Grupo Aval Acciones y Valores S.A. ADR (Each representing 20 preferred shares)

Welcome to Grupo Aval's fourth quarter 2019 Consolidated Results Conference Call. My name is Hilda, and I will be your operator for today. Grupo Aval, Acciones y Valores S.A., Grupo Aval, is an issuer of securities in Colombia and in the United States. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation. Grupo Aval is also subject to the inspection and supervision of the Superintendency of Finance, as holding company of the Avalk Financial Conglomerate. 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-GAAP measures, such as ROAA and ROAE, among others, are explained when required in this report. 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. 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 and the SEC. 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, but we expressly disclaim any application to review, update, or correct information provided in this report, included any forward-looking statements, and do not intend to provide any update for such material developments prior to our next earnings report. 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. 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. I will now turn the call over to Mr. Luis Carlos Sarmiento Gutiérrez, Chief Executive Officer. Mr. Sarmiento Gutierrez, you may begin.

Thank you, Hilda. Good morning, and thank you all for joining our fourth quarter 2019 conference call. Although it is my pleasure to share with you our strong financial results for the year 2019, and I'm also happy to say that the first two months of 2020 have us on track to meet our budgets, I can't minimize the concerns that we have over what is going on globally with the COVID-19 and the oil dispute between Saudi Arabia and Russia. From our perspective, because we haven't seen the full impact of this global pandemic, and because we feel that there is still a lot to happen in the oil war, we believe that it is far too early and even imprudent to venture a revised prediction for Colombia's and Central America's economies, let alone a revision of our own 2020 guidance. We will therefore leave unchanged our 2020 guidance until we have a better grasp and more research on which to support any changes. Today, we will address the macroeconomic performance during 2019 of those countries where we predominantly operate, as well as our own financial results. We will refer to the billion-dollar bond that we recently issued, and as usual, we will provide an update regarding the legal processes of Ruta del Sol. I will just take an additional moment to stress that we are putting forth all possible and necessary efforts to protect the health of our employees via home office programs, health advice, and the elimination of practically all business traveling and live meetings. And we're also protecting our clients by placing at their disposal and emphasizing the use of all possible ways to digitally access their products and services. Moving on to the macro scenario. Colombia's economy, where almost 70% of our consolidated business resides, continued its path of acceleration during 2019. GDP growth during the fourth quarter was 3.4%, bringing GDP growth for the year to 3.3% up from 2.5% in 2018. This welcome level of growth was not evidenced since before 2015. It was precisely in 2015 that the Colombian economy had to adjust to the shock from a 70% decrease in oil prices. Just as importantly, Colombia's GDP growth during 2019 happened during the broad economic slowdown that especially affected all other Latin American economies. Additionally, last time that they were measured in February, Colombia's fundamentals were still going strong and high-frequency data showed positive momentum in consumer spending and private investment. However, as approximately 40% of Colombia's total exports are represented by oil, and because Ecopetrol is a very significant taxpayer, a persistent decline in oil prices will most likely widen the country's trade and current account deficits, worsen next year's fiscal outlook, have an adverse effect on domestic demand, and curtail growth below 3%. Having said that, if one was to find differences between the oil shock of 2015 and the one we're living through these days, two are perhaps of relative importance. One, one must recall that an oil barrel was priced in excess of $110 in mid-2014. By February 2016, right before oil prices started to rebound, oil had lost $78 per barrel. This time around, the price of an oil barrel was around $55 just before Saudi Arabia and Russia refused to agree on production cuts. Simple math indicates that the 2015 scenario can't be relived. Two, around September of 2014, the exchange rate in Colombia hovered around 1,900 pesos per dollar. By December of 2015, the peso had devalued by almost 75% to almost 3,300 pesos per dollar. We see a remote chance that on this occasion, the peso will devalue another 75% towards an exchange rate of 6,000 pesos per dollar in the next 12 months. Those two differences alone might signify that this time the economy will hardly be impacted as much as in the previous 2014-2016 shock. Having said that, certain industries, especially the airlines, hotels, and other tourism-dependent sectors are disproportionately getting hurt. Coming back to the country's GDP growth in 2019, this result was mainly driven by stronger private consumption and investment from the demand side, which increased by 4.6% and 4.3% respectively, compared to 1.2% and 1% a year earlier. The increase in private consumption was driven by, one, the stability in monetary policy, two, the increase in remittances from abroad, three, the increase in expenditure of Venezuelan migrants, and four, a growth higher than the inflation in formal employee wages. From the supply side, GDP growth was driven by sectors such as commerce, which grew 4.9%, financial services that grew 7.9%, and professional services that grew 7.7%, all of these which grew at a stronger pace than average GDP, while sectors such as construction, which decreased by 2.7%, and communications that grew by 1.5% grew at a slower pace. The country's trade deficit continued to be the weakest component from the demand side, increasing to 3.8% in 2019, from 2.7% in 2018 driven by weaker exports, which decreased by 5.7%, as Colombia has not been able to significantly increase exports of non-traditional products. Instead, imports increased by 2.7%, driven by strong private consumption. These factors explain the widening of the current account deficit that reached 4.3% of GDP in 2019 from 3.9% in 2018. Employment continued to deteriorate in 2019 and averaged 10.5% for the year, up from 9.7% in 2018. The average unemployment rate in the 13 metropolitan areas rose from 10.8% in 2018 to 11.2% in 2019. Lack of enough job creation and the impact of the migration of millions of Venezuelans to this country seem to be the main causes for the resilience in unemployment. It must be noted, however, that during January of this year, average unemployment in the 13 principal cities in the country saw improvement as it dropped year and year by 80 basis points, from 13.7% to 12.9%, the lowest there has been for the month of January in the last five years. Annual inflation rose to 3.8% by the end of 2019 from 3.2% in 2018. Inflation started the year on a downward path, reaching 3% in February of 2019. However, in the second and third quarters, inflation increased, mainly driven by pressures on food prices, which increased by 5.2% in 2019 versus 2.4% in 2018. We expect that for the most part, the transitory shocks that affected food prices in 2019 will dissipate in 2020. Additionally, the consumption basket upon which inflation numbers are built was recently redefined to decrease the share of tradable goods and increase the share of services. This implies that consumer prices are now less prone to fluctuations in the exchange rate. If inflation stays under 4% in 2020, we see no need for a change in monetary policy. However, the economic backlash from the dual shocks mentioned before might result in a significant rise in consumer prices. Consequently, and although we do not expect to see inflation rise as much as it did in 2015, the central bank might be forced to restate its policy in the upcoming weeks, as we have already seen in the USA and other countries. The country's fiscal deficit was reduced from 3.1% in 2018 to 2.5% in 2019, even lower than the 2.7% limit established by the fiscal rule for the year. This positive behavior was driven by strong tax collections and higher than expected dividends paid by Ecopetrol. As mentioned in our previous calls, meeting 2020's target of 2.3%, will be challenging without relying on one-off revenues. Additionally, current pressures from the recent oil price environment might significantly decrease Ecopetrol's profitability, and with it, its ability to pay taxes and dividends, which will in turn pose additional challenges to this year's fiscal rule target. During 2019, the exchange rate was highly volatile, ranging between 3,072 and 3,522 pesos per dollar. Although the valuation of the peso between December of 2018 and December of 2019 was only 0.8%, on average, the exchange rate depreciated 11% during the year as a result of two very different trends. First, in the first months of the year, there was a strengthening of the peso against the dollar, mainly associated with the recovery of the price of oil. And in contrast, starting in the month of May, the dollar strengthened globally, driven by the scaling of the trade war between the United States and China. At year-end 2019, an exchange rate of approximately 3,400 pesos per dollar seemed to be the new norm. However, The current shock to the economy has already driven it closer to 4,100 pesos per dollar. It's tough to imagine that it will yield in the upcoming weeks. Moving on to Central America, during 2019, the region's GDP grew 2.7%, less than it had grown in 2018 when it grew at 3.1%, associated to the worldwide economic growth slowdown. It should be noted that growth was better in the second half of the year at 3% than in the first half at 2.6%. Within the region, as of September 2019, date for which information by country is available, Guatemala was the best performer with GDP growth of 3.6%, followed by Panama with 2.9%, Honduras and El Salvador with 2.4%, Costa Rica at 1.7% and Nicaragua at minus 5%. 2020 should see somewhat better growth derived from the operation of a new copper mine, Cobre Panama, and other infrastructure projects in Panama, a better performance from agriculture in Honduras, and the first year of a new government in El Salvador. The implementation of the 2019 fiscal reform in Costa Rica will remove the fiscal uncertainty that the country lived under last year. In Nicaragua, the economy is expected to moderately recover in 2020, but still contract around 1%. We therefore expect that regional growth for 2020 will be around 3%. Moving on to financial highlights. Although Diego will refer in detail to our financial performance, these are a few highlights. In general, our results for 2019 were driven by, one, a better performance of the Colombian economy, two, better loan portfolio quality, which resulted in lower cost of risk, three, strong returns in our fixed income and equity portfolios, four, solid performance in commissions and fees, five, successful continuation of our digitalization and cost optimization efforts, and six, solid contribution from our non-financial entities. As a result, 2019 marked the first year in our history that our net income exceeded 3 trillion pesos. In fact, Aval's total net income amounted to 3.03 trillion pesos, or 136 pesos per share, an increase of 4.2% versus 2018. Consequently, the return on average equity for the year was 16.4%. Non-recurrent expenses for the year affected the bottom line by approximately 190 billion pesos, mainly driven by provision expenses booked in relation to CRDS and SITP. For illustration purposes only, recurrent net income between 2018 and 2019 grew by more than 11%. By December, we had fully provisioned all the problem commercial loans that we had been talking about for the last three years. We also wrote off all loans to Electricaribe. At December, Aval's tangible capital ratio had risen to 9.2%. Consolidated assets grew by 7.4%, and consolidated loans grew by 6%, driven by an 8% increase in consumer loans a 9% increase in mortgage loans, and a 4% increase in the commercial loan portfolio. The 2019 net interest margin was 5.7% versus 5.67% in 2018 as a result of a 6.4% name on loans and a 2.3% name on investments. 30 and 90-day past due loans were increased by the inclusion of 762 billion pesos in PDLs as a result of the CRDS loans becoming due and unpaid during the year. However, these indicators ended the year at 4.36% and 3.26%, respectively, only 10 and 19 basis points higher than in 2018. Allowances for 90-day PDLs reached 140% at year end. Cost of risk for 2019 was 2.2% versus 2.4% a year earlier. Importantly, cost of risk for the fourth quarter was 2.1% compared to 2.5% in the previous quarter and 3.1% in the fourth quarter of 2018. Due mainly to strong banking and pension fund fees, Net fee income for the year increased by approximately 13%, or 15% in the fourth quarter versus the same quarter in 2018, and 10% versus the third quarter of 2019. Although income from Corfi Colombiana's non-financial sector investments declined, due mostly to the non-recurrent income from these investments during 2018, Corfi Colombiana continued to contribute with its strong results during 2019, especially derived from its investments in toll road concessions. Personnel, including severance costs and SG&A expenses, grew by 6.1% during the year, but only 2% when excluding FX. Finally, complementing our balance sheet's strong funding and liquidity positions, the deposits to loans ratio finished 2019 at 1.01 times and the cash-to-deposits ratio at approximately 17.2%. Moving on to the progress we made during 2019 in our digital efforts, these are a few highlights. Our consolidated digital clients increased to 3.5 million. We now offer 22 100% digital products through our banks, up from 15 at 2018. We now use advanced analytics in 31 of the most important operating processes in our banks, up from 14 in 2018. Our digital sales increased from 230,000 in 2018 to 940,000 during 2019. We continue to increase penetration of digital sales as a percentage of total sales and are now up to 35% while 60% of total banking transactions are now digital in nature. Our digital strategy is based on three objectives. First and foremost, we have been and will continue to digitalize all possible existing products and operations of our banks and pension fund manager. The execution of this first objective allows us to be more efficient and to offer a better service by improving customer journeys. However, we realize that this same effort is being undertaken by other banks around the world and by the top banks in Colombia. Accomplishing this objective is a bank's ticket to play for the future, and therefore, we are currently focusing most of our digitalization effort on this first objective. The second objective to develop is new digital business models. This is the creation of new products and services such as DALI, a 100% digital platform which we launched a few weeks ago. Accomplishing this objective should allow us to serve new segments and markets which we couldn't previously serve, mainly due to cost. Although these platforms should make clients out of people who have not wanted to work with traditional banks, younger generations more inclined to maintain exclusively digital relations with their banks, and people who have not been sought out by banks and therefore are still to become bank clients. Third and final objective is to generate or participate in ecosystems. Accomplishing this objective entails offering our digital financial products and services as a complement and a way to generate added value to ecosystems through which other non-banking products and services are offered. Moving on to legal. Regarding ongoing legal matters related to Ruta del Sol, I will briefly share with you an update on the most relevant developments. The main development is related to the Tribunal Administrativo de Cundinamarca, or TAC. As you may recall, on December 2018, a class action suit was ruled, in first instance, against TRDS, its shareholders, including EPISODE, and other individuals and entities not related to EVAL or its affiliates, jointly and severally, to pay damages to the nation for approximately 715 billion pesos. An appeal was filed on February 2019, and consequently, the first instance ruling was suspended until the appeal is decided by a higher court, the Consejo de Estado. However, on October 24, 2019, the Consejo de Estado, which has not yet ruled on the appeal, modified the suspensive effect of the appeal. Changing the effect could be construed to mean that the fine must be paid and other components of the ruling would take effect even before the appeal has been decided. All the parties involved submitted legal requests to get that decision overturned. On February 14, 2020, the Consejo de Estado ruled in relation to the effects of the appeal, stating that the decision of the first instance ruling will only become effective in the case that the appeal is lost. Consequently, The first instance ruling will continue on standby until the appeal is decided by the Consejo de Estado. In the antitrust investigation conducted by the Superintendency of Industry and Commerce, in the next months or so, an informe motivado should be presented to the superintendent. This is a document prepared by the antitrust area within the SIC recommending a course of action in reference to the investigation, including confirming the charges, imposing fines, and or discharging one or all the defendants. Finally, on January 28th, we issued a senior bond in the international capital markets for a total value of a billion dollars with a tenor of 10 years and a coupon of 4.38%. The demand for the notes, which reached three times the amount issued, came from more than 200 investors from the United States, Europe, Asia, and Latin America. The bonds were issued by Grupo Aval Limited, a subsidiary of Grupo Aval, guaranteed by Grupo Aval in accordance with Rule 144A and Reg S, issued under the Securities Act of 1933 of the United States of America. In line with the use of proceeds included in the offering memorandum, Part of the net proceeds, approximately half, will be used to wholly subscribe a Basel III-compliant HD-1 at-back credomatic. The rest of the proceeds will be kept in highly liquid short-term investments and or loaned to some of our operating subsidiaries. And with that, I'll pass it on to Diego, who will now explain in detail our business results.

Thank you, Luis Carlos. I will now move to the consolidated results of Grupo Aval under IFRS. 2019 has been our best year in net income so far. Four elements drove our performance. Number one, positive results in interest income driven both by a pickup in loan growth and a strong valuation and OCI realization in our fixed income investment portfolios. Second, 20 basis points decrease in cost of risk. Third, strong contribution of net income from commissions and fees, particularly in pension fund management and banking fees from Central America. And fourth, a favorable impact of tax reform on our statutory tax rate. We achieved these positive results amidst a still low growth scenario of our loan portfolio. Although we were positive on growth for 2020, given the recent developments, we're cautious and guiding on performance in this highly fluid environment. The global economy is expected to lose traction due to interruptions in trade and production, as well as overall lower consumption that results from COVID-19. We're thus expecting a moderation in economic activity in Colombia as a result of the global scenario that could be exacerbated by the impact of low oil prices. Moving to page 10, assets grew 7.4 over the year and 1.8 during the quarter. Colombian assets grew by 8.2% over the year and 3.7 during the quarter, driven by cash, fixed income investments, and net loans. Central America, which weighs close to 30 percent of our book, saw 4.7 and 3.5 percent growth in dollar terms over the year and the quarter, respectively, driven as well by increasing investment portfolios and net loans. Excluding the 4.6 annual contraction of Nicaragua, total assets of Central America and operations grew 5.3 percent in dollar terms. Finally, an annual 0.8% depreciation and quarterly appreciation of 5.8% of the Colombian peso brought annual growth up to 5.6% and led to a 2.5% quarterly contraction when translated into Colombian pesos. Moving to page 11, loans excluding repos grew at 6% over the year and 0.1% during the quarter. Although improving compared to a year earlier, commercial loans continued to drive the soft dynamics of Colombian banking system. This low performance was partially compensated by a stronger growth of the consumer portfolio, supported on a positive trend in quality, especially in Colombia. Our Colombian consumer and mortgage business continues to be dynamic, expanding 9.8% and 14.1% respectively for the 12 months. Quarterly growth was consistent with this performance at 3% and 3.4% respectively. Our Colombian corporate loan portfolio, excluding repos, grew by 0.8% during the quarter and 4.3% over the year. Gross loan portfolios in Central America increased 3.7% in dollar terms over the year and 2.6% during the quarter. Nicaragua, that weighs 6% of our Central American assets, dampened the 12-month performance, contracting 19.8%, while the rest of the region expanded at 5.4%. We gained market share in every country except Nicaragua and Panama. On pages 12 and 13, we present several loan portfolio quality ratios. Delinquency metrics continue to improve during the quarter, both in Colombia and in Central America. In the fourth quarter, we charged off the full exposure to Electric Carrier and Transit, one of the SITP companies, that combined amounted for $908 billion. In addition, Ruta del Sol impacted new PEL formation as it became past due, both on a 30- and a 90-day basis, with $762 billion exposure. This loan was fully provisioned by year-end. Despite an improvement over the last quarter, delinquencies of Central American loan portfolio increased over the year. This was primarily driven by macro in Costa Rica and sociopolitical events in Nicaragua. As IFRS 9 reflects expected credit losses, this performance had been incorporated into our cost of risk during the second half of 2018 and the first quarter of 2019. Our commercial loan portfolio showed an improvement of 31 basis points in 30-days PDLs and 10 basis points in 90-days PDLs over the quarter. We recorded a 26 basis points improvement in 30-days commercial loan PDLs and three basis points in 90-day PDLs in Colombia. Central America, 38 commercial PDLs improved by 60 basis points and by 42 basis points for 98 PDLs driven by Guatemala and Panama. Delinquency ratios for consumer loans showed an improvement on a 30-day basis, more substantially stable on a 90-day basis over the quarter. In Colombia, the improving trend in delinquency of consumer loans persisted, with 30-day PDLs falling 27 basis points to 4.9 over the year and remaining stable over the quarter. 90-day PDLs were stable at 3.1% over the year and were eight basis points higher over the quarter. In Central America, 38 PDLs consumer loans improved 21 basis points to 4.7 over the quarter, while 98 PDLs remained stable at 2.1%. Yearly deterioration of consumer in Central America was primarily driven by Costa Rica. Our mortgage PDLs increased during the quarter, driven by Central America. The cost of risk improved by 42 basis points over the quarter, due to a 46 basis points improvement in Colombia and a 32 basis points improvement in Central America. Full year cost of risk improved by 17 basis points, driven by 23 basis points improvement in Colombia and three basis points improvement in Central America. Our PDL coverage of 98 PDLs remaining at 1.4%. On page 14, we present funding and deposit evolution. Funding dynamics were consistent with loan growth. Funding structure remained materially stable with deposits representing 76% of total funding and our deposit to net loan ratio reaching 101%. Our liquidity position continues to be strong with cash to deposit ratio at 17%. Deposits grew 0.8% in the quarter, accumulating 6.8% over the 12 months. Colombia grew at 1.3% in Colombia peso terms, and Central America at 5.9% in dollar terms during the quarter. Over the 12-month period, Central America grew at 10.2% in dollar terms, while Colombia grew at 4.8% in peso terms. On page 15, we present the evolution of our total capitalization, our attributable shareholders' equity, and capital-equity ratio of our banks. During the year, our total equity grew by 12.8%, while our total equity grew at 11.6%, mainly driven by our earnings and our OCI growth related to the valuation of our investment portfolio. Total equity and natural equity grew 3.0% and 2.8% respectively over the quarter. As of December 2019, our banks show appropriate Tier 1 and total solvency ratios. On February 2020, we reported for the first time the Grupo Aval conglomerate adequacy capital to the Superintendency of Finance, showing an excess over minimum adequacy capital. On page 16, we present our yield on loans, cost of funds, spread, and net interest margin. Our yearly net interest margin increased three basis points to 5.7% in 2019, mainly driven by higher net interest margin on investments that was partially offset by a tighter net interest margin on loans. Quarterly net interest margin slightly increased as a result of lower net interest margin on investments and a stable net interest margin on loans. As anticipated, pricing in Colombia continued to be aggressive during the last quarter due to the improvement in consumer loan quality and better outlook in the corporate portfolio resulting from a stronger GDP. This led to a 20 basis points compression in quarterly net interest margin and loans in Colombia and was partially offset by a higher net interest margin and loans in Central America as some of the higher yielding countries grew faster in our portfolio. We continue to expect some pressure on net interest margin and loans as growth increases the share of newly priced loans in our mix. On page 17, we present net fees and other income. Gross fee income for 2019 grew 11.6% when compared to 2018, with gross fees in Colombia increasing 8.2% in pesos and by 5% in Central America in dollar terms. Growth in Colombia was driven by a particularly strong performance in pension fund management fees. The year 2018 was a strong year in other income from operations due to property plant and equipment optimization in Banco de Bogota and Banco Popular. Also, the non-financial sector registered during 2018 a particularly high income explained by the initiation of construction of two of our toll road concessions. The decrease in income from these transactions was partially offset by an increase in OCI realization from investments in debt securities, equity methods, and dividends in 2019. Our infrastructure income decreased by 12.8% during 2019, mainly driven by income related to the initiation of construction of Covioriente and Pacifico Uno concessions during 2018. In addition, working process during 2019 was lower than during 2018 due to variations in weather conditions that slowed progress reached when building bridges and tunnels in some of the roads. Our gas and energy sector maintained strong contribution, and our agribusiness returned to a positive contribution to the non-financial sector income during 2019. On page 18, we present some efficiency ratios. Personnel and SG&A expenses grew 6.1% with 1.7% increase in Colombia and 2.4% in Central America in dollar terms during 2019. Personnel increased 5.4% driven by a depreciation of peso on our Central American operation. In fact, personnel expense remained flat in Colombia and grew 2.0% in dollar terms in Central America. G&A expenses increased 3.0% in 2019 compared to a year earlier. This figure was 8.6% for Colombia and 4.9% for Central America in dollar terms when adding IFRS 16 related depreciation and amortization to administrative expenses. G&A includes an extraordinary non-income tax expense in order to raise the fiscal cost of certain fixed assets, which amounted to 1.9% growth in the Colombian operation. However, this was offset by a positive effect, an income tax recovery that resulted in a net positive effect of $57.6 billion in net income. Depreciation and amortization expense increased by 67%, mainly due to the adoption of IFRS 16 during 2019, which changed the accounting methodology of leases, now accounting the right of use under depreciation and amortization. Finally, other expenses increased by 44% in 2019 compared to 2018, mainly explained by provisions of PORVENIR for expenses related to pension clients' transfer from the private to the public pension fund system. On page 19, we present our net income and profitability ratios. Attribute net income for 2019 was 3,034 billion pesos, or 136 pesos per share, 5.5 pesos higher than 2018 accumulated results. Attribute net income for the quarter was 715 billion, or 32 pesos per share. The non-recurring events that affected our net income during 2019 were the specific provision expenses in relation to Ruta del Sol and SITP that added $328 billion on our cost of risk, with a post-tax atrial net income negative effect of $162 billion. Other non-recurring events had a $25 billion negative effect on atrial net income. Our return on average assets and our return on average equity for the year were 2% and 16.4% respectively. We are now available to address your questions.