Grupo Aval Acciones Y Valores S.A. Q3 FY2025 Earnings Call

Welcome to Grupo Aval's Third Quarter 2025 Consolidated Results Conference Call. My name is Regina, and I will be your operator for today's call. Grupo Aval Acciones y Valores S.A. is an issuer of securities in Colombia and the United States SEC, which means it must comply with securities regulations in both countries. Grupo Aval is also under the oversight of the Superintendency of Finance as the holding company of the Aval Financial conglomerate. The consolidated financial information in this document complies with IFRS as set out by the IASB. Unconsolidated financial data for our subsidiaries in the Colombian banking system adheres to Colombian IFRS as reported to the Superintendency of Finance. Details concerning the calculations of non-IFRS measures such as ROAA and ROAE are provided as necessary in this report. This document contains forward-looking statements, identifiable by terms such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential, or similar phrases. Actual outcomes may vary significantly from what is anticipated due to changes in the broader economic and business landscape, fluctuations in interest and currency rates, and other risks mentioned in our filings with the Registro Nacional de Valores y Emisores and the SEC. Recipients of this document are responsible for evaluating and utilizing the information contained herein. The matters discussed in this presentation and our understanding of them may evolve significantly over time, but we do not assume any obligation to review, update, or correct the information in this report, including forward-looking statements, and we do not intend to provide updates on material developments before our next earnings report. This document and its figures offer an overview of the topics discussed rather than a detailed description. When applicable, we refer to billions as thousands of millions. With us today are Ms. María Lorena Gutiérrez Botero, Chief Executive Officer; Mr. Diego Solano, Chief Financial Officer; Mr. Jorge Castaño, Corporate VP of Financial Assets and Efficiencies; Mrs. Paula Durán, Corporate VP of Sustainability and Strategic Projects; Mr. Jorge Otalvaro, VP of Synergies at Aval Valor Compartido; and Mr. Camilo Pérez, Banco de Bogota's Chief Economist. I will now turn the call over to Ms. María Lorena Gutiérrez Botero, Chief Executive Officer. You may begin.

Thank you. Good morning, everyone, and thank you for joining us for our third quarter 2025 conference call. I am here with Diego Solano, our CFO; Jorge Castaño, Corporate VP of Financial Assets and Efficiencies; Paula Durán, Corporate VP of Sustainability and Strategic Projects; Jorge Otalvaro, VP of Synergies at Aval Valor Compartido; and Camilo Pérez, Chief Economist of Banco de Bogota. This quarter, we reached a year-to-date net income of COP 1.4 trillion, 88% higher than the same period of 2024. Net income for the quarter was COP 521 billion, the highest quarter figure in 3 years, growing 25.3% over the year and 5.3% over the quarter. This performance reflects strong net interest income as continued improvement in loan activities, a pickup in loan growth, and the results of our cost reduction efforts. Before addressing our financial performance, I will share the progress made in some of our strategic projects. First, our banks have continued working on improving their deposit mix towards retail funding. We launched accounts and savings pockets with a special remuneration rate and repositioned our bank's favorable account value proposition to both individuals and businesses. We also introduced product offerings to face increased competition, including short-term deposits and savings accounts with competitive rates. As a result of the above, peso-denominated deposits from individuals grew 22% over the year with savings and checking accounts growing 11% and term deposits by 31%. Second, in addition to deposits, our efforts to deepen our presence in the consumer segment considers increasing our share of lending products where we are underweight and revamping our payment value proposition. We aim to increase our market share in credit cards where we have a space to grow. On this front, we entered an alliance with Visa that grants us exclusivity in Colombia for the FIFA World Cup. Third, on October 6, the Central Bank's immediate payment system officially started operations, offering everyday, anytime, instant and free transfers. This system will reduce the use of cash and promote financial inclusion. In Colombia, 75% of monetary transactions are with cash. We estimate these numbers could go down to 55% in future years, considering Brazil's peak experience. Given this opportunity in September 2025, we launched Gou Payments, our own instant payments system with world-class infrastructure that will improve our time to market and offer innovative, safe, and user-friendly solutions. Fourth, as we mentioned in the past, we are simplifying our processes through transversal initiatives, capturing value in our operational and administrative processes. This effort is based upon our main guiding principle, our external and internal customers come first. I will now invite Jorge Otalvaro to go into more detail on Gou Payments and our synergies plan executed through Aval Valor Compartido. Jorge?

Thank you, María Lorena. Good morning. At Grupo Aval, we are fully committed to driving the immediate payment system led by the Central Bank in Colombia. Gou Payments will serve as our payment platform for the group's entities and will also enable fintechs, trust companies, and other players to connect to the payment system where our value proposition is autonomy, differentiation, and agility in time to market with the Central Bank across all channels. Our strategy includes strengthening our processing capabilities, including traditional and instant payments, and clearing house services for Aval Banks and third parties. We are ready to launch innovative solutions that deliver a competitive edge, including interoperability for account-to-account merchants and payments, advanced capabilities in cash management, payment collections, QR solutions, and an open ecosystem for third parties. Our four banks were the first and only players in Colombia, offering seamless credit cash transfers via WhatsApp, merging into our clients' day-to-day habits and offering an easy experience. We will measure success by the impact on cash reduction and the adoption of services by new clients, prioritizing cash management and excellence in B2B services. Let me mention our performance during the first month of credit; we connected more than 8 million keys to individuals, 62% of them which are Tag Aval, the only customizable alphanumeric key in the market, executing more than 10 million transactions. We also have a market share over 45% in merchant keys with more than 1 million keys. Finally, we processed more than 10 million transactions with a total amount of COP 2 trillion. Now let me share our results on synergies and efficiencies at Aval Valor Compartido. In 2025, we focused on identifying potential synergies and implementing action plans to capture efficiencies through standardization and process mastering while raising productivity and control standards. After analyzing 30 administrative and operational processes, we initially selected 8 key processes for our synergy model. Administrative processes include procurement, property management, facility management, talent acquisition, payroll, and physical security, currently serving Banco de Bogotá, Banco de Occidente, Aval Valor Compartido, and Gou Payments. Other entities will be incorporated in the coming months. A second wave to be launched next year will focus on operational synergies, particularly in back office banking processes and IT synergies such as cloud, data center operations, and optimization of our physical channel network. Some of the key achievements in 2025 are a 40% reduction in procurement cycle time, a 50% simplification of active contracts, and we also launched the Aval Real Estate portal, which reduced commercialization times for real estate owned by two-thirds. In cybersecurity, we designed the cybersecurity synergy strategy, prioritizing the security operational center (SOC) and the centralization of critical tools. The SOC service points coverage increased from 16 to 23 connected companies. We also launched the Aval talent portal, which will reduce hiring time by 20%. Finally, regarding ATMs and banking agents, we are the first to implement Near Field Communication (NFC) technology in Colombia, and we developed a machine learning model to optimize coverage of Aval Bank's physical service points. Thank you all for your attention. Maria Lorena.

Thank you, Jorge. Last year, we announced the acquisition of Corficolombiana's shares in the trust company and the broker deal, and we launched Aval Fiduciaria while simultaneously creating Aval Investment Banking. We are now moving into the second phase by integrating the trust funds, trust estate, and fiduciary, separating Fiduciaria Bogotá, Fiduciaria Occidente, and Fiduciaria Popular into Aval Fiduciaria. With this strategy, Aval further expands its leadership in the asset and wealth management business in Colombia and abroad. Now I invite Jorge Castaño, our VP, to share with you our advancements and perspective in the Aval Asset Management business. Jorge?

Thanks, María Lorena, and good morning to all of you. As María Lorena mentioned before, this operation is part of our extended corporate strategy aimed at improving operational efficiency, diversifying revenue streams, and strengthening our competitive position in key markets as the non-banking financial services. The initiative is expected to deliver meaningful financial and operational benefits over time, supporting sustainable growth and resilience in an evolving economic environment. Aval Fiduciaria is set to become the largest fiduciary in Colombia by assets under management with COP 201 trillion and the leading institution in fee income with a 21% market share. The company will oversee more than 5,500 trust funds and diversify our range of products and services, serving retail, small and medium enterprises, corporate and institutional clients. Through Aval Casa de Bolsa, we will strengthen our capabilities in fixed income, equities, derivatives, and FX markets, enhancing long-term value creation and consolidating our leadership in the Colombian financial sector. Next year, Aval Fiduciaria will continue to strengthen its position in the fiduciary market. We expect to increase our share of total industry fees and consolidate our position as the number one player. In 2026, fee income is projected to grow around 13.2% versus 2025, exceeding COP 635 billion. We also expect tailwinds from deepening of the commercial model with Banco de Bogotá and Banco de Occidente and implementation of the new integrated commercial model with our other banks. By business line, we are targeting funds fee growth of 20%, explained by an increase in assets under management, well above the sector's expected 12.7% and administration growth of 15.4% compared with 7.1% for the industry, supporting our ability to capture superior value in 2026. This transaction will also unify fiduciary risk management policies and operational processes and importantly, enhance commercial synergies across our other business segments. In addition, we expect to capture cost efficiencies in the medium term. We are working to strengthen Aval Fiduciaria's product portfolio and customer service. We will have an integrated commercial model in coordination with our four banks across the country as well as with Porvenir and Aval Casa de Bolsa. Their offering also incorporates cash management solutions and offshore investment access via digital platforms and corresponding agreements in Panama and the USA. The integration also accelerates the rollout of enhanced digital investment channels, enabling better penetration across retail, small and medium enterprises, and corporate clients, supporting a materially higher distribution capacity across Grupo Aval's client base. The transaction has already received regulatory approval by the financial superintendents, and the required corporate approvals are expected to be received by month-end. We aim for Aval Fiduciaria to start operations as a single company with unified client-facing challenges by January 2, 2026. That's all from me for now.

Thank you, Jorge. Now Paula will go over our sustainability achievements for this quarter. Paula?

Thank you, María Lorena, and good morning, everyone. The most relevant sustainability highlights for Grupo Aval in the quarter include the definition of our sustainable strategy with a vision that further connects our business goals to our ESG impact. We call it sustainable ROE, R for returns with purpose, O for opportunities for all, and E for environmental value. Across all three pillars, we have defined specific goals and actions in close collaboration with our entities. Starting with our returns with purpose pillar, this quarter, all our entities participated in the CSA assessment of the Dow Jones Sustainability Index. Results will be released at the end of the year, but preliminary scores already reflect significant progress compared to global industry leaders. During the quarter, we also received several recognitions for our sustainability achievements. Banco de Bogotá, Corficolombiana, and Promigas were included by Colombia among the 50 leading companies in sustainability for this year. Additionally, the Global Compact Network Colombia announced the Sustainable Development Best Practices Award where Banco de Bogotá, Corficolombiana, and Promigas won in five different categories: gender equality, climate actions, reduced inequalities, decent work, and economic growth. In terms of sustainable finance, we continue to achieve strong results. Our sustainable portfolio reached COP 35 trillion with 78% representing our social portfolio and 22% our green portfolio. In line with our commitment to the energy transition and the development of resilient infrastructure in Colombia, we have consolidated our position as a leading player in the structuring and financing of major projects nationwide. Under the leadership of Aval Banca de Inversión, Banco de Bogotá and Banco de Occidente participated in the financing of the infrastructure project connecting the airport with the Porto International Airport, expected to generate over 2,000 direct jobs. Additionally, Grupo Aval led the COP 1.9 trillion refinancing for the project. We're also leaders in financing of social projects that incorporate more than 800,000 panels, expanding clear energy generation and strengthening the country's renewable infrastructure. Moving to the opportunities for all pillar, quarterly highlights include our participation in the Vamos Pa’lante 2025 campaign led by the University of Los Andes and W Radio to support young people from vulnerable backgrounds to complete their university studies. All of our entities, branches, and ATMs are open for donation to the campaign, which is expected to benefit 1,200 students through university scholarships. Our entities also continued advancing social programs focused on financial inclusion, education, SMEs and productive projects. Our progress on diversity, equity, and inclusion was also recognized by ranking, where three of our companies were ranked among the top 10 in Colombia in their categories. Regarding our flagship social initiative, Misión La Guajira, we continue delivering on our commitment. Since its launch 1.5 years ago, we have brought water, energy, and connectivity to vulnerable communities, benefiting more than 21,000 people and 3,000 families across 80 communities. On the environmental balance front, during this quarter, we defined Grupo Aval's climate strategy, which establishes a comprehensive roadmap to strengthen the management of risks and impacts associated with climate change. The strategy adopts IFRS 2 guidelines and TNFD recommendations in line with the financial superintendence of Colombia's regulation with clear goals to reduce emissions by 51% by 2030 and to promote carbon neutrality by 2050. We reaffirm our commitment to a low-carbon economy aligned with the Paris Agreement and Colombia's National sustainability objectives. It is also worth noting that beyond our entity's individual progress, we became the first bank in Latin America to report under the TNFD standards, assessing the impact of its operational nature. In conclusion, we continue delivering across all ESG dimensions, remaining firmly committed to achieving a sustainable ROE, proving that profitability and sustainability are not competing goals but two sides of the same vision, creating lasting value for people, for the planet and for the country. Thank you.

Thank you, Paula. Now moving to the macro environment. Let me share some key trends affecting our business. Monthly data indicates that in the third quarter, the Colombian economy continued to perform positively, primarily driven by increased household demand. The main sectors driving growth remain public administration, entertainment, and e-commerce. Looking ahead, we expect GDP growth of 2.7% in 2025 and 2.8% in 2026. This inflation has stalled. Inflation reached 5.1% in October, surpassing the 2024 year-end figure of 5.2%. We now expect inflation to close at 5.3% in 2025 and 4.2% next year. This view incorporates upward pressure in the coming months, particularly driven by ongoing minimum wage discussions. The fiscal environment remains challenging. The government approved the 2026 national budget at COP 546.9 trillion. However, this lacks a clear path back to the fiscal rule suspended this year. Analysts project a fiscal deficit of minus 7.5% of GDP in 2025, worse than the 7.1% forecast in the medium-term fiscal framework. In September, the Central Bank kept its policy rate unchanged at 9.25%, maintaining a cautious stance amid persistent inflationary pressures. We expect rates to remain steady through early 2026 with cuts beginning in the second quarter of 2026, ending the year at 8.25%. Camilo will now elaborate on our economic outlook. Camilo?

Thank you, María Lorena. Good morning to everyone. In the third quarter, the Colombian economy continued its upward trend, with an estimated annual growth rate of around 3%, marking the highest level since 2022. Domestic demand played a significant role in driving local activity. Consumer companies are now back in positive territory and have been on an upward trajectory for over two years, while the national unemployment rate fell to its lowest level ever for a third quarter, averaging 8.5%. Alongside solid household income from both jobs and unemployment assistance, Colombians have been increasing their consumption, especially of goods, which has been aided by access to credit. Consumer loans saw their highest annual growth rate since 2023 in this quarter. The surge in domestic demand has also been bolstered by a record influx of over 7 million tourists so far this year through August. Additionally, government current and investment spending grew in real terms by more than 3% in the third quarter, further supporting economic activity. The sectors performing best are those most reliant on demand from both locals and tourists and the public sector, including commerce, entertainment, transportation, accommodation, manufacturing, food services, and finance. On the export side, we have seen strong results in coffee, processed foods, gold, bananas, and textiles, particularly leather, which countered declines in oil and coal exports. However, the ongoing lag in construction, particularly in residential buildings, continues to limit the sector's potential recovery, which is mainly driven by civil works, machinery, equipment, and biological resources investment. We anticipate that investment will recover post-2026 elections if uncertainty subsides. Looking ahead, while acknowledging global risks and the local electoral situation, we maintain a growth projection of 2.7% for 2025, aligned with potential levels, which is higher than our forecasts for 2023 and 2024. For 2026, we expect economic growth to improve to 2.8%. Regarding inflation, this process paused in the third quarter, with inflation at 5.2% in September, matching the year-end figure for 2024. October saw an increase to 5.5%. Inflationary pressures have remained due to rising food input costs, increased domestic demand for goods, and higher labor costs from adjustments in the minimum wage, labor reforms, and reduced working hours. Thus, we expect inflation to close 2025 around 5.3%, above the level projected for 2024. Consequently, pending decisions on 2026 wages, the Central Bank has maintained its benchmark interest rate at 9.25%, which may remain stable for much of 2026 unless there is significant improvement in inflation. Interest rates currently pose restrictions, particularly for investment. For households, the impact is expected to be limited, as the ongoing positive consumption trend relies mainly on resources other than credit. On the fiscal side, we anticipate that favorable global financial conditions for emerging economies, effective debt management, and stronger nominal GDP growth will reduce interest payments to between 3.2% and 3.8% of GDP, compared to the projected 4.7% of GDP in the medium-term fiscal framework. However, the primary deficit, excluding interest payments, is expected to approach historical highs, exceeding 3% of GDP, surpassing the 2.4% forecast for the world, only exceeded by figures from the local crisis at the end of the 1990s and during the pandemic. Despite the difficult state of public finances, the exchange rate fell from COP 4,102 per dollar to COP 3,970 per dollar between June and September, reflecting the global dollar's weakening. Moreover, the government's monetization of dollars from operations with international banks, total return swaps, and external bond issuances has made the Colombian peso the best-performing currency in Latin America. The government still has excess dollar balances and plans to issue new bonds worth up to COP 5 billion and secure direct credit from international banks up to $1 billion, ensuring continued impacts on the exchange rate. Ultimately, these cash flows will help mitigate the effects of electoral uncertainty expected to rise as elections approach. Lastly, we anticipate that the current account deficit will widen from minus 1.8% of GDP in 2024 to minus 2.6% in 2025, driven by a faster recovery in imports compared to exports, with commodity prices influencing trade terms. Notably, for the first time, remittances have overtaken oil exports as the primary source of foreign currency, enhancing the export basket's diversification. In summary, we are at the start of congressional and presidential elections, scheduled for the first half of 2026. It is too early to predict election outcomes, but economic forecasts suggest that Colombia will need a government focused on fiscal discipline, promoting private investment to reduce uncertainty, and making public policy decisions that encourage economic growth. That concludes my remarks.

Thank you. Thank you, Camilo. Moving to financial results. Our financial performance continued to improve with net income for the quarter reaching COP 521 billion, resulting in an 11.5% return on equity. The improvement throughout this cycle has been driven by consistent positive trends in the core business metrics of our banking segment. In addition, Porvenir was a strong contributor to our quarterly results. Gross loans and deposits grew 2.1% and 0.4% over the quarter, reaching 4.6% and 8.5% over 12 months. Consumer loans had the strongest quarterly growth in 10 quarters at 1.5%. As we had anticipated in our last call, commercial loan dynamics recovered significantly, growing 2.1% during the quarter. The strong performance in commercial lending includes benefits from the joint efforts of our banks with Aval Banca. Peso-denominated commercial loans grew 3.1% over the quarter, the fastest pace in the last 8 quarters. Given our exposure to U.S. dollar-denominated loans, the 3.6% appreciation of the peso over the quarter had a negative impact on growth metrics. Our net interest income grew 11.6% to COP 2.9 trillion during the quarter, while our net interest margin improved to 4.3%, incorporating a consolidated NIM on loans of 4.6%. 90 days PDLs were 3.7%, the lowest level since the fourth quarter of 2022. Our cost of risk for the quarter was 1.9%. During the quarter, our investment portfolios performed well, driving NIM over investments. The performance of Porvenir's stabilization reserve during the quarter was robust. Now I would like to pass the call to Diego, who will give you our results. Diego?

Thank you, Maria Lorena. I will start on Pages 12 and 13 with a few charts showing the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system. For comparability reasons, these are on consolidated figures under Colombian IFRS as published by the Superintendency of Finance. Starting on Page 11 for the 12 months ending in August 2025, commercial loans and mortgages for the system grew 0.8% and 5.8% in real terms, while consumer loans contracted 2.4% in real terms. Year-on-year, our Aval Banks gained 56 basis points of market share in consumer loans, 188 basis points for mortgages, and lost 77 basis points in commercial loans. This yielded year-on-year market share losses of 9 basis points in total loans. For the last 3 months, loans grew 1.6% in the system. This market growth begins to show signs of recovery, considering a 0.8% inflation rate. Mortgages grew 2.8% and commercial loans, 1.1% in nominal terms over the quarter, while consumer loans maintained their growth trajectory with a 1.7% increase for the quarter. On Page 12. Loan quality for both the system and the Aval Banks showed an improvement during the quarter in most loan categories. Our banks continue to exhibit better loan portfolio quality than the system in gross loans, mortgage loans, and consumer loans. I will now move to the consolidated results of Grupo Aval under IFRS. On Page 13, assets grew 7.2% year-on-year and 2.4% over the quarter to COP 344 trillion. Fixed income investments, which account for 17% of our assets, reached COP 58 trillion, growing 24% year-on-year and 9.3% during the quarter. Gross loans, which account for 59% of our assets, reached COP 203 trillion, growing 4.6% year-on-year and 2.1% over the quarter. Growth metrics were affected by the 3.6% appreciation of the Colombian peso during the quarter and 6.1% over 12 months. This peso appreciation reduced gross loan growth by 1.1 percentage points year-on-year and 0.6 percentage points quarter-on-quarter. Peso-denominated loans that account for 84% of gross loans grew 6.1% year-on-year and 2.8% during the quarter. While dollar-denominated loans, which account for 16% of gross loans grew 3.4% year-on-year and 1.8% in dollar terms over the quarter. Given the appreciation of the Colombian peso, our dollar-denominated loans contracted 2.9% year-on-year and 1.8% quarter-on-quarter in peso terms. Although retail loans continued to drive our growth, commercial loans have shown positive signs for the quarter. Consumer loans grew 4.1% year-on-year and 1.5% in the quarter. Gross loans growth continues to recover, increasing 4.4% year-on-year and 1.1% during the quarter. Personal loans grew 7.6% year-on-year and 4% during the quarter; auto loans grew 1.9% year-on-year and 0.1% during the quarter; and finally, credit cards contracted 3.4% year-on-year and 0.4% during the quarter. Mortgages, where we continue to be underweighted, grew 18% year-on-year and 3.5% over the quarter. Finally, commercial loans expanded 2.2% year-on-year and 2.1% during the quarter. This incorporates a negative impact of the peso appreciation of 1.4 percentage points year-on-year and 0.8% quarter-on-quarter. We expect our 2025 loan growth to be around 4.5%, incorporating a negative effect of the peso appreciation on dollar-denominated loans. On Page 14, we present the evolution of funding and deposits. Total funding increased 8.1% year-on-year and 2.9% during the quarter. Total bank borrowings grew 19% year-on-year, in line with the expansion of our investment portfolio, and account for 8.8% of total funding. Deposits that account for around three-fourths of our funding grew 8.5% year-on-year or 0.4% quarter-on-quarter. Our deposits to net loan ratio closed at 109%. On Page 15, we present the evolution of our total capitalization, our attributable shareholders' equity, and the capital adequacy ratio of our banks. Our total equity increased 2.9% in the quarter and 5.6% year-on-year, while our attributable equity increased 3.7% during the quarter and 5.9% year-on-year. Total solvency and Tier 1 ratio evidenced an increase in all of our banks. On Page 16, we present our NIMs. Net interest income reached COP 2.9 trillion, increasing 20.6% year-on-year and 11.6% during the quarter, driven by the strong performance of our trading investment income. Part of the quarterly net interest income was offset by hedging and derivatives that I will comment later when covering other income. Total NIM increased 35 basis points to 4.35% quarter-on-quarter. Our consolidated NIM on loans expanded 21 basis points year-on-year and contracted 6 basis points during the quarter to 4.4%, while NIM on investments improved to 4.13%. NIM on loans incorporates a 60 basis points year-on-year expansion in NIM on retail loans to 5.9% and a 13 basis points year-on-year contraction of NIM on commercial loans to 3.28%. Focusing on our banking segments, the NIM on loans was 4.88%, materially stable year-on-year. This incorporates a 41 basis points year-on-year increase in NIM on retail loans to 6.4% and a 39 basis point year-on-year decrease in NIM on commercial loans to 3.72%. The total NIM of our banking segment expanded 17 basis points from the quarter to 4.74% due to the same dynamics that affected our consolidated NIM. On Page 17, we present our yields on loans, cost of funds, and spreads. On a consolidated basis, the average yield on loans for the quarter decreased 2 basis points quarter-over-quarter to 11.7%, while the average 3-month IBR fell 6 basis points to 9.2%. Our consolidated cost of deposits remained relatively flat during the period, while our cost of funds slightly increased by 7 basis points quarter-on-quarter to 6.83%. The increase in the cost of funds is mainly attributable to a higher repo position related to our fixed income business. Finally, the Central Bank CapEx policy rate remained unchanged at 9.25% throughout the third quarter amid persistent inflationary pressures. We expect this level to remain over the following few quarters with rate cuts beginning by the end of 2026. On Pages 18 through 20, we present several loan portfolio quality ratios. Starting on Page 18, loan portfolio quality further strengthened during the quarter. PDL metrics continued to improve in all categories. 30-day PDL formation for the quarter reached COP 1.083 trillion, 23% lower than for the third quarter of 2024. 30-day PDLs were 4.64%, a 17 basis points improvement over 3 months and 113 basis points improvement over 12 months. 90-day PDLs were 3.37%, a 15 basis points improvement in the quarter and a 93 basis points improvement over 12 months. Commercial 30-day PDLs were 4.29% and 8 basis points improvement quarter-on-quarter and 110 basis points year-on-year. 90-day PDLs were 3.69%, an 18% improvement over the quarter and 105 basis points over the year. Consumer 30-day PDLs improved 39 basis points for the quarter and 136 basis points year-on-year to 4.68%, while 90-day PDLs improved 13 basis points during the quarter and 84 basis points year-on-year to 2.71%. Mortgages 30-day PDLs and 90-day PDLs improved 2 basis points and 5 basis points, respectively, over the quarter. Finally, the ratio of charge-offs to average 90-day PDLs was 0.71x. On Page 20, coverage measured as allowances for Stages 2 and 3 as a percentage of Stages 2 and 3 loans was 31.9%, increasing 38 basis points relative to the previous quarter. The shareable portfolio classified as Stage 1 grew to 89.1%, while Stage 3 fell for a fourth consecutive quarter to 5.8%, driven by improvements across all portfolios. On Page 20, cost of risk net of recoveries slightly increased this quarter to 1.9% in line with our expectations for the year. We expect 2025 cost of risk to be in the 1.9% range. Cost of risk net of recoveries from consumer loans improved 33 basis points to 3.9%. This includes a 41 basis point improvement in personal loans to 7.7% while cost of risk for payroll loans was 1%. On Page 21, we present net fees and other income. Gross fee income grew 11.8% year-on-year and 7.5% quarter-on-quarter. Net fee income increased 11.5% and 8%, respectively, over these time periods. Both pensions and trust fees increased over the quarter due to high performance-based management fees driven by positive returns in financial markets. Banking fees increased 4.7% above growth in loan activity. Our income from the non-financial sector was 88% of that reported in the third quarter of 2024 due to a lower contribution from the infrastructure sector. Finally, on the bottom of the page, the quarter-on-quarter decrease in operating income is mainly driven by derivatives and FX losses of COP 211 billion. These were mainly explained by hedging strategies for trading income in our fixed income instruments. On Page 22, we present some efficiency ratios. Cost to assets for the quarter was 2.7%, including a 9 basis points relative to a quarter earlier and increased 9 basis points year-on-year. Our quarterly cost-to-income improved 124 basis points to 50.7% over the quarter, driven by the positive performance of our NIM. Quarterly expenses fell 1.4% quarter-on-quarter and grew 10.3% year-on-year. General and administrative expenses fell 0.8% quarter-on-quarter and reached 16% year-on-year. The year-on-year increase was driven by operating taxes, which account for 26% of this category and explain 7.9 percentage points of the year-on-year growth in administrative expenses. Personnel expenses grew 1.4% over the quarter and 4.8% year-on-year, well below the 9.5% increase in Colombia's minimum wage. Finally, on Page 23, we present our net income and portfolio ratios. Attributable net income for the quarter was COP 521 billion or COP 21.9 per share, increasing 25.3% relative to the third quarter of 2025, the highest since the second quarter of 2023. Our return on average assets and return on average equity for the quarter were 1% and 11.5%, respectively. I will now summarize our general guidance for 2025 and 2026. For 2025, we expect return on average equity to be in the 10.5% area with loan growth in the 4.5% area with commercial loans growing in the 2% area and retail loans growing 8.5%. This incorporates an expected negative impact of the peso appreciation of 2 percentage points on commercial loan growth. We expect our consolidated NIM to be in the 4% area with the NIM on loans in the 4.5% area. NIM of our banking segment is expected in the 4.6% range with NIM on loans in the 5.1% area. Cost of risk net of recoveries is projected to be in the 1.9% area, cost of assets in the 2.75% area, income from the non-financial sector of 85% for that of 2024, and fee income ratio in 21%. Now moving to our initial view for 2026. We expect loan growth in the 8% area with commercial loans growing at 7% and retail loans growing at 9%. Total NIM in the 4.3% area with NIM on loans in the 5.2% area. NIM of the banking segment is expected to be in the 5% area with NIM on loans for the banking segment in the 5.6% area. Cost of risk net of recoveries in the 2% area cost to assets in the 2.8% area, income from the non-financial sector of 1.3 times that for 2025, and a fee income ratio of only 1%. Finally, we expect our 2026 return on average equity to be in the 12% to 12.5% range.

Thank you, Diego. Finally, looking ahead, 2026 will be challenging for Colombian businesses, particularly during the first part of the year. The electoral cycle will bring political uncertainties that can be expected to bring volatility in the financial markets and delay investment decisions. In addition, the market consensus anticipates a high Central Bank real interest rate to prevail, incorporating fiscal balance concerns and inflationary pressures due to a high minimum wage increase. Even though we recognize this to be a challenging environment, we remain positive for the continued recovery of the industry in which we operate. This view is supported by the expectation of a sustained expansion of economic activity, a stable labor market, a slight improvement in asset quality, a reduction in average cost of funds relative to the year, and opportunities for further banking penetration resulting from the introduction of Bre-B. In addition, we are working hard and focused on unlocking fundamental value supported by our strategic pillars. First, we expect to improve our presence in loans and deposits in the retail segment, adding to the segments and businesses where we already lead, which will result in improvement in NIM and further growth. We continue working on improving the alignment of the strategy and culture of our banks around a more client-centric experience, further differentiation in target segments and products of each one of the business units, as well as the redesign and centralization of key processes in Aval Valor Compartido. We expect these elements to translate into a better customer experience, shorter innovation cycles, and time to market, and more competitiveness in our cost structure. We are committed to having a positive impact on the community and those we serve without losing focus on commercial and financial performance. Finally, regarding year-to-date share price performance, the price of our preferred shares has increased by 82%, 1.6 times that of the index. Our ADR increased by 116%, 10.3 times that of the Standard & Poor's 500. We are evaluating several options to further liquidity for our local shares and our ADR. On this front, we reached an agreement with the depository bank of our ADR program to reduce by 80% the conversion cost of the issuance and cancellation of the ADRs in the United States. This measure will be effective starting next Monday, November 17, 2025, through next month and year April 17, 2026. So now we are open to questions.

Our first question will come from Brian Flores with Citibank.

The first question is more of a request. If you could repeat the guidance, I think you focused only on general loan growth and ROE for '25 and '26. It would be great. I try to catch it, but honestly, I have bad hearing. So apologies on that. On the second point, I wanted to ask you about the contribution from trading and other operating income. Do you think these levels are sustainable because we have seen good contributions from these lines in the second quarter and also in this third quarter? So just if we can think about these levels on a recurring basis. And my last question is on your NIM profile. It seems the NIM on loans is declining, but also the NIM on investments is increasing very healthily. So also, how recurring do you think this is?

Brian, I think those are great questions. Let me start with the easiest one and just to recap our loan growth guidance. For this year, we are guiding to 4.5% with retail loans growing at 8.5% and commercial loans at 2%. That 2% includes a relevant negative impact of FX over our U.S. dollar-linked loans. For next year, we're guiding to 8%, with a similar growth on the retail front, retail growing at 9% and commercial growing at 7%. This includes a combination of not having the negative impact and eventually having a positive income from FX and then reflecting growth over the past few months and I would say over the past quarters recovering on that front. Then I think questions 2 and 3 are linked, and we are thinking about how to better transmit this to you guys. On the trading front, you should look at our numbers with three lines in mind. You need to be aware of what is happening in net interest margins, trading income, and what is happening on the derivatives front. That's why I emphasized during the call that we had a negative effect from derivatives that impacted the results in the fixed income sector. What I'm getting at is that when you consider those lines, our performance has been strong. However, given that we are conservative there and we hedge, we are trying to lock in the kind of returns that we are looking into. The area where we had an upside this quarter was due to a very strong performance from Porvenir. We expect to continue seeing positive performance from Porvenir, but this was a particularly strong quarter. Overall, that is what is happening in the numbers. Regarding the trends of peso loans and investments, there's an effect of having grown our fixed income portfolio, which is financed largely with repos. So we didn't want to change our methodology. But if you earmark the cost of those repos to fixed income, you see a better performance on the loan side; however, for comparability, we didn't want to make adjustments in each of the quarters. To get to the substance of your question, we are seeing an improvement in pricing of loans, and actually, something that is built into our guidance is that we are working on improving our mix, both on the asset side and on the liability side. So you see in the guidance, we are guiding to better numbers for NIM for next year, but also a slightly worse number on the cost of risk side; what that is doing is it's leading us to grow more on some of the products that we haven't grown in the past, and we are creating a richer mix on the asset side. We are doing essentially the same on the liability side, where we're growing our deposits from the retail base for individuals, which is progressively helping us and is built into those numbers. So, bottom line, we are positive on the evolution of NIM. It's still shy of the stable numbers we used to see before the long cycle because of the Central Bank policy changes. But a lot of this growth is not dependent on Central Bank policy; rather, we’re building it into our numbers. Sorry for the long explanation, but your questions are very relevant for understanding our future outlook.

No, it was very helpful. If I can, just a very quick follow-up. Can you repeat the levels of cost of risk and ROE for both '25 and '26?

ROE for this year is in the 10.5% area and for next year, it is in the 12% to 12.5% range. Cost of risk for this year is 1.9% and for next year, it is 2%.

So just a quick follow-up there on asset quality. So we're seeing most metrics improving, cost of risk down at 1.9%, similar to what you guided. Just to get a sense on what you expect going forward? And also a quick question on coverage. So we saw stable 90-day NPL ratios of 130%. So what level should we work with going forward? Do you expect this to continue?

I have to be shortsighted on the answer to this one because it's very macro dependent. For next year, we're looking at a cost of risk that is built in, aiming closer to the end of the cycle of recovery. That's why we are not including any substantial improvement or any relevant shift in cost of risk as a target. It depends very much on how further years look like and what our sustainable costs of risks would appear. This built-in perspective considers a GDP growth close to 3% for Colombia, a stable labor market, and a slight reduction in rates by the end of next year, which should support that kind of level with a changing mix towards these kinds of assets that I previously mentioned. The coverage side is very much dictated by mechanics and how you provision under full IFRS, so it's not a target; it's a result that depends on how our different stages are behaving and what provisions we're making and our write-off policies. Therefore, I would suggest placing much more emphasis on the new PDL formation, as it anticipates how things are going to evolve in the future, where the trend has been consistently positive for our banks.

I have a question. My first one is regarding OpEx and efficiency ratios. How should we think about the synergies coming from Aval Valor Compartido? What will be the targeted efficiency ratio and the potential impact on ROE in 2026 and the subsequent years? Because, if I'm not mistaken, it seems that the guidance of cost to assets suggests an increase from 2.5% to 2.8%. I would like to understand if OpEx will be in line with inflation or above or below? That would be my first question. The second one is very short; I would like to understand the impact on interest expenses this quarter, especially regarding the interbank borrowings. I would like to know what was behind that? And if this is one-off or should we expect a similar impact going forward?

Starting with your last question, I believe that's along the lines of Brian's question. What we've been doing over the past few quarters is increasing our position in FX, and that position is being financed with repos, which has affected our repo position. As such, the increase in expenses is primarily attributable to higher volume tied to the larger positive carry on the other side of the balance sheet. Regarding OpEx, Colombia is facing pressure for the next year on the inflation side. We've built into our numbers a minimum wage increase that could be in the order of 11%. So when you start with loan growth in the 8% range and into account a minimum wage increase, alongside an ending forecast for inflation around 5.3%, you're looking at input pressure on expenses that begins there. The other part of your question is that we are still in the early phases of the Aval Valor Compartido initiative. We started with administrative processes, and those processes are being implemented. There are some restructuring costs associated with this, which may delay the net results from these initiatives. However, as Jorge Otalvaro previously mentioned, we have a large vision, and we’re moving into our next phase, which will address back office and operational processes next year. When we have additional information, we can readdress that question to provide a clearer projection on expectations.

And there are no further questions at this time. Ms. Maria Lorena Gutierrez Botero, I turn the call back over to you.

Okay. Thank you for your attendance on today's conference call. This is the last time we meet in 2025. So see you next year. And I wish you all a happy holiday season. Merry Christmas, Happy New Year. Thank you for being with us.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.