In This Article:
Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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Grupo Aval Acciones y Valores SA (NYSE:AVAL) reported a return on average equity of 9.7%, comparable to levels from the third quarter of 2022.
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The company continues to gain market share while growing at a prudent rate, with its banking segment returning to net income levels similar to late 2022.
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Grupo Aval's sustainable portfolio has strengthened, reaching 17.3 trillion pesos, supporting various sustainable initiatives.
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The company improved its score in the Dow Jones Sustainability Index, placing in the 90th percentile, reflecting advancements in environmental, social, and governance dimensions.
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Grupo Aval's financial system remains solid, with improvements in cost of risk and asset quality, particularly in consumer loans and mortgages.
Negative Points
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Loan growth remains subdued, with growth still in negative territory in real terms, and margins under pressure due to regulatory and monetary policy challenges.
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The fiscal situation in Colombia poses challenges, with taxation underperforming government estimates, necessitating deeper spending cuts.
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The commercial loan segment is lagging behind the consumer segment in recovery, with certain sectors still facing macroeconomic pressures.
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Grupo Aval's non-financial sector income contracted due to concessions transitioning from construction to operation phases.
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The Colombian financial system faces regulatory pressures such as changes in interest rate caps, affecting consumer loans and high liquidity and solvency requirements.
Q & A Highlights
Q: Can you elaborate on your strategy for the mortgage market in 2025, considering the current market conditions? A: We expect to continue outpacing the system in the mortgage market. We are underweighted compared to our peers, which allows us to better select our customers. We anticipate maintaining this trend into the future. Regarding ROE trends, the improvement will be driven by a combination of cost of risk, cost control, and market growth, with a significant contribution from the central bank's expected rate cuts.
Q: Why is the commercial segment taking longer to recover compared to the consumer segment, and when do you expect improvement? A: The commercial segment typically lags behind the consumer segment in the economic cycle. Households feel the impact first, followed by companies. We are exposed to all sectors, and while some are sensitive to macro conditions, we are not anticipating any large single events. Improvement is expected as the economy stabilizes.