: We've been very disciplined with pricing to ensure that we're growing but we're growing in a profitable way so that those are the kind of things we need to give that way.
Speaker Change: However, we continue to work on origination and high quality and high profitability origination [inaudible]
Speaker Change: is the first of July , no? So we are waiting because there are some...
Speaker Change: We are waiting for the Constitutional Court because they are analyzing if the reform is okay with the Constitution.
Speaker Change: So, but we are prepared, importantly, the government has published a decree with the main issue for us that is the commissions and the commissions are set in the way that we were expected.
Speaker Change: So, I think we are waiting for the Constitutional Corp Act for when it is prepared for both scenarios, no, with reform or without reform.
Speaker Change: And then you also asked about our guidance. Our guidance is basically taking a neutral scenario. The pension reform would be positive when our results see the effective as planned. We've gone for our guidance on the prudent side.
Speaker Change: No, no, no, perfect, super clear. And then if I can just follow up on on that last comment. So if it goes as as you let's say the positive expectation that you have on the pension reform, do you have an estimate on the impact particularly or or not yet?
Speaker Change: We are waiting to see how regulation comes out before we get into those numbers. We would prefer to wait for that.
That makes sense. Thank you.
Speaker Change: Your next question comes from the line of Yuri Fernandez from JP Morgan. Your line is open.
Unknown Speaker 00.00.00.00
Yuri Fernandez: No, thank you all. Just a little bit more for her here, just to see if I understood correctly. It's positive the short term, but then the flow's changed in the future. It's negative, right? In the long in the long run, on proven air.
Speaker Change: And I think the Diego already mentioned is in the presentation regarding the increasing stage true just checking if this was one company or two or more companies which sector are they are those companies from all.
Speaker Change: And if you did include any stage two, it should become stage two at some point, like how you are seeing these are as far as comfortable with, you know, with those, and it should plan to rebuild the Colbert in the commercial stage two and stage three parts one.
Sure, guys, you know, some, some more like this. Thank you.
Yeah. Let me start with your last one. It's...
Speaker Change: This is actually a seasonal kind of review so there's no reason to have any concern because of that but there's some mechanic process where if companies didn't perform as well last year then they're rating false
Speaker Change: And even though they might be up to date and well performing with their loans, we need to change the rating and that implies moving to the lower slice of stage two.
Speaker Change: The implication of that is we move from expected loss for 12 months to lifetimes, therefore we increase the level of provisions, but it's more of a...
Speaker Change: Updating process that reflects how last year was better than how 2025-2026 was looked like.
Speaker Change: So not really a concern nor is this a change in front.
Speaker Change: We obviously continue to be careful about other portfolios as we've done throughout the cycle and we need to see the economy to continue to pick up to be affordable but we are well on that track.
then you are going to come to…
Speaker Change: The concise answer is, it takes a positive and short term in the long term, not the medium, but quite long term, we see a change because the volume that will go to the private sector will decrease.
However, a substantial portion of current customers.
Speaker Change: A part of the transition process, so the process of reducing the level of assets undermanagement will take some time to offset the advantage of a better fee system.
Speaker Change: Hello, super, super clear. Thank you for the clarification, Diego. If I may, just a final one. If you can provide some comments and sorry if you already did before regarding the political, you know, outlook in Colombia, I know probably it's too soon to have a view. But whatever can comment like on how some expectations. It's interesting for us here. Thank you. Thank you.
Speaker Change: I think he doesn't want to answer that question, but I would say that the political look is uncertainty, you know, because you know that we have
Speaker Change: I present Petro with this, I don't know how to say consultable but I can referendons that the Congress will discuss that all next week.
Speaker Change: We are waiting for that and they are with the reforms, the labor reform and the health reform.
Speaker Change: And we have 40 candidates for next year in the presidential election.
Speaker Change: So, what you will see in the following months is uncertainty about that and more uncertainty that President Pedro will do, no, create.
Speaker Change: You know, labor reform has been here for a while, right? Unfortunately, it's a point. Well, thank you, thank you for the answer, everyone.
Unknown Speaker 0.0.0
Speaker Change: Your next question comes from a line of one downer from Bank of Columbia. Your line is open.
Very low, okay, if you cut it.
Juan Dowder: Okay, I will proceed with that with the questions. I have a couple of questions.
Speaker Change: The first one is in regards to your provisions. What is your expectation and especially how do you read the balance of risk at this moment of the juncture in perspective of the changes of the one-time policy path of
Speaker Change: I think more internationally. I need that reading of the environment will lead you to change your expectations towards provisions, which seem to have a bottom in the previous quarter.
Speaker Change: If you can get Diego Saravia dancing with Garcudana, I appreciate it. The other question is about
Speaker Change: a decrease in the fin and con ratio in this quarter. I would like to give you a little bit of a decrease.
Speaker Change: and on your expectations on the issue for 2025, also you mentioned it and a strategic
Speaker Change: Improving the feasts, and so what could be your initiatives in that regard. Thank you very much.
Yeah, well, regarding provisions, I think that...
Speaker Change: Something that differentiates Aval from other peers in the system is the structure of a art portfolio.
Speaker Change: So our guidance is tight more to that than other products. For example, we are much more concentrated.
Speaker Change: in the payroll loans that, even though they do carry the effect that we've seen and named.
Speaker Change: are substantially better than some of the unsecured consumer lending and credit cards products that are also part of the system.
Speaker Change: We are in a position to have a better view on that.
Speaker Change: and then on the mix of industries we have slightly lower exposure to SMEs.
Speaker Change: then some of our peers, and that also helps us. So that's the rationale behind why our performance has been a substantially better than the rest of the system throughout the cycle and why we are able to have a more positive view.
Speaker Change: Then regarding fees, there's a mixture of effects here, review team, what we did was we raised our...
T-Rage, because we saw the name is slightly falling, we are pointing basically to the same guidance that we had before, we're thinking in pencil-enominated piece.
Speaker Change: Something that did affect us during the first quarter is, you might have seen that Colombia had a pretty tough march due to market volatility and we'd seen some months affecting performance
Speaker Change: However, we're seeing a pickup in retail activity that allows us to expect also an improvement on that side.
Then there's something that is about specific and it is...
Speaker Change: Yes, as you well highlighted, that's one of our pillars because we feel we're not doing enough.
Speaker Change: on the field side. And given that we're actively working on that, that's also part of our source of, I think, being much more constructive on what we can achieve on fees moving forward.
Thank you.
Speaker Change: And there are no further questions at this time. Ms. Maria LaRena Griteera's, but Tera, I turn the call back over to you.
Speaker Change: No, thank you, thank you to everyone to be with us in this corner and see you in three months.
Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for your participating and you may now disconnect.