Q1 2026 Grupo Aval Acciones y Valores SA Pfd Earnings Call
Speaker #1: Welcome to Groupu Eval's first quarter 2026 consolidated results conference call. My name is Regina, and I will be your operator for today's call. Groupu Eval, Axiones y Valores S.A.
Speaker #1: Groupu Eval is an issuer of securities in Colombia and in the United States SEC. As such, it is subject to compliance with Securities Regulation in Colombia and applicable U.S.
Speaker #1: Securities Regulation. Groupu Eval is also subject to the inspection and supervision of the Superintendency of Finance as holding company of the Eval Financial Conglomerate.
Speaker #1: The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the IASB. Details of the calculations of non-IFRS measures, such as ROAA and ROAE, among others, are explained when required in this report.
Speaker #1: On November 27, 2025, Banco de Bogotá's subsidiary Multi-Financial Holding Inc. (MFG) entered into a share purchase agreement with VAC International Corporation (VIC), a subsidiary of VAC Holding International Corp., for the disposal of 99.57% of the issued and outstanding shares of Multi-Financial Group Inc. (MFG), the parent company of Multibank Inc. On March 18, 2026, after obtaining the required regulatory authorizations and fulfilling all agreed-upon conditions precedent the transaction was completed.
Speaker #1: For comparability purposes only, we have prepared and present supplemental unaudited pro forma financial information for the periods prior to 4Q25, which reflects the reclassification of the operations relating to MFG as non-current assets and liabilities held for sale and discontinued operations.
Speaker #1: This supplemental unaudited pro forma financial information is not intended to represent and should not be considered indicative of the results of operations or financial position that would have been achieved had the transaction occurred on the dates assumed nor is it intended to project our results of operations or financial position for any future period or date.
Speaker #1: The pro forma financial information is unaudited, and the completion of the external audit for the year ended December 31, 2025, may result in adjustments to the unaudited pro forma financial information presented herein.
Speaker #1: This report includes forward-looking statements. In some cases, you can identify these forward-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.
Speaker #1: 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 risks described from time to time in our filings, with the registro nacional de valores y emisores in the SEC.
Speaker #1: 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.
Speaker #1: 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.
Speaker #1: The financial statements of Groupu Eval, Axiones y Valores S.A. in accordance with Colombian regulations must be filed with the market and with the Superintendency of Finance with the opinion of an external auditor.
Speaker #1: At the time of this solicitation, this process is still ongoing. 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 a listen-only mode. Later, we will conduct a question-and-answer session.
Speaker #1: I will now turn the call over to Ms. Mireya Lorena Guterres Lucero, Chief Executive Officer. Ms. Mireya Lorena Guterres Lucero, you may begin.
Speaker #2: Thank you. Good morning, everyone, and thank you for joining us for our first quarter 2026 conference call. I am here with Diego Solano, our CFO; Camilo Pérez, Chief Economist of Banco de Bogotá; and Jorge Castaño, VP of Financial Status and Efficiency.
Speaker #2: Before turning to our financial results, I would like to highlight two significant corporate developments of the quarter. First, on March 18, Banco de Bogotá completed the sale of 99.57% of MFG's 4,464 million U.S.
Speaker #2: dollars concentrated on its strategic focus and strengthening its capital position. Second, I am pleased to announce the appointment of Juan Carlos Echeverria as an incoming CEO of Banco de Bogotá, whose leadership we are confident will drive the next chapter of the bank's strategy.
Speaker #2: Our tribute to net income reached 336 billion Colombian pesos, a decrease of 2.3% compared to the first quarter of 2025. During this quarter, we recorded the equity tax, which amounted to 312 billion Colombian pesos in operating expenses, with a 210 billion Colombian pesos impact in a tribute to net income reducing the quarter's ROAE by approximately 457 basis points.
Speaker #2: Excluding this time, this one-time effect our underlying performance reflects improving trends across our businesses. The quarter was characterized by improving asset quality and cost of risk, a strong contribution for our non-financial sector, and continued progress on operational efficiency.
Speaker #2: Funding cost pressures driven by the renewed tightening cycle and the impact of the equity tax were the main headwinds. This is also a strategically significant quarter for Groupu Eval.
Speaker #2: We launched our 2026-2031 corporate strategy, a long-term framework that reflects our ambition to increase our relevance in the market where we operate to capture efficiencies and deploy technology in an structured and disciplined way and to generate real impact for all of our stakeholders.
Speaker #2: Our strategy is organized around three core axes: relevance, opportunities, and impact. A materialized 10 strategic pillars that we orient our evolution as a group over the next five years.
Speaker #2: Under the relevance, relevance axis, we are focused on strengthening our leadership position, deepening client centricity, and optimizing capital allocation. Under opportunities, we are accelerating efficiency and standardization, leading digital transformation and turning data and artificial intelligence into competitive advantages.
Speaker #2: Under impact, we are committed to developing our talent, upholding the highest standards of corporate governance and risk management, and ensuring that our growth generates a positive impact for society and the environment.
Speaker #2: This strategy is a shared commitment across Groupu Eval to consolidate our position as Colombian leading financial group. Now, I would like to invite Jorge Castaño, our VP, to share our advancements in other strategic matters.
Speaker #2: Jorge?
Speaker #3: Thank you, Mireya Lorena, and good morning, everyone. Turning to the first pillar that Mireya mentioned, profitable business, the purchase and adoption transaction of Itaú's personal banking business by Banco de Bogotá.
Speaker #3: Marks a defining moment in Groupu Eval's retail banking strategy. Once fully executed, this transaction is expected to deliver 3.3 trillion pesos in consumer portfolio growth, equivalent to 34 months of organic expansion, while adding 3.2 trillion pesos in mortgage lending, positioning Banco de Bogotá in third place in the Colombian housing market with a 12.8% market share.
Speaker #3: On the deposit side, we expect personal deposits from individuals to grow by 4.1 trillion pesos, representing around 20 months of accelerated organic growth and reaching a high of 9.3% market share.
Speaker #3: On the client side, the bank will add around 277,000 customers. Double its premium segment with 35,000 new high-value clients and expand the preferred segment by 60%, adding 97,000 clients.
Speaker #3: Taken together, these results confirm that this transaction is just a growth initiative. It is a structural repositioning of Banco de Bogotá as a relevant force in Colombian retail banking, a unique opportunity to upgrade and relaunch its personal banking business, and a key step in its evaluation as a universal bank and flagship entity of Groupu Eval.
Speaker #3: We are expecting to receive regulatory authorization from both the competition authority and the financial regulator within the coming weeks. Once clearance is obtained, Banco de Bogotá is fueled prepared to execute a disciplined 90-day integration roadmap.
Speaker #3: The operational groundwork covering system convergence, client migration protocols, and commercial team alignment is being developed in parallel with the regulatory process, ensuring zero lag between approval and execution.
Speaker #3: The Panama operations comprising a 6.8 billion dollars loan portfolio and 140 million dollars in deposits will be incorporated in the consolidated balance sheet with the same window, reinforcing capital efficiency and cross-border synergies from day one.
Speaker #3: Now, turning to Eval Fiduciaria, our asset management entity, the company successfully completed its integration process on January 2, 2026, establishing a strong foundation with 198 trillion pesos in assets under management, a platform of 33 collective investment funds and 5,700 trust mandates.
Speaker #3: This milestone is further validated by the highest counterpart risk and portfolio management ratings given by Fitch Ratings and subsequently reaffirmed by S&P Global, reflecting the institution's commitment to operational excellence and investor confidence.
Speaker #3: During the fifth quarter of the 2026 Eval Fiduciaria reinforced its industrial leadership. The company hosts a 19% market share in commissions, with revenue growing by 12.5% to reach 151.4 billion pesos, assets under management grew 4.4 billion pesos, assets under management grew 4.2% in the quarter to 206.5 trillion pesos.
Speaker #3: With collective investment funds gained 149 basis points of market share to reach 22.3%, capturing more than half of total market growth. The client-based 4.7% expanded in the quarter at 13% year over year.
Speaker #3: On profitability, the company boasts an ROE of 33.0% with net income of 22 billion pesos for the fifth quarter, operational efficiency improved materially as well, bringing the cost-to-income ratio to 65.0% and improvement of close to 10% points.
Speaker #3: Looking ahead, Eval Fiduciaria continues to execute under its 2031 strategy, highlighted by a collaboration with BlackRock through the meta-decidida solution, which gives Colombian retail investor access to balance a global ETF portfolios alongside continued investment in digital challenges to democratize access to its full product suite.
Speaker #3: Now, let me turn to our payment leadership business, GoPay. The company continues to strengthen its position as Groupu Eval's interoperable payment and value-added service platform.
Speaker #3: During the period, Go secured two critical regulatory milestones: certification from the Financial Superintendents of Colombia and authorization from Banco de la República to operate with the private ecosystem.
Speaker #3: Commercial traction is already visible, controlled pilots have engaged more than 120 users in initial phase, deciding to validate performance ahead of full rollout. On the collection side, Go is enabling the private by Eval pattern across its existing base of 22,000 active agreements in Eval-based centers, while 635 corporate clients with specialized integrations are currently progressing to final development and implementation, representing a significant near-term revenue opportunity as interoperable collections accelerate across the ecosystem.
Speaker #3: Underpinning this growth is a proprietary technology platform built to the highest standard of security, resilience, and operational capacity. Capable of delivering value-added products and services to both financial and non-financial institutions.
Speaker #3: Finally, we are strengthening both the organizational structure and the executive teams, bringing in senior professionals with a proven track record and strong recognition across the field of payments industry.
Speaker #3: This investment in talent and infrastructure is deciding to ensure best-in-class product development and the most effective commercial rollout possible as GoPay moves toward full-scale deployment.
Speaker #3: Finally, turning to the efficiency segment, a central pillar of our 2026-2031 corporate strategy is the capture of efficiencies and synergies across the group through our shared service center ABC.
Speaker #3: In procurement, we have already taken over a process in Banco de Bogotá, Banco de Occidente, Adebillas, GoPayments, and Aval Valor Compartido. During the second quarter, we will take over Banco Popular, Aval Fiduciaria, and Groupu Eval Holding.
Speaker #3: I want to close the year with telling for the near and cost Colombiana and its subsidiaries. This center will operate on a controllable spending based on 1.4 trillion pesos and for 2026, we have a savings goal of 62 billion pesos.
Speaker #3: Most of our contractual renegotiations are during the fourth quarter, for which we project 32 billion pesos in savings, equivalent to a 9% annual savings rate over the controllable spending base.
Speaker #3: In technology, during the second quarter, we began implementing a unified cloud migration roadmap for Groupu Eval. This initiative will optimize our technology infrastructure, including data centers and modernized technical applications, network across the group.
Speaker #3: In property management, we have already taken over and established our four banks and Coffee Colombiana. This center manages 720 billion pesos portfolio of assets, with a target to raise the commercialization rate from 27% to 37% by year-end.
Speaker #3: In human talent, we manage payroll for 40,000 employees in attraction and selection. We are managing an average of 750 model openings with an internal satisfaction score of 4.7 out of 5.
Speaker #3: We are also targeting reduction in average time to fill from 24 days to 22 days. Analytical challenge and security agency overseas has taken control of 4,110 properties across our banks, establishing an estimation of programs through the network.
Speaker #3: That concludes my segment across every pillar we discussed today, Groupu Eval is executing with discipline and building the foundation for sustainable, profitable growth. Back to you, Maradona.
Speaker #1: Thank you, Jorge. Now, let me walk you through the key asset market economic developments of the quarter. The global environment has grown more complex since our last quarter.
Speaker #1: The escalation of the conflict in the Middle East has introduced a new layer of uncertainty. Presidential crisis and global supply chains. This dynamic has moderated global growth prospects for 2026.
Speaker #1: On the domestic front, GDP growth decelerated to 2.3% in the fourth quarter of 2025, down from 3.4% in the third quarter, as private consumption moderated and investment funds declined amid deteriorating investor confidence.
Speaker #1: Early 2026, data reaffirms these trends. According to Danes Economic Activity Indicator, the economies grew just 1.5% in the January, February period. During almost entirely by the service sector.
Speaker #1: We expect a 2026 full-year GDP growth of approximately 2.4%. On inflation, price pressures have increased. Annual inflation reached 5.68% in April 2026. It's higher reading since September 2024, with projected inflation at 6.2% for 2026, with a gradual return toward the 4% range expected by 2028.
Speaker #1: The central bank raised the policy rate by cumulative 200 basis points during the first quarter, above market expectations and what was priced into the ideal.
Speaker #1: With this increase, the rate range 11.25% at the end of March. In its most recent April meeting, against market expectations and within a tense relationship with the government, the central bank's board unanimously decided to maintain its intervention rate.
Speaker #1: This was the last rate decision meeting before the first and second presidential election rounds. As of March, the Colombian peso has strengthened nearly 13% over the past 12 months, supported by a strong remittance inflows and a broadly weaker US dollar helping contain inflation on the info side.
Speaker #1: Camilo will elaborate on our economic outlook. Camilo?
Speaker #2: Thank you, Maradona. Good morning to everyone. The global economy registered growth slightly above 2% in the first quarter of the year, marking its slowest expansion rate in a year and a half, as a result of the weakening of several key sectors.
Speaker #2: In particular, the performance of the agriculture, mining, manufacturing, and construction sectors largely explains the low growth. In the absence of investment, private consumption and public spending have consolidated as the driving forces of the Colombian economy.
Speaker #2: For households in a scenario of double-digit wage growth and lower inflation for goods and for services, families have maintained their spending levels on durable goods, with some sectors of industry and commerce being the biggest beneficiaries.
Speaker #2: Meanwhile, despite its moderation due to the rapid increase in prices, household consumption of services remains positive, favoring sectors such as lodging and food services, entertainment, and professional activities, among others.
Speaker #2: Given the household spending is driven by income levels and not necessarily by borrowing, the financial sector continues to experience low growth. In fact, the continued weakness in investment due to the elevated uncertainty and higher interest rates poses challenges to the sector's performances.
Speaker #2: For the remainder of the year, amidst the impact of the war in the Middle East, tighter local financial conditions, a prolonged period of challenges for key sectors, and electoral uncertainty, the Colombian economy is expected to grow 2.4%.
Speaker #2: Turning to prices, inflation rebounded from 5.1% at the end of 2025 to 5.7% in April 2026 due to increased pressures in non-rental services, food, and goods.
Speaker #2: For the remainder of the year, the upward trend in inflation is expected to continue due to the light effect of the minimum wage increase, higher energy commodity prices resulting from the conflict in the Middle East, the arrival of El Niño, and the potential depreciation of the peso.
Speaker #2: Inflation is expected to end 2026 at around 6.2% before slowly moderating toward the targets starting in 2027. On the fiscal front, a slight improvement is projected compared to the previous year.
Speaker #2: In 2026, for the first time in four years, the government is expected to meet its revenue targets thanks to the adjustment made to its financial plan.
Speaker #2: Regarding spending, the failure to approve the 2025 financing law would force the government to implement a $16 trillion expenditure cut. If it cannot secure sufficient revenue to support it.
Speaker #2: However, this cut will be insufficient to improve public finances. Thus, a primary fiscal deficit of 3.1% of GDP is estimated for 2026, lower than the 3.5% of GDP observed in 2025, representing a marginal improvement that does not alter the structural situation of the fiscal front.
Speaker #2: In fact, standard and pushed lower Colombian rating from BV to BV minus adjusting the outlook from negative to stable. Given the improvement in revenue and a containment of spending, the government has had sufficient liquidity to implement debt management operations, including dollar purchases to close the total return swap, repurchases, and redemptions of domestic and external debt, as well as internal debt swaps.
Speaker #2: Thus, the performance of several local assets has been influenced by the government actions, particularly the exchange rate, public debt, and liquidity. Against this backdrop with inflation and inflation expectations rebounding on the fiscal situation remaining vulnerable, Bangladesh Republic raised its interest rate by 200 basis points in the first quarter to 11.25%.
Speaker #2: In a clash with the government and a media political uncertainty surrounding the elections, the central bank's board unanimously opted to hold the rate hiking cycle in April.
Speaker #2: Though this not only implied the end of the adjustments. The central bank would have additional room to increase its interest rate between 50 basis points and 100 basis points, which would bring the benchmark rate to around 12.25% by the end of the year.
Speaker #2: With an scenario of higher domestic interest rates and a favorable result of the March legislative elections, which confirmed the absence of absolute majorities in Congress, the local exchange rate extended its downward trend, reaching its lowest level since 2021, near 3,500 pesos per dollar.
Speaker #2: However, this trend was contained by dollar purchases made by the government. Likewise, the uncertainty surrounding the presidential elections delivered the appreciation trend of the Colombian peso.
Speaker #2: Ultimately, the election results are increasingly becoming the main catalyst for the future of the country's economy and institutions, although high uncertainty persists just days before the first round.
Speaker #2: In a potential second round, the results appeared quite close, so only after the election will the proposed macroeconomic scenario be validated. Back to you, Maradona.
Speaker #1: Thank you, Camilo. Turning to our financial results, gross loans and March of $193.6 trillion Colombian pesos increasing 6% compared to 2025, and deposits reached $216.8 trillion Colombian pesos increasing 11.7% over the last 12 months.
Speaker #1: The central bank's strong shift toward a more restrictive monetary policy and the higher yield on Colombian sovereign debt have pressured our consolidating funding costs.
Speaker #1: Our banks have closely followed within pricing adjustments and setting action plans to navigate this environment. We continue to make progress in growing our state funding base, which provides a more stable and cost-effective source of funding.
Speaker #1: Notably, the spread between yield on loans and cost of deposits in our banking segment held a steady at 5%. Regarding our non-banking subsidiaries for venue deliveries, strong results despite significant volatility in both the equity and the fixed income market.
Speaker #1: North Colombia had a strong quarter as well, boosted by seasonal dividends, a higher inflation expectation for 2026, which benefited revenues from different structural sectors.
Speaker #1: Now, I would like to pass the call to Diego, who will give you the details of our results. Diego?
Speaker #2: Thank you, Maradona. I will start on pages 9 and 10 with a few charts showing the growth rate and the quality of our loan portfolio relative to the rest of the Colombian banking system.
Speaker #2: More comparability reasons, these are unconsolidated figures under Colombian IFRS as published by the superintendency of finance. Starting on page 9, over the 12-month period ending on February 2026, the rest of the banking system continues the aval, as well as the rest of the banking system continues to gain momentum.
Speaker #2: Growth for the system was primarily driven by large corporates, institutional, and government in the commercial loans, and by unsecured products in the consumer loans sector.
Speaker #2: Our strategy remains consistent. We have deliberately prioritized portfolio quality and risk-adjusted returns over volume growth. We have focused on local currency, commercial loans, and personal loans and credit cards in the consumer segment.
Speaker #2: We continue to be selective in corporate commercial loans given the aggressive pricing competition currently present. Our peso-denominated commercial loans market share increased by 10 basis points year on year to 26.3% and remained flat over the quarter.
Speaker #2: Regarding our dollar-denominated commercial loans, where we have historically been overweighted, we reduced our market share by 231 basis points to 36.8%. In addition, in peso terms, the balance of our dollar-denominated commercial loans were negatively impacted by an 8.9% appreciation of the Colombian peso over the year.
Speaker #2: As a result of the above, our market share for commercial loans fell 15 basis points over the year and increased 3 basis points over the quarter.
Speaker #2: In consumer loans, to reduce rate sensitivity, we continue diversifying our portfolio towards higher yielding and shorter-term loans reducing our concentration in payroll lending. We gained 147 basis points of share in personal loans year on year and 49 basis points over the quarter, raising our market share to 22%.
Speaker #2: The Itaú consumer business acquisition will take us to market weight in personal loans. As part of the effort to reinvigorate our credit card business, where we lost 11 basis points over the quarter and 151 basis points year on year, we launched the Visa FIFA Alliance.
Speaker #2: Itaú consumer business acquisition will add 2 percentage points of credit of share in credit cards to the 17.3% we held at the end of this quarter.
Speaker #2: We maintain a leadership position in payroll lending with 41.7% market share. We reduced our share in payroll lending 49 basis points over the quarter, accumulating 128 basis points year on year.
Speaker #2: Overall, our market share for consumer loans closed at 28.7% with a 17 basis points decrease over the quarter and 98 basis points decrease year on year.
Speaker #2: Moving on to mortgages, we continue to gain market share with 12 basis points increase over the quarter and 89 basis points year on year.
Speaker #2: As a result of the above-mentioned, we closed our market share in total loans at 25% stable over the quarter and 30 basis points lower than a year earlier.
Speaker #2: On page 9, on page 10, sorry, loan quality for both the system and the aval banks continue to show an improvement across all loan categories.
Speaker #2: Our banks continue to exhibit better loan portfolio quality than the rest of the system. In all categories. I will now move to the consolidated results of group A under IFRS, starting on page 11.
Speaker #2: Assets grew 2.4% over the year to 338 trillion pesos and contracted 3.2% over the quarter. Impacted by the divestiture of NFT. Exceeding the NFT assets, quarterly and annual growth were 2.1% from 9.2% respectively.
Speaker #2: In terms of mix, other assets which include the assets held for sale related to the NFT during the fourth quarter of 2025 declined 17.1% to 12.5% of total assets in first quarter 2026.
Speaker #2: As NFT assets were de-recognized following the completion of the divestiture. The bottom of the page, gross loans grew 6% over the year and 1.5% during the quarter.
Speaker #2: Our peso-denominated loans increased 8% and 2.2% respectively. Commercial loans grew 5% year on year and 1.6% over the quarter. Peso-denominated commercial loans grew 8.6% year on year and 2.9% quarter on quarter, while US dollar-denominated commercial loans grew 0.1% year on year and decreased 3.3% quarter on quarter in dollar terms.
Speaker #2: Our dollar-denominated loans account for 8.1% of our total portfolio after the NFT divestiture and confront primarily from the US agencies of Banco de Bogotá, our trade finance activities, and the offshore subsidiaries of Banco de Bogotá and Banco Occidente.
Speaker #2: These loans were affected by an appreciation of the Colombian peso of 12.7% year on year and 2.6% quarter on quarter. Consumer loans grew 4.2% year on year and 0.5% during the quarter.
Speaker #2: Payroll loans that account for 54% of our consumer loans grew 0.8% year on year and contracted 0.5% over the quarter. Personal loans that account for 27% of our consumer loans grew 14.1% over the year and 3.5% during the quarter.
Speaker #2: Credit cards that account for 11% of our consumer loans grew 1.2% year on year and contracted 0.4% quarter on quarter. Automobile loans that account for 7% of our consumer loans increased 1.3% year on year and 0.5% quarter on quarter.
Speaker #2: Finally, mortgages grew 16.8% year on year and 3.5% over the quarter. On page 12, we present funding and deposit evolutions. Total funding reached 281 trillion pesos, growing 8.9% year on year and 1.9% over the quarter.
Speaker #2: Total deposits, which account for around three-fourths of our fundings, grew 217 trillion pesos, grew to 217 trillion pesos, at 11.7% year on year and 4.5% over the quarter.
Speaker #2: Savings deposits grow the overall deposit performance and gain share in our mix. Savings deposits grew 17.8% year on year and 6.2% during the quarter.
Speaker #2: A strong performance that reflects our continued efforts to deepen our retail funding business and diversify our funding mix. Our deposits to net loans increased to 116% responding to higher volatility.
Speaker #2: This further pressed our NIM, adding to the challenge in benchmark rate increase. On page 13, we present the evolution of our total capitalization, our true total shareholders' equity, and the capital and equity ratio of our banks.
Speaker #2: During the quarter, dividend subsidy 755 billion pesos were declared to our shareholders. In addition, 708 billion pesos of dividends were declared to the minorities at our subsidiaries.
Speaker #2: As a result, our total equity decreased 3.3% over the quarter and increased 3% year on year. Our attributable equity decreased 3.5% over the quarter and increased 3.6% year on year.
Speaker #2: Total solvency and Tier 1 ratios were relatively stable in most of our banks. In the case of Banco de Bogotá, the increase in solvency reflects the recognition of the risk-weighted assets coming from MFG after the sale was completed.
Speaker #2: In addition, Banco de Bogotá and Banco Occidente solvency ratios reflect clients distributed pretty much. On page 14, we present our NIM. Net interest income reached 2.2 trillion during the first quarter of 2026, increasing 14.3% compared to fourth quarter of 2025 and decreasing 4.1% compared to first quarter of 2025.
Speaker #2: Total NIM increased 39 basis points to 3.34% quarter on quarter and decreased 45 basis points year on year. Our consolidated NIM on loans contracted to 4.4% during the quarter, down from 5.05% in fourth quarter 2025, mainly driven by the ongoing repricing of our cost of funds in response to higher rate environment.
Speaker #2: Our NIM on investment recovered to 0.25%, up from negative 3.1% in fourth quarter 2025, reflecting a mild recovery in the local capital markets. The quarter was also marked by a strong performance from FX and realities that completed our banks' trading strategies.
Speaker #2: Focusing on our banking segment, the NIM, the total NIM of our banking segment expanded 31 basis points over the quarter to 4.15% due to the same dynamics that affected our consolidated NIM.
Speaker #2: NIM on loans was 4.98%, decreasing 55 basis points quarter on quarter. This incorporates a 69 basis points quarter on quarter decrease in NIM on retail loans to 6.47% and, of course, 46 basis points quarter on quarter decrease in NIM on commercial loans to 3.86%.
Speaker #2: The timing is matched between a casual repricing liability and assets is the primary driver of NIM on loans compression observed this quarter. This effect will partially be reduced as commercial floating loans repriced with a lag of a few months of a few months.
Speaker #2: In addition, we held a relatively high liquidity profile to position our banks to eventual volatility. Further pressing our NIM. On page 15, we present yields and cost of funds.
Speaker #2: Interest rate dynamics on our loans and funding are driven by the movements in the average benchmark rate in Colombia. The average central bank intervention rate increased approximately 100 basis points during first quarter, while our consolidated cost of deposits increased 16 basis points to 6.75%.
Speaker #2: On pages 16 to 18, we present several loan portfolio quality ratios. On page 16, rate quality continues to improve during the quarter, 98 PDLs were 3.15%, a 16 basis points improvement relative to the last quarter, and 68 basis points over 12 months.
Speaker #2: 38 PDLs were 4.3%, a 7 basis points improvement over 3 months, and 94 basis points over 12 months. PDL formation continued to decelerate. New 98 PDLs in the quarter were 766 billion pesos.
Speaker #2: The current ratio at 98 PDLs strengthened to 137%, up from 134% during fourth quarter 2025. Commercial 38 PDLs were 3.86%, a 2 basis points increase over 3 months, 98 PDLs were 334, a 14 basis points decrease over the quarter.
Speaker #2: We recorded an 18 basis points decrease in consumer 38 PDLs to 4.49%, and 98 PDL decrease of 21 basis points to 2.58%. Mortgages 38 PDLs and 98 PDLs improved 26 basis points, and 19 basis points quarter on quarter.
Speaker #2: Finally, the ratio of charge-offs to average 98 PDLs was 0.64 times. On page 17, the share of our loan portfolio classified as stage 1 28 to improve reaching 90.3% of the total portfolio, up from 89% in first quarter 2025 and 89.8% in fourth quarter 2025, reflecting the ongoing improvement in the credit quality across all sectors.
Speaker #2: The allowances for stages 2 and 3 at a percentage of loans classified as stages 2 and 3 was materially stable during the quarter for total loans.
Speaker #2: On page 18, our net cost of risk was 1.8%, increasing 6 basis points quarter on quarter and during 36 basis points year on year.
Speaker #2: Our gross cost of risk was 2.1% in first quarter 2026, stable quarter on quarter. Net cost of risk for consumer loans was 4.1% in the quarter, a slight uptick from 3.8% in fourth quarter 2025, driven primarily by credit cards.
Speaker #2: Net cost of risk for commercial loans remained contained at 0.7%. On page 19, we present net fees and other income. Those fee income grew 6.9% year on year and decreased 1% quarter on quarter.
Speaker #2: Net fee income increased 10% and decreased 0.7% respectively. Gross fee income was driven by a 5% increase in banking fees, 6.9% in pension funds, and 14.3% in trust activities.
Speaker #2: Income from non-financial sector was around 1.3% times of that reported during first quarter 2025 due to a positive impact of higher inflation and concession revenues.
Speaker #2: Energy and gas contributed 255 billion broadly in line with previous periods. Finally, on the bottom of the page, the year-on-year increase in operating income is mainly explained by lower derivatives and FX gains.
Speaker #2: By higher derivatives and FX gains. Net income from other financial instruments at fair value decreased 92 billion from 348 billion pesos due to a one-time fair value recognition of 303 billion pesos related to the Promigas pipelines during fourth quarter 2025, as discussed on our ur previous call.
Speaker #2: On page 20, we present some efficiency ratios. Total other expenses reached 2,565 billion pesos in first quarter 2026, increasing 20.3% year on year, and 6.4% quarter on quarter.
Speaker #2: This is largely explained by the equity tax, which recorded under was recorded under general admin expenses and accounts for 312 billion pesos. Without the impact of the equity tax OPEX grew 5.7% year on year and decreased 6% quarter on quarter versus a seasonally high fourth quarter.
Speaker #2: Underlining expense growth remains more moderate underlining expense growth remains moderate and broadly in line with our cost control targets. Operating taxes explain the equity tax accounted for 22.9% of total expenses.
Speaker #2: Personal expenses increased 5.1% year on year to 830 billion pesos impacted by the 23% minimum, which increased on part of our workforce. Cost to assets for the quarter was 3%, including a 36 basis points negative impact from the equity tax, and remained stable year on year at 2.6% when excluding these expenses.
Speaker #2: Our quarterly cost to income improved to 53.9%, mainly due to higher income from a non-financial sector and net fees. Excluding the equity tax, cost to income was 47.3% following the same drivers.
Speaker #2: Finally, on page 21, we present our net income and profitability ratios. Attributable net income was 337 billion pesos for 14.2 pesos per share. This includes 351 billion pesos from continuing operations and a net loss of 15 billion pesos related to discontinued operations.
Speaker #2: The equity tax had a negative impact of 210 billion pesos on our total net income during the quarter, excluding this one-time impact. Our net income from continued operations would have been 561 billion pesos.
Speaker #2: Our return on average assets and return on average equity for the quarter were 0.9% and 7.4% respectively. Excluding the effect of the equity tax, return on average assets and return on average equity would have been 1.2% and 12%.
Speaker #2: I will now summarize our general guidance for 2026. We expect low-income growth in nine and a half percent area, with commercial loans growing in the six and a half percent area and retail loans growing in the 14% area.
Speaker #2: Our consolidated NIM in the 3.9% area with NIM on loans in the 4.4% area. NIM of our banking segment in the 4.8% area with NIM on loans in the 5.2% area.
Speaker #2: Cost of risk net of recoveries in the 1.9% area. Cost to assets in the 2.85% area incorporating a 9 basis points impact of the equity tax.
Speaker #2: Income from the non-financial sector of 1.3 times of that for 2025. If the income ratio in the 22% area. Finally, we expect our 2026 return on average equity to be in the nine and a quarter area incorporating 114 basis points impact from the equity tax.
Speaker #2: Back to my director.
Speaker #1: Thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts on Colombia and Grupo Aval in 2026. The environment we are navigating in 2026 is under undeniable complex.
Speaker #1: With political and electoral uncertainties, persistent inflation and our renewed monetary tightening cycle, and a challenging global backdrop. We have the experience and the tools to navigate it, and we are better positioned today than we were at the start of the previous cycle.
Speaker #1: Our balance sheet is more resilient as shown by the diversification of our loan portfolio and our funding structure. We have decreased the duration of our loan book which will enable us to reprice the cycle faster than before.
Speaker #1: On the funding side, we have reduced maturity and repricing gaps, growing in segment less sensitive to interest rates. In addition, we have reduced interest rate risk sensitivity using interest rate swaps among other derivative tools.
Speaker #1: On profitability, we expect our ROAE in the 9% and 9.5% area. For the year, incorporating per the 114 basis points, negative effect of the equity tax and second, the impact of tightening cycle of on our NIM over the following four years.
Speaker #1: Looking ahead, our path is clear. We will deepen our relevance with clients, accelerate the capture of efficiencies, through technology and operational integration, and continue unlocking the value of our non-financial businesses through CORFI Colombiana.
Speaker #1: All of this is anchored in our 2026-2031 corporate strategy, our roadmap to consolidate Grupo Aval Colombia's leading financial group. Colombia's financial sector will continue to be a pillar of trust and investment regardless of the political cycle.
Speaker #1: Grupo Aval will continue playing that role with discipline and a long-term perspective. Now we are open for questions.
Speaker #2: Thank you. We will now begin the question and answer session. If you have a question, please press star, then the number one on your touch-tone phone.
Speaker #2: If you wish to be removed from the queue, please press star, then one, a second time. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers.
Speaker #2: Once again, to ask 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 #2: Please go ahead.
Speaker #3: Hi, team. Thank you for the opportunity to ask questions. I have a friend who needs a clarification on the guidance. Just wanted to check with you if you mentioned that the group's NIM on loans for the year is expected at 4.4, which is the level you finished this quarter.
Speaker #3: I think that's my first question. If depending on the answer I have a follow-up.
Speaker #4: Yeah, the answer is yes. It says 4.4%. The main difference.
Speaker #3: okay. Perfect. So just go ahead, go ahead.
Speaker #4: Oh, go ahead, please. No, go ahead, please.
Speaker #3: No, just wanted to understand so how should we understand the positioning of the group in the cycle, right? Because the NIM level is coming from 4.6, went all the way to 5.
Speaker #3: So should we understand that now the sensitivity is a bit lower in the sense that as rates have continued to go up, you will have maybe muted effects on the NIM?
Speaker #3: Just wanted to clarify that.
Speaker #4: Yeah. Brian, I think that the best tool way to think about it is throughout the year given that you're going to see volatility throughout the next few quarters.
Speaker #4: The reason for this volatility is that the repricing mismatch between assets and liabilities, for example, during this quarter. We had a strong repricing of our liability side and very mild on the asset side.
Speaker #4: What we started to see at the end of the quarter that was reflected on the next quarter is a recovery of NIM. However, we do expect as Camilo mentioned before further central bank actions.
Speaker #4: By the way, the central bank action the last one that we had hasn't been yet or did not reflect in the first quarter because it happened at the end of the first quarter.
Speaker #4: So we're going to see that happening. And that might also press the third quarter moving forward. So that's the reason why I would say given that you're going to see volatility in the repricing process, I will stick to what to expect on average during the year.
Speaker #3: Okay. Perfect. And then another clarification on the guidance. You mentioned they are ready for the year. Your expectation is 9.25 with 14 dips impact from the equity from the wealth tax, right?
Speaker #4: Yeah. Yes. And before moving into that, I think you also asked regarding positioning, and I want to emphasize something that Maria Lorena mentioned. And it says over these past years we've been rebalancing our portfolio actively as well as our deposit side.
Speaker #4: Part of what we've done and let me repeat part of what I said during the presentation is to lower our exposure to payroll lending and increase our exposure to products on the retail side that reprice much faster.
Speaker #4: We also have reduced our position in dollar-denominated assets that have a lower NIM to try to enhance our NIM on the asset side. On the liability side, even though it takes much longer to be able to see consequences of what we're doing, we're strongly working on the retail side deposits.
Speaker #4: So regarding positioning trying to summarize what I said is we expect this to be a milder cycle than what we saw the last time around where we were much more liability sensitive than what we currently are.
Speaker #4: Then regarding ROE, I'm going to try to summarize what we're getting into. Basically, you might have seen that there were some changes that we did in our guidance, but some of them compensate what we will feel from the equity tax and also the pressure from the central bank actions.
Speaker #4: I would say roughly we already have a clear view on how to compensate at least half of what happened from the equity tax and continue to work actively in trying to compensate the rest.
Speaker #4: So our guidance for efficiency actually is not bringing down or being affected by the full impact of the equity tax, but it already has around roughly half of that compensated.
Speaker #4: On the other hand, we are building in a tougher interest rate environment than what we expected before. Also, we're building in more liquidity in our balance sheets preparing to the electoral volatility.
Speaker #4: You might imagine that this liquidity is very expensive because it has basically a zero NIM or slightly negative NIM that has affected us during this quarter.
Speaker #4: Perhaps after the electoral cycle, we might loosen that position. But we're seeing a tougher NIM environment. However, we have a few positives. One of the positives here is our cost of risk continues to behave better than what we expected before.
Speaker #4: That's coming in and as I mentioned before, we're also working strongly on the efficiency side and you saw Jorge Castaño's presentation that focused on actions rather than the actual results.
Speaker #4: But these are the actions that will lead us to these kind of results.
Speaker #5: Our next question will come from the line of call.
Speaker #4: Yeah. A final one for your very good question, Brian. Do you think our previous guidance was 10 and a half? We have roughly 1.2 percentage point impact from the equity tax.
Speaker #4: We have a strong impact from the NIM and we're compensating up. So all in all, if you strip away the equity tax, we actually lowered our guidance in roughly 20 basis points or something of that order of magnitude.
Speaker #5: Our next question will come from the line of Carlos Gomez with HSBC. Please go ahead.
Speaker #6: Good morning and thank you for taking my question. Which is a bit different. Can you tell us how the pension reform is going to affect your business and whether you think that porvenir should be part of your portfolio for the long run?
Speaker #6: And the right time, but what are the prospects of simplification of your structure and reducing the number of different units in the coming three, four years in your opinion?
Speaker #4: Let me take these ones and I'm going to pass it down to Maria Lorena. Regarding the pension reform, as we've mentioned in the past, the pension reform actually balances out to, let's say, something similar from the value perspective.
Speaker #4: It says the pension reform reduces growth long-term, and I'm going to qualify what long-term means. But also increases returns in the short-term. Long-term means when you take into consideration that an average affiliate to a pension system is around 38 years old.
Speaker #4: And that the resources will be managed by pension funds for the remainder of their active life before they retire. The contraction of what we're going to see there with current affiliates will start being relevant around after year 10.
Speaker #4: So during the first years, you're going to see volumes that are not strongly affected by the reform. However, it does change the expected sizes thereafter.
Speaker #4: Yes, porvenir is actually a strong part of our business. It's both porvenir and, as you see, the trust business are things we're working on.
Speaker #4: We are working not only on our intermediation business, but we're also considering as one of our pillars to work on the asset management and the fee-generating businesses in addition to what we do in intermediations.
Speaker #6: Okay.
Speaker #4: Okay.
Speaker #5: Our next question will come from the line of Ieri Fernandez with JPMorgan. Please go ahead. Ieri, your line might be muted.
Speaker #7: Hi, guys. Sorry, I wasn't muted. My fault here. Hi, Diego, Maria Lorena. I have a question regarding loan growth on the guidance. And if I heard correctly, I think you're still guiding for 9.5.
Speaker #7: That is just a small adjustment from the previous around 10% that you had before. And consumer loans are still growing fast on your guidance, right?
Speaker #7: 14%. My question is more in line with what Brian was talking about the cycle, right? If there is a higher uncertainty in Colombia, inflation, higher rates, everything that we are seeing, do you think that keeping this growth of consumer loans is the best move?
Speaker #7: I'm just checking if maybe being a little bit more cautious and growing a little bit less would not be a deal in this kind of framework.
Speaker #7: So just checking your comfort of accelerating the growth on consumer. I know Aval has been recovering market share, but again, just checking about the time and about the cycle.
Speaker #7: And then I have a second question regarding other videos. I was just checking the presentation and go a little bit to my attention the core capital of that unit.
Speaker #7: I know it is overall small for the group, but if you can comment about the core capital of AbbVia, why it's moved down, why the other subsidiaries they moved up.
Speaker #7: And if you feel comfortable with that level of 9.3, correct your capital tier one. Thank you.
Speaker #4: And we'll start first with your last question that's a very easy one. If you look at our sovereignty ratios, our banks, use mainly core equity tier one and are not strong users of 81 or tier two value.
Speaker #4: Then you also mentioned the small operations. So we can act very easily on videos regarding potential support. And it was likely come not from equity, but from hybrid funds as we did in the past.
Speaker #4: Videos is doing very well from the commercial side. So that's the reason why you see consumption of sovereignty and it is consumption due to a very healthy growth.
Speaker #4: Then to your question, I should have clarified that this guidance includes Itaú as part of the numbers. So just going back to some of the numbers, the Itaú transaction will add around 2 percentage points in share of credit cards.
Speaker #4: It will also add to our personal loans business and it's basically the main driver of that kind of growth. In absence of Itaú, you're right, we would have been guiding into a much milder growth, more in line with nominal GDP growth or something in that order of magnitude.
Speaker #6: No, that was clear. Thank you very much, Diego.
Speaker #5: Our next question will come from the line of Daniel Mora with Creditcore Capital. Please go ahead.
Speaker #8: Hi, good morning and thank you for the presentation. I have a couple of questions with the first one is regarding OPEX and efficiency. Can you please review what will be the OPEX savings per year during the next phase of the strategy with Aval or Compartir and efficiency target that you expect to reach in this year 2026 and in the medium term?
Speaker #8: That will be my first question. And the second one is regarding Cofe Colombiana. Can you provide further color of the impact of inflation at Cofe Colombiana?
Speaker #8: Especially in the infrastructure business in the report you mentioned that it considers the inflation expectations, but I would like to understand if it is indeed the expectations or they are called inflation.
Speaker #8: I would like to understand if this is just one of impact or considering the upward trend in inflation with the higher income income compared to.
Speaker #4: Well, yeah, regarding OPEX, we're working on multiple brands. Those that Jorge mentioned will be running by the end of this year, the run rate of around 30 to 40 million dollars per year.
Speaker #4: And that's an initial phase of what we're going to be doing. And then not included in what we discussed here, we're strongly working on the technology side and in a data call we can get back to that point where we see substantial opportunities to work on.
Speaker #4: Regarding Cofe, the way it works is these concessions given that the rights received on the concessions, some of those are tied to inflation, do adjust up with expected annual inflation.
Speaker #4: That compensates in part the very strong increase in cost upon that they have. So there's some sort of an offset. But if you were to think only of Cofe Colombiana, not the financial sector as aligned, but Cofe Colombiana as a whole, they are being affected by higher interest rates and the income from inflation and the concessions is not enough to compensate to fully compensate what they're feeling from the funding side.
Speaker #5: Again, if you'd like to ask a question, press star and the number one on your telephone keypad. Our next question is a follow-up from the line of Carlos Gomez with HSBC.
Speaker #5: Please go ahead.
Speaker #9: Hello, I came back to the line because I think there was a question that was not answered before. I just wanted to know if that's something you would like to address.
Speaker #9: Regarding the possible consolidation of the group in the next three or four years.
Speaker #4: I'm sorry, I missed the question.
Speaker #9: Yeah. This is the question that we hear all the time. We just are working on having efficiencies and having synergies between among banks and we have a good integration with the few CIOs this year.
Speaker #9: So we are on the way to be more efficient, to have more impact, and to have risk case. So we are working on that.
Speaker #9: But no more to say.
Speaker #6: Okay, just wanted to make sure that you had the opportunity. And since we are at it, anything you can do to improve the liquidity of the stock?
Speaker #4: Yeah. Our liquidity has been increasing, not enough to our satisfaction part of what we are doing. From the investors, relationship side is working strongly on communication, but there are further actions that we would need to do to increase liquidity.
Speaker #4: There's no plans for a secondary or a new issue at this point. So the actions would be more on stock management rather than from additional stock issue.
Speaker #6: Very clear. Thank you so much.
Speaker #5: Our next question will come from the line of Santiago Villanueva with Wivienda. Please go ahead.
Speaker #10: Yeah, good morning and thank you for taking my question. I just have two questions. My first question is I see that in 2025, the four banks gained nearly 60 basis points in retail funding, non-market share.
Speaker #10: And by 2026, they have already gained 45 basis points. But most of that profit has come from Bogotá and Popular. I'd like to know what your market share expectations are for this segment in 2026 and what you have planned to help Occident and Villa to contribute a little bit more.
Speaker #10: And my second question is, could you provide us a little more detail on the performance of the infrastructure segment in Cofe Colombiana for this quarter?
Speaker #10: Thank you.
Speaker #4: Yeah, and I don't have a figure. I'm happy to give it out to you later on. That's public information. I just don't have a number here.
Speaker #4: But you're right, we've been more successful on Popular and Bank Bogotá bringing in retail deposits. But you can be sure that we're working with all of the banks to ensure that all contribute to this very relevant strategic objective.
Speaker #4: Regarding infrastructure, I think that was covered in the previous question. You have the one-time effects of changes in inflation expectations. That improved the performance of the infrastructure business.
Speaker #4: However, as I mentioned, over the year, we're going to have a higher interest rate environment that will partially offset what we received during the first quarter.
Speaker #4: So it's very much related to what I discussed before.
Speaker #3: And regarding businesses in Cofe Colombiana, as you know, so Colombia doesn't have new projects in infrastructure, given the government is not just open one project in this last four years.
Speaker #3: So given that we are finishing our concessions, the construction of the concessions, so we are looking for projects outside Colombia. So this is part of our strategy.
Speaker #3: And we hope that the new government, whatever we will have new projects in infrastructure. But given that right now we don't have and we are looking at a road.
Speaker #5: And this will conclude our question and answer session. Ms. Maria Lorena Gutierrez-Becerro, I turn the call back over to you.
Speaker #3: So thank you to you for being with us today and see you in the next call. Have a good day.
