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What does Aval Pref ADR do and what are its main business segments?

What factors drove the changes in Aval Pref ADR's revenue and profit?

- **Record Q1 Performance**: Net income up 28% QoQ, loans share at 25.3%, and NIM on retail loans at 5.8%.
- **Strategic Momentum**: AI partnership with Microsoft, Augusta customer database, and 70% transaction growth in real-time payments.
- **Challenges Ahead**: Slower NIM recovery due to high rates, cautious loan growth, and 2025 ROE guidance of 10%-11%.
- **ESG Leadership**: Top 3 in financial sector ESG ranking, 55% female workforce, and 300 tons CO2 reduction via biogas.
- **Macroeconomic Risks**: Fiscal deficit (60% of GDP), 2.7% GDP growth, and 4.7% inflation by year-end.


**【CEO Summary Section】**
- Q1 2025 net income reached Ps. 362 billion, a 28% increase from Q4 2024 and 3.2x higher than Q1 2024. Market share in loans expanded to 25.3%, with mortgages at 16.6%, the highest in history.
- NIM on retail loans reached a two-year high, but total NIM on loans remained flat due to competitive pressures in corporate loans.
- Customer experience initiatives include a loyalty program, integrated customer database (Augusta), and standardized Net Promoter Score (NPS) measures.
- Strategic priorities: financial diversification (retail deposits, interest rate risk management), operational efficiency, AI adoption (partnership with Microsoft), and ESG integration.

**【CFO Financial Commentary】**
- Assets grew 7.5% YoY to Ps. 330 trillion, with gross loans up 5.4% YoY to Ps. 199 trillion. Mortgage and consumer loans drove growth, while commercial loans faced pricing competition.
- NIM on loans was 4.4% YoY, with retail NIM up 96 bps to 5.8% and commercial NIM down 81 bps to 3.4%. Cost of funds fell 37 bps QoQ to 6.8%.
- Cost of risk improved to 2.0% QoQ, with consumer loans showing 32 bps improvement. Fee income grew 6.2% YoY, driven by pension and banking services.
- 2025 guidance: loan growth of 9% (commercial 7%, retail 11%), NIM on loans in the 4.5% range, ROE 10%-11%.

**【Q&A Key Takeaways】**
- **ROE Guidance Adjustment**: Lower ROE range (10%-11%) reflects slower Central Bank rate cuts and cautious loan origination amid competitive pricing.
- **Pension Reform Impact**: Neutral guidance assumes potential negative long-term flows offset by short-term fee gains; Porvenir prepared for regulatory changes.
- **Asset Quality**: Stage 2 reclassification (Stage 2/3 coverage 33.3%) is mechanical, not indicative of trend; cost of risk expected to stabilize below 2.0%.
- **Political Uncertainty**: 2025 elections and policy reforms (labor, health) may weigh on business sentiment, though economy shows resilience.

**【Macroeconomic Outlook】**
- Colombia's Q1 2025 GDP growth of 2.8% driven by public spending and consumption; 2025 GDP forecast 2.7% amid global trade risks.
- Inflation expected to end 2025 at 4.7%, with Central Bank rate cuts to 8.5% by year-end, constrained by fiscal deficit (60% of GDP).
- Exchange rate projected at Ps. 4,300/USD, with external deficit widening to 2.6% of GDP due to import recovery.

**【ESG Highlights】**
- Grupo Aval ranked 3rd in financial sector for ESG, with Corficolombiana (8th) and Porvenir (2nd) leading non-banking entities.
- Social initiatives: 45 communities with water solutions, 81 with energy, and 35% female management representation.
- Environmental efforts: Banco Popular generating 570,000 kWh/year via biogas, reducing 300 tons of CO2.


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