Grupo Aval Acciones y Valores SA (AVAL) Q2 2025 Earnings Call Highlights: Record Net Income and ...

Net Income: COP856 billion for the first half of 2025, 1.7 times higher than the first half of 2024. Quarterly Net Income: COP494.9 billion, the highest in three years, growing 37% over the quarter and 142% year-over-year. Net Interest Margin (NIM): Reached 4% for the first time in three years; consolidated NIM on loans at 4.5%. Cost of Risk: 1.7% for the quarter, 4.81% for the year, the lowest level since Q1 2023. Loan Growth: Loans grew 3.2% year-over-year; deposits grew 6.8%. Deposit Mix Improvement: Peso-denominated deposits held by individuals improved from 16.7% in Q1 2025 to 18.2% in Q2 2025. Assets: Grew 6% over the year and 1.8% on the quarter to COP336 trillion. Loan Portfolio: Consumer loans grew 6% year-on-year; mortgages grew 20% year-on-year. Funding and Deposits: Total funding increased 6.3% year-on-year; deposits grew 6.8% year-on-year. Return on Average Equity (ROAE): 11.3% for the quarter. Return on Average Assets (ROAA): 1.1% for the quarter.

Warning! GuruFocus has detected 5 Warning Sign with AVAL.

Release Date: August 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Grupo Aval Acciones y Valores SA (NYSE:AVAL) reported a net income of COP856 billion for the first half of 2025, which is 1.7 times higher than the first half of 2024. The company's net interest margin reached 4% for the first time in three years, with a consolidated NIM on loans at 4.5%. The cost of risk for the quarter was 1.7%, the lowest level since the first quarter of 2023. Grupo Aval's banks have improved their deposit mix, with peso-denominated deposits held by individuals increasing from 16.7% to 18.2% during the quarter. The company has made significant progress in its sustainability and strategic projects, including advancements in sustainable finance and corporate governance.

Negative Points

Loan growth dynamics have been slower than initially anticipated, although activity picked up in June and July. The fiscal outlook for Colombia remains challenging, with the government raising its fiscal deficit estimate to 7.1% for 2025. Intense price competition in the market has led to a loss of market share in commercial loans. The speed of recovery in net interest margins has been modest due to high real central bank interest rates and regulatory changes affecting consumer loan interest rate caps. The company's trading assets have gained relevance, raising concerns about managing risk and volatility in this segment.

Q & A Highlights

Q: Can you provide further color on the cost of risk performance this quarter, and do you see this trend continuing? A: The cost of risk was low this quarter, primarily due to high recoveries rather than lower provisions. While this is positive, we maintain our guidance of 1.95% for the year. This quarter's performance does not change our overall outlook on cost of risk. - Diego Fernando Solano Saravia, CFO

Story Continues

Q: What drove the solid performance in other income this quarter? A: Other income was influenced by various factors, including recoveries and some positive income from controversies. These gains were partially offset by higher expenses during the quarter. Overall, we are maintaining our guidance. - Diego Fernando Solano Saravia, CFO

Q: How do you see the Net Interest Margin (NIM) evolving in 2025 and 2026 given the slower reduction in the monetary policy rate? A: We are focusing on expanding NIM by changing our mix on both the deposit and loan sides. Despite regulatory changes affecting interest rate caps, we expect NIM on the commercial side to improve as cost of funds decrease. The recovery is slower than anticipated, but we remain positive about future trends. - Diego Fernando Solano Saravia, CFO

Q: Can you explain the increase in trading assets on your balance sheet and how you are managing associated risks? A: We are taking advantage of market opportunities, such as exchanges of bonds with the Colombian government, to refresh our portfolios. Additionally, growth in trading assets is linked to our expanding treasury business with clients. Risk management is handled by offsetting client positions, ensuring no additional risk is taken. - Diego Fernando Solano Saravia, CFO

Q: Could you repeat the guidance for 2025? A: Our guidance includes an ROE of 10.5%, loan growth of 7%, with commercial loans growing 5% and consumer loans 9%. Consolidated NIM is expected to be around 4%, with the banking segment at 4.7% and loans at 5.3%. Cost of risk is projected at 1.95%, and income from the non-financial sector is expected to be 90% of 2024 levels. - Diego Fernando Solano Saravia, CFO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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