Q2 2025 Grupo Aval Acciones y Valores SA Earnings Call

Speaker #1: Ambassadors in the SEC. Recipients of this document are responsible for the assessment and use of the information provided herein. Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material developments prior to our next earnings report.

Operator: EEMS notice in the SEC. Recipients of this document are responsible for the assessment and use of the information provided herein. Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material development prior to our next earnings report. The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description. When applicable, in this document, we refer to billions as thousands of millions. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. With us today are Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer; Mr.

Speaker #1: The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description.

Speaker #1: When applicable, in this document, we refer to billions as thousands of millions. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session.

Speaker #1: With us today are Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer, Mr. Diego Solano, Chief Financial Officer, Ms. Paula Duren, Corporate VP of Sustainability and Strategic Projects, and Mr. Camilo Alvarez, Banco de Bogotá's Chief Economist.

Operator: Diego Saravia, Chief Financial Officer; Ms. Paula Duran, Corporate VP of Sustainability and Strategic Projects; and Mr. Camilo Alvarez, Banco de Bogotá's Chief Economist. I will now turn the call over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin.

Speaker #1: I will now turn the call over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin.

Speaker #2: Thank you very much. Good morning, everyone, and thank you for joining us for our second part 2025 conference call. I am here with Diego Solano, our CFO; Camilo Pérez, Chief Economist of Banco de Bogotá; and Paula Duren, Corporate VP of Sustainability and Strategic Projects.

Maria Lorena Gutierrez Botero: Thank you very much. Good morning, everyone, and thank you for joining us for our second part of the Q2 2025 conference call. I am here with Diego Saravia, our CFO, Camilo Alvarez, Chief Economist of Banco de Bogotá, and Paula Duran, Corporate VP of Sustainability and Strategic Projects. During the first half of the year, we reached an income of 856 billion pesos, 1.7 times higher than in the first half of 2024. Net income for the quarter was 494.9 billion pesos, the highest for the year in two years, growing 37% over the quarter and 142% over the year. Results of our banking segment continue to show positive trends in core business metrics. Our net interest margin reached 4% on average for the first time in two years, with our consolidated net interest margin on loans at 4.5%.

Speaker #2: Let me start. During the first half of the year, we reached an net income of 856 billion pesos, 1.7 times higher than in the first half of 2024.

Speaker #2: Net income for the quarter was 494 point 9 billion pesos, the highest quarterly figure in two years, growing 37 percent over the quarter and 142 percent over the year.

Speaker #2: Results of our banking segment continue consolidating positive trends in core business metrics. Our net interest margin reached the 4 percent level in for the first time in three years.

Speaker #2: With our consolidating on loans at 4.5 percent, this level of minimum loans is close to that which we have in the third quarter of 2022.

Maria Lorena Gutierrez Botero: This level of net interest margin on loans is equal to that we had in the first quarter of 2022. At that time, the average central bank excluded 8.83% relative to this quarter's average of 9.33%. The cost of risk for the quarter was 1.7%, and yields were 4.81%, the lowest level since the first quarter of 2023. Loans grew 3.2% year over year when deposits grew 6.8%. Loan flow dynamics have been softer than we initially anticipated. However, activity has peaked in June and July. Our banks deployed planned deposit flows during the second half of the year, particularly in commercial loans, working closely with advanced banking industries. During the quarter, our investment portfolios performed well, driving an expansion in net interest margin on investments. The performance of AFP Porvenir stabilization reserves positively contributed to these forest results.

Speaker #2: At that time, the average central bank issued at 8.83 percent, relative to this quarter's average of 9.3.33 percent. The cost of real estate for the quarter was 1.7 percent, and yields were 4.81 percent, the lowest level since the first quarter of 2023.

Speaker #2: Those low growth 3.2 percent year over year were deposits while deposits grew 6.8 percent. Long growth dynamics have been suffered that we initially anticipated.

Speaker #2: However, activity has ticked up in June and July. Our bank deployed plans to foster growth during the second half of the year, particularly in commercial loans, working closely with a vast banker in the field.

Speaker #2: During the quarter, our investment portfolio performed well, driving an expansion in new loan investments. The performance of Porvenir Stabilization Reserve positively contributes to this quarter's results.

Speaker #2: Now, regarding the progress of our strategic priorities, I'd like to highlight a few areas. Our banks have continued working on improving their deposit mix toward retail funding.

Maria Lorena Gutierrez Botero: Now, regarding the progress of our strategic priorities, I would like to highlight a few areas. Our banks have continued working on improving their deposit mix to where we trade solid. The share of pesos in nominated deposits held by individuals improved during the quarter from 16.7% in the first quarter of this year to 18.2% in the second quarter of 2025. Regarding the payment business, we continue complementing our offer of products and services to individuals and companies through Red Aval payments. Recently, I am surrounded by the Superintendency of Finance as a low-value payment management entity, both for instant payments and traditional payments. This will allow us to accelerate the design and go-to-market to value-added products for our current and potential customers. We are on the track to adopt the central bank’s instant payment system when it starts operating in September.

Speaker #2: The share of peso-denominated deposits held by individuals improved during the quarter from 16.7% in the first quarter of this year to 18.2% in the second quarter of 2025.

Speaker #2: Regarding the payment business, we continue complementing our offer of products and services to individuals and companies through gold payments. Recently authorized by the Superintendency of Finance as a low-value payment management entity, both for instant payments and traditional payments.

Speaker #2: This will allow us to accelerate the design and go-to-market-to-value added products for our current and potential customers. We are on the track to adopt in breve the central bank instant payment system when it starts operating in September.

Speaker #2: We have already been certified to use keys in the centralized directory and in process to be certified for transaction settlements. On the senior design efficiency front, we conducted an analysis of the potential synergies between the processes of Grupo Aval entities.

Maria Lorena Gutierrez Botero: We have already been certified to use Q in the centralized directory and in process to be certified for transaction settlement. On the synergy design efficiencies front, we conducted an analysis of the potential synergies between the processes of Grupo Aval entities. As a result, the first wave of implementation will continue through the second half of the year, focusing on seven key areas: procurement, talent attraction and selection, payroll management, property management, facility management, physical security, and physical challenge management. On the procurement front, we implemented a procurement synergy center, which seeks efficiency, economies of scale, and a more competitive and sustainable value chain. This center will operate on a spending base of 4.3 trillion pesos, 4,200 contracts, and 16,000 creditors.

Speaker #2: As a result, the first wave of implementation will continue through the second half of this year, focusing on seven key areas. Procurement, talent attraction and selection, payroll management, property management, facility management, physical security, and physical challenge management.

Speaker #2: In the procurement front, we implemented the procurement synergy center with six efficiency economies of scale and a more competitive and sustainable value chain. This center will operate on an expanding base of 4.3 trillion pesos, 4,200 contracts, and 16,000 creditors.

Speaker #2: We expect to track capture efficiencies that will result in initial savings of more than 10 percent of a $2.1 trillion manageable spending base, and a reduction in contracting times of 42 percent, 40 percent.

Maria Lorena Gutierrez Botero: We expect to capture the efficiencies that will result in initial savings, more than 10% of a 2.1 trillion pesos manageable spending base, and a reduction in contracting times of 40%. In talent attraction and selection, we will build a talent management center for Grupo Aval, which will allow us to attract the best talent, accelerate onboarding processes, and promote internal mobility. As a significant milestone, next month, we will launch a digital employment platform that will become the largest job opportunity for us in the country. In payroll management, centralization will not only generate operational efficiencies, but also allow us to deploy people analytics practices across the board. This will give us an integrated view of talent, facilitate the identification of trends at the corporate level, and improve data-driven decision-making.

Speaker #2: In talent attraction and selection, we will build a talent management center for Grupo Aval, which will allow us to attract the best talent, accelerate onboarding processes, and promote internal mobility.

Speaker #2: As a significant milestone, next month we will launch a digital employment platform that will become the largest job opportunity portal in the country. In payroll management, centralization will not only generate operational efficiencies but also allow us to deploy people analytics practices across the board.

Speaker #2: This will give us an integrated view of talent, facilitating the identification of trends at the corporate level and improving data-driven decision-making. With this, we will be able to anticipate risks, such as talent attrition.

Maria Lorena Gutierrez Botero: With this, we will be able to anticipate risks such as talent attrition, risking unappealing needs, or drops in productivity, among others. This has already been implemented by Aval Valor Compartido for Banco de Bogotá and will be rolled out during this year to our other three Colombian banks. Now, I will invite Paula Duran to go over our ESG achievements for this quarter.

Speaker #2: Risking an appealing niche or drops in productivity among others. This has already been implemented by Aval Valor Compartido for Banco de Bogotá and will be rolled out during the year to our other three Colombian banks.

Speaker #2: Now, I will invite Paula to go over our ESG achievements for this first panel.

Paula Duran: Thank you, Mariano Reina. This quarter, Grupo Aval made significant progress in advancing our ESG agenda. We updated our total materiality assessment with input from 280 stakeholders identifying 10 priority topics, including economic development, cybersecurity, innovation, sustainable finance, corporate governance, social impact, and climate change. Annual goals in these areas are now under review to ensure full alignment with our strategy. In terms of corporate governance, we had significant development. For the first time, we held a joint meeting with the boards of directors of Grupo Aval and its subsidiaries. The event brought together more than 130 directors for two days in Melbourne to address global and local challenges, share perspectives, and foster collaboration.

Speaker #3: Thank you, Maria Lorena. This quarter, Grupo Aval made significant progress in advancing our ESG agenda. We updated our total materiality assessment with input from 280 80 stakeholders, identifying 10 priority topics, including economic development, cybersecurity, innovation, sustainable finance, corporate governance, social impact, and climate change.

Speaker #3: Annual goals in these areas are now under review to ensure full alignment with our strategy. In terms of corporate governance, we had significant developments.

Speaker #3: For the first time, we held a joint meeting with the boards of directors of Grupo Aval and its subsidiaries. The event brought together more than 130 directors for two days in Medellín.

Speaker #3: To address global and local challenges, share perspectives, and foster collaboration, a key milestone during the event was the launch of the Aval Board of Directors guidelines—a guidance framework for good governance. This framework sets forth principles regarding the roles of board members, effective board management, and board evaluation.

Paula Duran: A key milestone during the event was the launch of the Aval Board of Directors guidelines, a guidance framework for good governance, setting principles regarding the roles of board members, effective and efficient board management, and audit evaluation. We also updated our corporate policies, guidelines, and codes, aligning them with international standards and best practices in corporate governance. These updates reinforce our compliance with Colombia's regulatory framework and reaffirm our commitment to ethical transparency and sustainable management. They also send clear messages to our entities regarding the minimum standards expected in their ESG mandate. In environment, our entities advanced in implementing the TCF framework supported by Global Consultancy enabling stronger climate risk management and target savings. We also expanded sustainable mobility initiatives with over 5,700 employees adopting low-emission transport, avoiding 300 tons of CO2 emissions. In terms of social impact, we fostered collaborative action in the municipality of Avalones.

Speaker #3: We also updated our corporate policy guidelines and codes, aligning them with international standards and best practices in corporate governance. These updates reinforce our compliance with Colombia's regulatory framework and reaffirm our commitment to ethical, transparent, and sustainable management.

Speaker #3: They also send clear messages to our entities regarding the minimum standards expected in their ESG management. In the environment, our entities advanced and implemented the TCF framework, supported by global consultancies, enabling stronger climate risk management and target settings.

Speaker #3: We also expanded sustainable mobility initiatives, with over 5,700 employees adopting low-emission transport, avoiding 300 tons of CO2 emissions. In terms of social impact, we fostered collaborative action in the municipality of Amalema, Corticolombiana, and Organización Pajonales—joint efforts to promote sustainable tourism, education, and sports—while Banco de Bogotá's financial education initiatives positively impacted nearly 500 community members.

Paula Duran: Corficolombiana and Organizacion Pajonales joined efforts to promote sustainable tourism, education, and sport, while Banco de Bogotá, the financial education initiative, positively impacting nearly 500 community members. In addition, we continued delivering on our commitments under the Misión La Guajira initiative, with six new water purification plants reaching a total of 81 communities now benefiting from social energy solutions. We also enabled free internet stores and announced new strategic partnerships with La Colombia for providing free connectivity to over 70 communities, the Government of La Guajira, National Civil Registry, and UNICEF Amauras. This quarter, we participated in WEFRED, the largest diversity and inclusion fair in Latin America, offering more than 1,000 job opportunities and contributing to the academic agenda with the participation of Grupo Aval leaders and HR teams from our entities.

Speaker #3: In addition, we continued delivering on our commitments under the Mission La Guajira initiative. With six new water purification plants, reaching a total of 81 communities, now benefiting from social energy solutions.

Speaker #3: We also enabled free internet zones and announced new strategic partnerships with Clara Colombia, providing free connectivity to over 70 communities. The government of La Guajira, the National Civil Registry, and UNICEF are among others.

Speaker #3: This quarter, we participated in WeTrade, the largest diversity and inclusion fair in Latin America, offering more than 1,000 job opportunities and contributing to the academic agenda with a participation of Grupo Aval leaders and HR teams from our entities.

Speaker #3: Our entities were also recognized among the top 10 of the 2025 ranking of inclusive organizations in Latin America by the Chamber of Commerce. We remain committed to ensuring that ESG is not just a component of our strategy, but a driver of concerned value creation for our stakeholders.

Paula Duran: Our entities were also recognized among the top 10 of the 2025 ranking of inclusive organizations in Latin America by the Chamber of the Work. We remain committed to ensuring that ESG is not just a component of our strategy, but a driver of long-term value creation for our stakeholders. Thank you.

Speaker #3: Thank you.

Speaker #2: Thank you, Paula. Now, on the macro side, let me share some relevant developments during this quarter. High-frequency data indicates that in the second quarter of the year, the Colombian economy continued to perform positively, driven by increased household demand.

Maria Lorena Gutierrez Botero: Thank you, Paula. On the macro side, let me share some relevant developments during this quarter. High-frequency data indicates that in the second quarter of the year, the Colombian economy continues to perform positively, driven by increased household demand. The main sectors driving growth remain public administration, entertainment, and commerce. For this year, we expect the economy to grow by 2.7%. Inflation reached 4.9% in July 2025, driven by service pricing as inflation is still high in rent and other services, especially by the elevated increase in minimum wage. We estimate that inflation will close this year around 4.9%. Despite the positive inflation outlook, the country's fiscal outlook was driven by the central bank's policy rate decision. In July, the central bank opted to keep rates unchanged at 9.25%, maintaining a cautious stance due to both external and internal risks.

Speaker #2: The main sectors driving growth remain public administration, entertainment, and commerce. For this year, we expect economies to grow by 2.7%. Inflation reached 4.9% in July 2025, driven by service prices, as indexation is still high in Brent and other services are under pressure due to the elevated increase in the minimum wage.

Speaker #2: We estimate the inflation that inflation will close this year around 4.9 percent. Despite the positive inflation outlook, the country's fiscal outlook was driven the central bank's policy raised the situation.

Speaker #2: In July, the central bank opted to keep rates unchanged at 9.25 percent, maintaining a cautious stance due to both external and internal risks. We expect the central bank's rate to end 2025 at 8.5 percent.

Maria Lorena Gutierrez Botero: We expect the central bank's rate to end 2025 at 8.5%. However, recent information could imply a further adjustment to this figure. The biggest challenge facing the economy is fiscal sustainability. In June, the government triggered the escape clause of the fiscal rule and raised its fiscal deficit estimate to 7.1% for this year, 200 basis points above the original target that was 5.1%. Our estimate points towards a fiscal deficit closer to 8% of GDP. We anticipate further short-term rates to stem from the Ministry of Finance, Financial Risk Management Operations, and underlying pressures on long-term interest rates to unfold in the upcoming months. Despite rising political noise in the pre-election year, we remain confident in Colombia's economic resilience and encourage the business sector to stay focused on executing their strategies. Camilo, welcome. Camilo, we will now elaborate on our economic outlook.

Speaker #2: However, recent information could imply upward pressure on this figure. The biggest challenge facing the economy is fiscal sustainability. In June, the government triggered the escape clause of the fiscal rules and raised its fiscal deficit, estimated at 7.1% for this year.

Speaker #2: 200 basis points above the original target that was 5.1 percent. Our estimates point towards a fiscal deficit closer to 8 percent of GDP. We anticipate pressure on short-term rates to stem from the Ministry of Finance liability management operations and underlying pressures on long-term interest rates to unfold in the upcoming months.

Speaker #2: Despite rising political noise in the pre-election year, we remain confident in Colombia's economic resilience and encourage the business sector to stay focused on securing their strategy.

Speaker #2: Camilo, welcome. Camilo, we will now elaborate on our economic outlook.

Speaker #4: Thank you, Caroline. Good morning. In the second quarter, household consumption continued to be the main driver of growth for the Colombian economy. Despite growing domestic and external uncertainty, consumer confidence reached its level in three years, a situation that has supported domestic demand.

Camilo Alvarez: Thank you, Mariano. Good morning. In the second quarter, household consumption continued to be the main driver of growth for the Colombian economy. Despite growing domestic and external uncertainty, consumer confidence reached its highest level in three years, a situation that has supported domestic demand. This increase in household confidence has been supported by the strength of the labor market, where the unemployment rate reached its lowest level in almost 20 years. Furthermore, alternative sources of income have strengthened. Remittances, which have had their record high in the second quarter, while coffee and tourism exports continue to rise. In addition to higher incomes, household demand is now being leveraged by credit, which for the first time since 2023 grew during the second quarter. In this context, the best-performing economic sectors continue to be those most dependent on private consumption, such as commerce, entertainment, transportation, lodging, manufacturing, food services, and finance.

Speaker #4: This increase in household confidence has been supported by the strength of the labor market, where the unemployment rate reached its lowest level in almost 20 years.

Speaker #4: Furthermore, alternative sources of income have strengthened, remittances which are at record highs in the second quarter while coffee and tourism exports continue to rise.

Speaker #4: In addition to higher incomes, household demand is now being leveraged by credit, which for the first time since 2023, grew during the second quarter.

Speaker #4: In this context, the best-performing economic sectors continue to be those most dependent on private consumption, such as commerce, entertainment, transportation, lodging, manufacturing, food services, and finance.

Speaker #4: Meanwhile, agricultural supply continues to rise due to lower input prices and favorable weather conditions. In fact, although the sectors, with the exception of mining, construction, and public services, experienced an outgrowth.

Camilo Alvarez: Meanwhile, agricultural supply continues to rise due to lower input prices and favorable weather conditions. In fact, all other sectors, with the exception of mining, construction, and public services, experienced an annual low. In the case of mining and construction, product and the implementation of public policy key to both sectors, explaining part of their weak performance. While construction investment in housing and infrastructure is lagging, in the second quarter, imports of machinery and equipment, as well as corporate loans, continue to rise, suggesting that the Colombian businesses, amid high income at this time, have modestly expanded their investment plans. Given this favorable context by recognizing global risks and the uncertainty leading up to the election next year, the economic growth of 2.7% is expected for 2025, close to potential levels and higher than those recorded in 2023 and 2024.

Speaker #4: In the case of mining and construction, the implementation of public policy key to both sectors has partly explained the weak performance. While construction investment in housing and infrastructure is lagging, in the second quarter, imports of machinery and equipment, as well as corporate loans, continue to rise, suggesting that Colombian businesses, amid high domestic demand, have modestly expanded their investment plans.

Speaker #4: Given the favorable context for recognizing global risks and the uncertainty leading up to the election this year, the economic growth of 2.7% is expected for 2025.

Speaker #4: Growth potential level and higher than those recorded in 2023 and 2024. Turning to prices, there is inflationary process resumed in the second quarter, as inflation fell from 5.1 percent to 4.8 percent between March and June, its lowest level since October 2021.

Camilo Alvarez: Turning to prices, the inflationary process resumed in the second quarter, as inflation fell from 5.1% to 4.8% between March and June, its lowest level since October 2021. In July, inflation picked up to 4.9%, and no significant gains are expected by the end of the year, which is expected to end slightly below 5%. Once again, outside the target range set by the central bank. Meanwhile, thanks to gains in inflation and expectations, as well as a more compliant global environment towards emerging markets, the central bank cut its interest rate by 25 basis points to 9.75% in April. Accumulated gains in inflation and favorable global financial conditions are expected to give the Colombian central bank a space to cut interest rates to around 8.50% by the end of the year.

Speaker #4: In July, inflation peaked at 4.9 percent, and no significant gains are expected by the end of the year, which is anticipated to lag below 5 percent.

Speaker #4: Once again, outside the target range, set by the central bank. Meanwhile, thanks to gains in inflation and its expectations, as well as a more compliant global environment towards emerging markets, the central bank cut its interest rates by 25 basis points to 9.75 percent in April.

Speaker #4: Accumulated gains in inflation and favorable global financial conditions are expected to give Colombia's central bank space to cut interest rates to around 8.50% by the end of the year.

Speaker #4: Nevertheless, recent inflation data implied upward pressure on this figure, and the central bank's room for rate cuts is not broader due to persistent fiscal challenges.

Camilo Alvarez: Nevertheless, using inflation data in time and afford pressure on the trigger, the central bank's role for rate cuts is not broader to the persistent physical challenges. In June, with the suspension of the fiscal rule, the government realized its assumed fiscal deficit of 2025 from 5.1% to 7.1% of GDP, and for 2026, from 4.2% to 6.2% of GDP, the latter depending on the approval of the tax reform. Given this challenging outlook, moving to a standard and push lowered the country's trade rating. The most significant decision came from a standard and push, which not only assigned the country the lowest trade rating of the three rating agencies, the whole bill, but also maintained its negative outlook. Despite the conflict's fiscal stance, between March and June, the exchange rate went from 4,181 pesos to 4,103 pesos per dollar, following the global weakening of the greenback.

Speaker #4: In June, with the suspension of the fiscal rule, the governor realized his assumed fiscal deficit of 2025 from 5.7 5.1 percent to 7.1 percent of GDP, and for 2026 from 5.4.2 percent to 6.2 percent of GDP.

Speaker #4: The latter, depending on the approval of a press report. Given these challenging outlooks, Moody's and Standard & Poor's lowered the country's credit rating. The most significant decision came from Standard & Poor's, which not only assigned the country the lowest credit rating of the three rating agencies, double B, but also maintained its negative outlook.

Speaker #4: Despite the complex fiscal stance between March and June, the exchange rate went from 4.181 pesos to 4.103 pesos per dollar. Following the global weakening of the greenback, in any case, the Colombian peso appreciated against the dollar by only 2% compared to an average of 6.5% for major Latin American economies.

Camilo Alvarez: In any case, the Colombian peso appreciated against the dollar by only 2%, compared to an average of 6.5% for major Latin American economies. For the remainder of this year, the exchange rate remains in volatile. If conflicted forces, while the dollar remains weakly valued, the country's experience could be affected by fiscal and material pressures. Furthermore, with a widening external deficit, the year-end exchange rate of around 4,200 pesos per dollar is expected. Specifically, the current account deficit is forecasted to fall from 1.8% of GDP in 2024 to 3.6% of GDP in 2029 for the budget, due to a stronger recovery in imports and imports both in goods and services, where in terms of trade will be affected by lower commodity prices. This wraps up the macroeconomic outlook. Thank you. Back to you, Mariano.

Speaker #4: For the remainder of the year, the exchange rate remained volatile. It continued to face various forces. As the dollar remained weak globally, the country’s premium could be affected by fiscal and electoral pressures.

Speaker #4: Furthermore, with a widening external deficit, the year-end exchange rate of around 4.200 pesos per dollar is expected. Specifically, the current account deficit is forecasted to fall from 1.8% of GDP in 2024 to 3.6% of GDP in 2025.

Speaker #4: Due to a stronger recovery in imports and exports, both in goods and services, the terms of trade will be affected by lower commodity prices.

Speaker #4: This wraps up the macroeconomic outlook. Thank you. Back to you, Maria Lorena.

Speaker #2: Thank you, Camilo. Given that economic outlook led me to say that we are pleased to continue trying to recover in the Colombian bank's initiatives.

Maria Lorena Gutierrez Botero: Thank you, Camilo. Given the economic outlook, let me say that we are pleased to continue signs of recovery in the Colombian bank industry. Loan demand has strengthened, with growth in real terms turning positive for the first time in nearly two years. Possible will continue to trend downward, supporting improved profitability across the system. Only 6 out of 29 banks reported net losses as of May 2025, compared to 11 in the same period last year, highlighting a sustained improvement in financial performance. Now, I would like to pass the call to Diego, who will give you details on our results. Diego?

Speaker #2: Loan demand has strengthened, with growth in real terms turning positive for the first time in nearly two years. The cost of real continues to trend downward, supporting improved profitability across the system.

Speaker #2: Only 6 out of 29 banks reported net losses at as of May 2025, compared to 11 in the period last year, highlighting a sustained improvement in financial performance.

Speaker #2: Now, I would like to pass the call to Diego, who who will give you details on our results. Diego?

Speaker #4: Thank you, Maria Lorena. I will start and pay you $9 and $10 in the future, showing growth rates and quality portfolio. Relative to the rest of the Colombian banking system, for comparative reasons, these are unconsolidated figures under Colombian IFRS, as published by the Superintendency of Finance.

Camilo Alvarez: Thank you, Maria Lorena. I will start and join this line in terms with the chart showing growth rates and quality portfolio relative to the rest of the Colombian banking system. For comparative reasons, these are unconfrontable figures under Colombian IFRS as published by the Superintendency of Finance. Starting on page 9, in 12 months ending on May 2025, emerging loans and mortgages for the system grew 1.3% and 4.6% in real terms, while consumer loans contracted 5.1% in real terms. Year on year, Aval Banks have gained 104 basis points of market share in consumer loans, 206 basis points in mortgages, and lost 109 basis points in commercial loans. This yielded year on year 10 basis points lower market share in total loans. Our performance in commercial loans was driven by aggressive price competition in the market. The last three months, loans grew 1.7% in the system.

Speaker #4: Starting on page nine, on four months ending on May 2025, commercial loans and mortgages for the system grew 1.3 percent, and 4.6 percent in real terms, while consumer loans contracted 5.1 percent in real terms.

Speaker #4: Year on year, Aval banks have gained 112 basis points of market share in consumer loans, 206 basis points in mortgages, and have lost 109 basis points in commercial loans.

Speaker #4: This yielded a year-on-year decline of 10 basis points in total loans market share. Our performance in commercial loans was driven by aggressive price competition in the market.

Speaker #4: For the last two months, loans grew 1.7 percent in the system. Even though dynamics continued to show signs of recovery, real growth was stagnant, continuing the 1.7 percent quarterly inflation.

Camilo Alvarez: Even though dynamics continue to show signs of recovery, real growth was stagnant, considering the 1.7% quarterly inflation. Mortgages grew 2.3% and commercial loans 1.6% in nominal terms over the quarter, while consumer loans returned to growth with 1.3% increase for the quarter. On page 10, loan quality for both the system and the Aval Banks showed an improvement during the quarter for all loan categories. Our banks continue to exhibit better or equal portfolio qualities in the system in all main categories. I will now move to the consolidated results of Grupo Aval under IFRS. On page 11, assets grew 6% over the year and 1.9% over the quarter to COP 336 million. Those loans, which account for 57% of our assets, reached COP 199.4 trillion, growing 3.2% year on year and 0.3% over the quarter. Reserve loans have driven up growth.

Speaker #4: Mortgages grew 2.3 percent, and commercial loans 1.6 percent in nominal terms over the quarter, while consumer loans returned to growth with 1.3 percent increase for the quarter.

Speaker #4: On page ten, loan quality for both the system and the Aval banks showed an improvement during the quarter, for all loan categories. Our banks continue to exceed better or equal loan portfolio quality in the system, in all main categories.

Speaker #4: I will now move to the consolidated results of Grupo Aval under IFRS. On page 11, assets grew 6 percent over the year, and 1.8 percent over the quarter, to 236 trillion pesos.

Speaker #4: Those loans, which account for 57 percent of our assets, reached 189.4 trillion pesos, growing 3.2 percent year on year and 0.3 percent over the quarter.

Speaker #4: Retail loans have driven outgrowth, consumer loans reached 6 percent year on year, and 0.5 percent in the quarter with payment loans to average recovery increasing 4.8 percent year on year, and 0.6 percent during the quarter, personal loans growing at 4.3 percent year on year, and 1 percent over the quarter, auto loans growing 3.9 percent year on year, and contracting 0.9 percent during the quarter, and credit cards contracting 4.7 percent year on year, and 0.6 percent during the quarter.

Camilo Alvarez: Consumer loans increased 6% year on year and 0.5% in the quarter, with payroll loans recovering increasing 4.8% year on year and 0.6% during the quarter. Personal loans growing at 4.3% year on year and 1% over the quarter. Household loans growing 3.9% year on year and contracting 0.9% during the quarter, and credit cards contracting 4.7% year on year and 0.6% during the quarter. Mortgages, the second part of our retail loans, continue to be underweighted with 20% year on year and 2.6% during the quarter. Finally, commercial loans expanded 0.3% year on year and contracted 0.3% over the quarter. Our dynamics during the quarter reflect aggressive price competition among our peers. We expect 2025 gross to be close to 7%. On page 12, we present the evolution of funding and deposits. Total funding increased 6.3% year on year and 1.5% in the quarter.

Speaker #4: Mortgages, the second part of our retail loans, continued to be underweighted, grew 20% year on year, and 2.8% during the quarter.

Speaker #4: Finally, commercial loans expanded by 3 percent year-on-year and contracted by 0.3 percent over the quarter. Our dynamics during the quarter reflect aggressive price competition from some of our peers.

Speaker #4: We expect 2025 loan growth to be close to 7 percent. On page 12, we present the evolution of funding and deposits. Total funding increased 6.3 percent year-on-year, and 1.5 percent during the quarter.

Speaker #4: Deposits that account for three-fourths of our funding grew 6.8 percent year on year, and 1.9 percent quarter on quarter. Our deposits to net loans ratio closed at 110 percent.

Camilo Alvarez: Deposits that account for three-fourths of our funding grew 6.8% year on year and 1.9% quarter on quarter. Our deposits to net loans ratio closed at 110%. This is the evolution of our total capitalization of our three reliability in the capital and equity ratio of our banks. Our total equity increased 3.1% over the quarter and 6.2% year on year, while our total equity increased 3.4% over the quarter and 6.2% year on year. Total solvency and few money ratio evidence of slight increase in most of our banks. On page 14, we present our yield on loans, cost of funds, spreads, and net interest margins. Total yield increased 52 basis points to 4% quarter, to 4% of 52 basis points growth over the quarter, mainly driven by an improvement in new money investments to 2.4%.

Speaker #4: On page 13, we present the evolution of our total capitalization for our two facilities, as well as the capital and equity ratios of our banks.

Speaker #4: Our total equity increased 3.1 percent over the quarter, and 6.2 percent year on year, while our traditional equity increased 3.4 percent over the quarter and 6.2 percent year on year.

Speaker #4: Total solvency and T1 ratio evidence a slight increase in most of our banks. On page 14, we present our yield on loans, cost of funds, spreads, and means.

Speaker #4: Total mean increased 52 basis points to 4 percent, quarter to quarter, representing 52 basis points growth over the quarter. This increase was mainly driven by an improvement in new money investments to 2.4 percent.

Camilo Alvarez: Our consolidated net interest margin loans expanded 20 basis points year on year and 7 basis points quarter on quarter to 4.5%. This report creates 77 basis points year on year expansion of net interest margin retail loans to 6% and a 34 basis points year on year contraction of net interest margins and commercial loans to 3.3%. Focusing on our banking segment, net interest margin loans of our banking segment increased 9 basis points in the quarter to 5%, with this incorporating a 10 basis point increase in net interest margin retail loans to 6.5% and 6 basis point increase on commercial loans to 3.9% during the quarter. The total yield of our banking segment expanded 38 basis points over the quarter to 4.6% due to the same dynamics that affected our consolidated yield.

Speaker #4: Our consolidated minimum loans expanded 20 basis points year on year and 7 basis points quarter on quarter to 4.5%. This incorporates a 7 basis points year on year expansion of minimum retail loans to 6%, and a 34 basis points year on year contraction of mean on commercial loans to 3.3%.

Speaker #4: Focusing on our banking segment, minimum loans of our banking segment grew 9 basis points in the quarter to 5 percent, with this incorporating a 10 basis points increase in minimum retail loans to 6.5 percent, and 6 basis points increase on commercial loans to 3.9 percent during the quarter.

Speaker #4: The total mean of our banking segment expanded 38 basis points over the quarter to 4.6%, due to the same dynamics that affected our consolidated mean.

Speaker #4: On a consolidated basis, the average yield on loans for the quarter increased 4 basis points quarter on quarter to 11.7%, while the average three-month IVR decreased 12 basis points to 9.2%.

Camilo Alvarez: The consolidated basis, the average yield on loans for the quarter increased 4 basis points quarter on quarter to 11.7%, while the average three-month IVR decreased 12 basis points to 9.2%. A consolidated cost of funds was materially stable falling 3 basis points quarter on quarter to 6.8%. Finally, driving the previous results, the central banks stood flat at 9 and a quarter during the second quarter. With these slow rate cuts, we have been filing longer adjustment periods that could be anticipated in this scenario. Our lien yields will continue to expand, though at a slower pace. On page 15 through 16, we present our non-proponent policy measures. Starting on page 15, non-proponent policy measures further strengthened during the quarter. Metrics continue to improve in all categories.

Speaker #4: The consolidated cost of funds was materially stable, falling 3 basis points quarter on quarter to 6.8%. Finally, driving the previous results, the central bank stood flat at 9.25% during the second quarter.

Speaker #4: With these slow rate cuts implying longer adjustment periods than previously anticipated in this scenario, our main yield will continue to expand, though at a slower pace.

Speaker #4: On page 15, we present current loan portfolio quality ratios. Early on page 15, loan portfolio quality ratios further strengthened during the quarter.

Speaker #4: The real metrics continue to improve in all categories. 30 APL formations for the quarter was the lowest since the second quarter of 2022, while 90 APL formations reached the lowest level of the last two years.

Camilo Alvarez: The 30-day PL formation for the quarter was the lowest since the second quarter of 2023, while 90-day PL formation reached the lowest level of the last two years. 30-day PLs were 4.31%, a 37 basis point improvement over three months, and 99 basis point improvement over 12 months. 90-day PLs were 3.51%, 23 basis point improvement over the quarter, and 73 basis point improvement over 12 months. Commercial 30-day PLs were 4.37% according to non-basis point improvement quarter on quarter and 80 basis point improvement year on year. 90-day PLs were 3.87% and 19 basis point improvements over the quarter and 63 basis point improvements over the year. Consumer 30-day PLs improved 39 basis points over the quarter to 5.07%, while 90-day PLs increased 30 basis points to 3.84%. Mortgage 30-day PLs and 90-day PLs improved 7 basis points and 30 basis points respectively over the quarter.

Speaker #4: 30 APLs were 4.81 percent, a 37 basis points improvement over three months, and a 99 basis points improvement over 12 months. 90 APLs were 3.51 percent, a 23 basis points improvement over the quarter, and a 73 basis points improvement over 12 months.

Speaker #4: Commercial 30 APLs were 4.37%, reflecting a 41 basis points improvement quarter on quarter and an 80 basis points improvement year on year. Commercial 90 APLs were 3.87%, showing a 19 basis points improvement over the quarter and a 63 basis points improvement over the year.

Speaker #4: Consumer 30 APLs improved 39 basis points over the quarter to 5.07%, while 90 APLs decreased 30 basis points to 2.84%. Mortgage 30 APLs and 90 APLs improved 13 basis points and 20 basis points, respectively, over the quarter.

Speaker #4: Finally, the ratio of charge-offs to average 90 APLs was 0.85 times. On page 16, the share of our portfolio classified as Page 1 remained stable at 88.5 percent, while Stage 3 fell for the consecutive quarter to 6.1 percent.

Camilo Alvarez: Finally, the ratio of charge-offs to average 90-day PLs was 0.85 times. On page 16, the share of our portfolio classified as stage 1 delayed stable at 88.5% while stage 3 fell for the first consecutive quarter to 6.1%, driven by improvements across all portfolios. As a result, coverage measured as allowance for stages 2 and 3 at a percentage of stages 2 and 3 were 31.5% at the end of the quarter. On page 17, cost of risk net of recovery continues to show the improvement in the quality of our portfolio. This decreased 31 basis points to 1.7%. We expect 2025 cost of risk to be in the 1.95% area. Cost of risk net for commercial loans increased 46 basis points to 0.4% over the quarter, and cost of risk net of recovery for consumer loans increased 37 basis points to 4.2%.

Speaker #4: Driven by improvements across all portfolios. As a result, coverage measured as allowance across stages 2 and 3 had a percentage of stages 2 and 3 worth 31.5% at the end of the quarter.

Speaker #4: On page 17, the cost of risk, net of recovery, continues to show an improvement in the quality of our portfolio. This decreased by 31 basis points to 1.7%.

Speaker #4: We expect the 2025 cost of risk to be in the 1.95 percent area. Cost of risk, net for commercial loans, decreased 46 basis points to 0.40 percent for the quarter, and the cost of risk, net of recovery for consumer loans, increased 27 basis points to 4.20 percent.

Speaker #4: The cost of risk for credit cards and auto loans increased quarter on quarter. On page 18, we present net fees and other income. Gross income grew 3.5 percent year on year and slightly increased 0.3 percent quarter on quarter.

Camilo Alvarez: The cost of risk of credit cards and other loans increased quarter on quarter. On page 18, we present net fees and other income. Gross income grew 3.5% year on year and likely 3.3% quarter on quarter. Net fee income increased 1% and 1.1% respectively over these two years. Our income from the non-financial sector was around 80% of that recorded in Q2 2024 due to lower contributions from the energy and gas producers' taxes. Finally, at the bottom of the page, the quarterly bonus increase in other operating income is mainly driven by the seasonal unitile income from dividends in Q1, lower contributions from the real estate and assets, and on-cloud valuations from a lot of development exchanges that position the portfolio with higher yields going forward. These were partially offset by stronger quarterly rate cuts. On page 19, we present some efficiency measures.

Speaker #4: Net income increased 1 percent and 1.1 percent, respectively, over these periods. Our recent growth from the non-financial sector was around 80 percent of that recorded in Q2 2024.

Speaker #4: Due to lower contributions from the energy, gas, and infrastructure sectors. Finally, at the bottom of the page, the quarter-on-quarter decrease in other operating income was mainly driven by the seasonal high income from dividends during the first quarter, lower contributions from remittances and foreign exchange (FX), and other comprehensive income (OCI) valuations from Colombia government bond exchanges that positioned our portfolio for higher yields going forward.

Speaker #4: These were partially offset by stronger order-income. On page 19, we present some efficiency ratios. Total Excel increased 2.4 percent quarter on quarter and 9.2 percent year on year.

Camilo Alvarez: Total expense increased 2.4% quarter on quarter and 9.2% year on year. General and administrative expenses increased slightly by 0.8% quarter on quarter and 4.4% year on year, with operating taxes and deposit measurements accounting for 34% of these variables. Cost of assets on the quarter were 2.8%, increasing 3 basis points quarter on quarter and 6 basis points year on year. Our quarterly cost of income slightly decelerated to 52% over the quarter. Finally, on page 20, we present our net income and profitability measures. Our net income for the quarter was 195 million pesos or 20.8 pesos per share, increasing 36.9% relative to Q1 2025 and being the highest in the last 12 quarters. Our return on average assets and our return on average equity for the quarter were 1.1% and 11.3% respectively. I will now summarize our general guidance and outlook for this part of the presentation.

Speaker #4: General and administrative expenses increased slightly by 0.8 percent quarter on quarter and 4.4 percent year on year, with operating taxes and deposit insurance accounting for 34 percent of these categories.

Speaker #4: Cost to assets for the quarter was 2.8 percent, increasing by 3 basis points quarter on quarter and 6 basis points year on year. Our quarterly cost to income slightly deteriorated to 52 percent over the quarter.

Speaker #4: Finally, on page 20, we present our net income and profitability ratios. Attributable net income for the quarter was ?195 billion, or ?20.8 per share, increasing 36.9 percent relative to Q1 2025 and being the highest in the last 12 quarters.

Speaker #4: Our return on average assets and our return on average equity for the quarter were 1.1% and 11.3%, respectively. I will now summarize our general guidance and outlook for this part of the presentation.

Speaker #4: We expect our 2025 return on average equity to be in the 10.5 percent area. This yields on a loan growth in the 7 percent area in commercial loans, growing in the 5 percent area in retail loans, and growing in the 9 percent area.

Camilo Alvarez: We expect our 2025 return on average equity to be in the 10.5% area. Details on the loan flow in the 7% area with commercial loans growing in the 5% area and retail loans growing in the 9% area. Our consolidated net interest margin in the 4% area within unknowns in the 4.5% area. Meaning our banking segment in the 4.7% area within unknowns in the 5.3% area. Cost of risk net of recoveries at 1.2 in the 1.9 at 95% area. Cost of assets in the 12th quarter area income from the non-financial sector of 90% of last year 2024 and created some ratio at the 21% area.

Speaker #4: Our consolidated means are in the 4% area, with minimum loans in the 4.5% area. The mean for the banking segment is in the 4.7% area, with minimum loans in the 5.3% area.

Speaker #4: Cost of risk, net of recoveries, is at 1.2 in the 1.9 at the 95 percent area. Cost to assets is in the 12 to quarter area, with income from the non-financial sector at 90 percent of the last 2024, and the income ratio at the 21 percent area.

Speaker #2: Okay, thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts on Colombia and Aval in this year, 2025.

Maria Lorena Gutierrez Botero: Okay. Thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts on Colombia and the following in this year, 2025. Year-to-date performance has been in line with our projection. Net income has been supported by a positive trend in cost of risk, a gradual improvement in our net interest margin, and controlled expenditure. However, the space at which our net interest margin on loans has recovered is still modest, driven by a high real central bank integration rate, changes in regulations that force lower interest rate cuts for consumer loans, and an intense price competition for high-quality corporate clients. We are actively working to adapt to this environment to improve our net interest margin under these higher or longer monetary policies. That said, the progress in our financial diversification efforts is building results.

Speaker #2: For year-to-date, performance has been largely in line with our projection. Net income has been supported by a positive trend in cost of risk, a gradual improvement in our mean, and controlled expenditure.

Speaker #2: However, the spirit with which our mean on loans has recovered is still modest, driven by a high real central bank intervention rate, changes in regulation that forced lower interest rate caps for consumer loans, and intense price competition for high-quality corporate credit.

Speaker #2: We are actively working to adapt to this environment to improve our margins under these higher or longer monetary policies. That said, the progress in our financial diversification efforts is yielding results.

Speaker #2: Three of our core banks have shifted their commercial focus toward higher easing and faster break-even products, such as personal loans and credit cards. At the same time, we continue working on shifting our mix toward lower-cost and stable deposits.

Maria Lorena Gutierrez Botero: Three of our core banks have shifted their commercial focus to our highest-in-ring and faster break-even products such as personal loans and credit cards. At the same time, we continue working on shifting our net interest margin towards lower costs and a stable deposit. Although loan growth has been modest, we are already seeing a change in trends, which we expect to consolidate during the second half of the year, especially in commercial loans. We are encouraged by the solid results or required for our constructive view on trends in net income and return on average equity. We remain focused on sustaining double-digit profitability throughout the remainder of the year. With this, we are now open for questions.

Speaker #2: Although loan growth has been modest, we are already seeing a change in trend, which we expect to consolidate during the second half of the year, especially in commercial loans.

Speaker #2: We are encouraged by the solid results for this quarter, which support our constructive view on trends in net income and return on equity. We remain focused on sustaining double-digit profitability throughout the remainder of the year.

Speaker #2: With this, we are now open for questions.

Speaker #1: Thank you. We will now begin the question-and-answer session. If you have a question, please press star, then one on your touch-tone phone.

Operator: 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, press star then one again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Again, if you have a question, please press star then one on your touchtone phone. Our first question will come from the line of Brian Flores with Citibank. Please go ahead. That question has been withdrawn. Our next question will come from the line of Daniel Mora with Credit Corp Capital. Please go ahead.

Speaker #1: If you wish to be removed from the queue, press star, then one again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers.

Speaker #1: Again, if you have a question, please press star, then one, on your touch-tone phone. Our first question will come from the line of Brian Flores with Citibank.

Speaker #1: Please go ahead. And that question has been withdrawn. Our next question will come from the line of Daniel Mora with Credit Core Capital. Please go ahead.

Speaker #5: Hi, good morning, and thank you for the presentation I have. If I may, three questions. The first one is regarding the cost of risk.

Daniel Mora: Hi. Good morning, and thank you for the presentation I have. If I may, three questions. The first one is regarding the cost of risk. In this quarter, it was quite low, but was explained by high recovery rather than by lower provision. So can you provide further color on this performance? And do you see this as a trend that can be repeated in the upcoming quarters or should be considered a one-off in this particular quarter? That would be my first question. The second one is regarding other income. It had a solid performance, but I would like to understand what was the reason behind this number. It was the other income inside the total other operating income. Thank you so much. And the third one is regarding NIM.

Speaker #5: In this quarter, it was quite low but was explained by high recoveries rather than by lower provisions. Can you provide further color on this performance in UCDs as a trend that can be repeated in the coming quarters?

Speaker #5: Or should we consider a one-off in this particular quarter? That would be my first question. The second one is regarding other income. It had a solid performance, but I would like to understand what was the reason behind this number.

Speaker #5: It was the other income inside the total other operating income. Thank you so much. And the third one is regarding NEM. Given the lower reduction of the monetary policy rate, how do you see the NEM evolving not only in 2025 but in 2026?

Daniel Mora: Given the lower reduction of the monetary policy rate, how do you see the NIM evolving not only in 2025, but in 2026? Do you expect the recovery cycle of the banks of about to take longer than initially expected? Thank you so much.

Speaker #5: Do you expect the recovery cycle of the banks to take longer than initially expected? Thank you so much.

Speaker #4: Thanks for the questions. Let me try to take them in order, starting with perhaps the most important one regarding NEM. As Maria Lorena mentioned in her closing remarks, we're actively focusing on expanding NEM beyond what happens through the monetary cycle.

Diego Saravia: Thanks for the questions. Let me first take a look at the other study. That is the most important one regarding net interest margin. As Maria Lorena Gutierrez Botero mentioned in her closing remarks, we are actively focusing on expanding net interest margin beyond what happens with the monetary cycle. That is why we are changing our mix both on the deposit side and on the loan side. What we have seen in Colombia as well has been some distortion that has been implied by changes in regulation. It is tough to have a precise number of what the implication of the changes in the formula for interest rate caps has been, but there could be a discussion between 300 and 400 basis points compared to the previous formula for the consumer side. That has pressed numbers lower, and in fact, has had an implication in growth for consumer loans.

Speaker #4: That's why we are changing our mix, both on the deposit side and on the loan side. Part of what we have seen in Colombia has been some distortion that has been implied by changes in regulation.

Speaker #4: It starts to have a precise number of what the implication of the changes in the formula for interest rate caps has been, but there could be a discussion between 300 and 400 basis points compared to the previous formula for the consumer side.

Speaker #4: That has pressed numbers lower and, in fact, has had an implication in growth for consumer loans. On the other hand, on the corporate side, on the commercial side, we've included a new solid graph on NEM here to try to show what is going on in the Colombian market. We are having, as expected, NEM expansion on the consumer side as the cost of funds goes down.

Diego Saravia: On the other hand, on the corporate side and the commercial side, we have included a new funding graph on the end here to try to show what is going on in the Colombian market and if we are having as expected net interest margin expansion on the consumer side as cost of funds goes down. But on the commercial side, the lack of growth has forced very intense price competition for the highest quality loans. As we have emphasized through a number of our previous calls, we are very disciplined in our pricing to make sure that we have profitable growth moving forward, and that is the reason that has driven lower growth on the consumer side than we might have desired in the past.

Speaker #4: But on the commercial side, the lack of growth has forced very intense price competition for the highest quality loans. As we have emphasized through a number of our previous calls, we are very disciplined in our pricing to ensure that we have profitable growth moving forward. That's the reason that has driven lower growth on the consumer side than we might have desired in the past.

Speaker #4: However, when you look at the numbers, the trend has changed. Late May, June, and July, we're seeing better behavior in the market that makes us positive about how things will evolve.

Diego Saravia: However, when you look at the numbers, the trend has changed in late May, June, and July, and we are having a better behavior in the market that makes us positive on how things will evolve. To wrap up what is going on with net interest margin, what we are seeing is we expect net interest margin on the commercial side to start to pick up again to more levels closer to where Colombia should be operating at. We expect to see the improvement on the consumer side to continue as rates go down. This is slower than what we could have anticipated or anybody in Colombia a year ago, but monetary policy has been quite slow. I hope I did not expand too much on that, but we are positive, and that is the case for our guidance moving forward.

Speaker #4: To wrap up what's going on with NEM, what we're seeing is we expect the NEM on the commercial side to start to pick up again, to more levels closer to where Colombia should be operating at.

Speaker #4: And we expect to see the improvement on the consumer side to continue as rates go down. This is slower than what we could have anticipated or anybody in Colombia a year ago, but monetary policy has been quite slow.

Speaker #4: So I hope I didn't expand too much on that, but we are positive, and that is the case for our guidance moving forward. On the cost of risk, you're right, this was a positive quarter on the cost of risk side.

Diego Saravia: On the cost of risk, you are right, this was a positive quarter on the cost of risk side. However, we have stuck to the guidance of 1.95% that we had given in the past and the guidance for our numbers. With all this, it is positive. It does not change our view on what the numbers will look like. And finally, on other income, we have a lot of different items going there. Some of those have to do with recoveries of some controversy we had that implied some positive income. Some of those have offsets on the higher expenses that you saw during this quarter. So all in all, we have stuck to our overall guidance, perhaps changing a slightly slower loan growth and a slightly more positive non-financial, but overall, basically the same guidance that we gave on the last quarter.

Speaker #4: However, we have stuck to the guidance of 1.95% that we had given in the past. And the guidance for our numbers hasn't, you know, this is positive.

Speaker #4: It does not change our view on what the numbers will look like. And finally, another income we have different items going there. Some of those have to do with recoveries of some controversies we had that implied some positive income.

Speaker #4: Some of those have offsets on the higher expenses that you saw during this quarter. So, all in all, we have stuck to our overall guidance.

Speaker #4: Perhaps the only changes are slightly slower loan growth and a slightly more positive non-financial outlook, but overall, it’s basically the same guidance that we provided on the last call.

Speaker #1: Our next question will come from the line of Brian Flores with Citibank. Please go ahead.

Operator: Our next question will come from the line of Brian Flores with Citibank. Please go ahead.

Speaker #5: Hi, team. Thank you for the opportunity to ask questions. I have a question on trading assets because, on your balance sheet, it is clear that they are gaining relevance year over year, quarter over quarter.

Brian Flores: Hi, team. Thank you for the opportunity to ask questions. I have a question on trading assets because on your balance sheet, it is clear that they are gaining relevance year over year, quarter over quarter. I just wanted to ask you, you can share your thoughts. Are you taking a tactical advantage here of certain market opportunities? Is this a strategy to enhance yields? I just want to understand not only what is being achieved because I think, as you see, trading is benefiting results, but also how you are managing risk here and the volatility on the segment. A second, maybe follow-up is if you could repeat the guidance. I am a bit slow here in typing, so if you could repeat, it would be great. Thank you.

Speaker #5: So, I just wanted to ask you if you are taking, you know, a tactical advantage here of certain market opportunities?

Speaker #5: Is this a strategy to enhance yields? I just want to understand not only what is being achieved, because, as you see, trading is benefiting results, but also how you're managing risk here on the volatility in the segment.

Speaker #5: And a second, maybe follow-up is if you could repeat the guidance. I'm a bit slow here in typing, so if you could repeat it, it would be great.

Speaker #5: Thank you.

Speaker #4: Okay. Regarding trading assets, there's two things going on. One is we are indeed using taking advantage from the exchanges of funds that the Colombian government has done during this year and what that does is we give in bonds that already had OCI that reduced the price of those bonds in our book, but that were so some of what you see of our strategy there, thinking of expanding NEM, is we are refreshing those portfolios.

Diego Saravia: Okay. Regarding trading assets, there are two things going on. One is we are indeed taking advantage from the exchanges of bonds that the Colombian government has done during this year. What that does is we have given bonds that already had OCI that reduced the price of those bonds in our book, but that we are keeping. Some of what you see of our trading asset strategy there, thinking of expanding them, is we are refreshing those portfolios. The other thing that you might see there is we have been working over time, expanding our treasury business for clients. Some of the growth that you see on the trading assets on the trading books have an offset with positions that we have taken with clients.

Speaker #4: The other piece that you might see there is we've been working over time expanding our treasury business for clients, and some of the growth that you see on the trading assets, on the trading book, has an offset with positions that we've taken with clients.

Speaker #4: So, when you take into consideration all those positions from the risk management, that I think was your second question, that is taken care of in that way.

Diego Saravia: When you take into consideration all those positions from the risk management that I think was your second question, that is taken carrying that that way. We are not actually taking more risk on our portfolio, even though you have seen some growth because of that treasury business with our customers.

Speaker #4: So we're not actually taking more risk in our portfolio, even though you've seen some growth because of that treasury business with our customers.

Speaker #1: Once again, for any questions, simply press star followed by the number one on your telephone keypad.

Operator: Once again, for any questions, simply press star followed by the number one on your telephone keypad.

Speaker #4: I think I didn't repeat guidance for Brian. I apologize for that. Brian, the ROE is in the 10.5 percent area. It's in the middle of the range that we have given out last time, the 10.11 percent.

Diego Saravia: Sorry. I think I didn't repeat guidance for Brian. I apologize for that. Brian, the ROE is in the 10.5 percent area, so in the middle of the range that we have given out last time, the 10 to 11 percent. And that is building on loan growth in the 7 percent area with commercial loans growing 5% in the 5 percent area and consumer or retail loans in the 9 percent area. Then NIM consolidated NIM in the 4 percent area, NIM on loans in the 4.5. And if you only look at the banking segment, NIM 4.7 percent area and NIM on loans 5.3 percent area. Cost of risk, as I mentioned before, 1.95 percent area, cost to assets two and three-quarters area, income from the non-financial sector, 90 percent of that for 2024, and free income ratio in the 21 percent area.

Speaker #4: And that is building on loan growth in the 7% area, with commercial loans growing 5% in the 5% area and consumer or retail loans in the 9% area.

Speaker #4: Then NEM consolidation, NEM in the 4% area, minimum loans in the 4.5% area. And if you only look at the banking segment, NEM is in the 4.7% area and minimum loans are in the 5.3% area.

Speaker #4: Cost of risk, as I mentioned before, 1.95 percent area. Cost to assets 2 and 3 quarters area. Income from the non-financial sector, 90 percent of that for 2024.

Speaker #4: And the income ratio in the 21% area.

Speaker #5: Super clear. Thank you.

Brian Flores: Super clear. Thank you.

Operator: Ladies and gentlemen, that will conclude our call for today. We thank you all for joining. You may now disconnect your lines.