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

Welcome to Grupo Aval's second quarter 2020 consolidated results conference call. My name is Hilda, and I will be your operator for today's call. 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 Aval 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 ROA 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 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 obligation to review, update or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material development 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 Gutiérrez, you may begin.

Thank you very much, Hilda. Good morning, and thank you all for joining our second quarter 2020 conference call. I truly hope that all of you have managed to stay healthy during these harrowing months. As expected, and due to the coronavirus pandemic and the associated worldwide quarantines, the second quarter of this year was one of sharp deceleration and economic contraction. Consequently, our results were negatively affected when compared to previous periods. The quarantine will be lifted next week, and we expect that things will start to go back to normal. It is uncertain, though, how long it will be before we can say that things, in fact, are normal. Today, I would like to touch on the following points. A macro review of the economy during the second quarter of 2020, an update of the actions that we have implemented to conduct our business during this juncture, a brief update of new developments regarding the legal processes of Ruta del Sol, and the main highlights of our financial performance during the second quarter and first semester of 2020. As we all know, this year's second quarter was marked by economic contraction around the world, mostly driven by lockdowns and quarantines that had a major impact in businesses and industries, which from one day to the next lost most or all their clientele. Obviously, Colombia was no exception. In fact, during the second quarter, Colombia's GDP, where we conduct almost 70% of our consolidated business, contracted by 15.5% when compared with the same quarter in 2019, the biggest economic contraction for a quarter in the country's history. A simple average indicates that the economy contracted at least 7.3% during the first half. These numbers contrast sharply when compared to the growths observed in the same periods of last year of 2.4% and approximately 3% for the second quarter and first half of 2019, respectively. It is worth noting that growth for the first quarter of this year was recently adjusted from 0.4% to 1%. From the supply side, during the second quarter, only three sectors grew. Agriculture, which represents 7.3% of GDP, grew 0.2%. Financial services, which represents 5.6% of GDP, grew 1%. and real estate activity, which represents 10.8% of GDP, grew 2%. The remaining nine sectors contracted. Among those, commercial activities fell 30.5%, manufacturing contracted 24%, and government services decreased 3.5%. From the demand side, during the quarter, private investment fell 33% when compared to the same period in 2019. which signals towards weaker private balance sheets and lower growth prospects, while domestic demand decreased 16.8%. We now expect the GDP will contract between 7% and 9% in 2020. This contraction, although very significant for the Colombian economy, is lower when compared to the country's Latin American peers. The IMF, for example, currently estimates a contraction of 7.8% for the Colombian economy and of 9.4% for the region. The decline of approximately 35% in the price of oil, our major export product, that evaluation of the Colombian peso of approximately 15% between December 2019 and June 2020 have decreased our export revenues and increased the price of imports, both taking a toll on the country's economic activity. The good news is that in the second quarter, As economies around the world started to reopen, the price of oil doubled and decreased volatility led the Colombian peso to appreciate 7.4% against the U.S. dollar. In any case, during the second quarter, exports decreased 27.5% and the reduction in domestic demand caused imports to decrease by 29.6% when compared to the same period in 2019. Recent events have begun to ease short-term concerns about the country's current account deficit. Higher oil prices are causing exports to slowly improve, and imports will only recover with increased domestic demand. Under these new circumstances, Colombia's current account deficit could end this year below the 4% GDP target. Additionally, since June, the exchange rate has fluctuated in a 3,600 to 3,800 pesos per US dollar range, supported by an inflow of dollars as a result of larger external funding, the increases in oil prices, and a renewed appetite for Colombian assets. We now believe that the exchange rate will remain inside this range during the remainder of the year. 12-month inflation has fallen significantly from 3.86% in March to 1.97% in July, mostly as a result of the contraction in economic activity and due to government subsidy programs for utilities, value-added tax exemptions, and low-cost mobile phone plans, and a mandated freeze in housing rents. We expect that inflation will likely be close to 2% by year's end and gradually move towards its long-term target of 3% starting again next year. The central bank has continued with its expansionary monetary policy, lowering the repo rate by 200 basis points so far this year to 2.25%, the lowest level in history. In line with expected inflation, we believe that the central bank is close to reaching the end of its interest rate cutting cycle and that rates will remain stable during next year. We agree with analysts' expectations that the central bank will probably lower its repo rate an additional 25 basis points in the next few months. As could be expected, employment has been one of the most affected macro variables in the current juncture. In fact, total national unemployment reached 19.8% in June after touching a maximum of 21.4% in May. Urban unemployment continued deteriorating and reached 24.9% as of June, up from 24.4% in May. The average national unemployment rate for the last 12 months, ending June, was 13.3%, up from 10.1% 12 months earlier, and 10.5% at year-end 2019. As far as we can tell, unemployment has started to recover in July, as some mobility restrictions, specifically in the construction of infrastructure, have been lifted. But it's with the economy itself it is too hard to predict when unemployment will return to pre-pandemic levels. In any case, analysts expect unemployment to be around 18% by year end and to remain close to 15% in 2021. On the fiscal front, the government has announced a new deficit target of 8.2% of GDP in 2020 and 5.1% of GDP in 2021. After suspending the fiscal rule until 2022, allowing for higher flexibility to face the emergency. The addition of fiscal room has allowed the government to increase spending related to health, social programs, and unemployment conservation and generation plans. In line with a wider deficit target, debt as a percentage of GDP, it's expected to materially increase from 50% to 65% in 2020. We do share the government's view that fiscal spending is a right measure to support economic recovery and that it will be pivotal to speed up the recovery process, reduce the toll on unemployment, and recuperate the track for long-term growth as long as spending is focused on the recovery of the private sector. We expect that running a higher fiscal deficit for this purpose is the right way to improve tax revenues and the long-term fiscal health outlook as undoubtedly lost revenues of business as a result of the pandemic will definitely affect tax collections in the short term. The outlook for the remainder of 2020 remains uncertain. However, it was just announced that lockdown will come to an end, as I said before, at the end of this month, and analysts' consensus suggests that this will likely start to restore the economy in the second semester. Additionally, high frequency data shows that sectors such as construction, manufacturing, and commerce are slowly recovering after hitting bottom in April. If this ongoing recovery trend continues, we expect most sectors will experience decisive recovery by the first semester of 2021. Other sectors, such as tourism, will only reach pre-pandemic levels after 2022. Moving on to Central America, we agree with the IMF's expectation for a contraction of the region's economy of 3% in 2020, followed by growth of 3.7% in 2021. Central America's growth in 2020 is being affected by weakened trade, a slowdown in tourism, and less remittances. The slowdown in trade mainly impacts Panama, El Salvador, and Nicaragua. while tourism mostly affects Costa Rica. Lower remittances affect Guatemala, Honduras, El Salvador, and Nicaragua. The weakening of domestic demand due to the quarantines has also played an important role in the region's economy. In line with the strictest quarantine in the region, Panama presented the sharpest economic decline, while Nicaragua sits on the opposite side of the spectrum. And now, an update on some of the initiatives we mentioned on our previous call regarding our handling of the pandemic. We continue implementing all the necessary efforts to protect the health of our employees via home office programs and online health advice. Most of our administrative employees, approximately 87%, continue working from home. Those that support our branch network, our call centers, and sales forces continue following strict social distancing and sanitary protocols. 45% of them are still working from home. Regarding our debt relief programs, as of last July 31st, we had granted reliefs in Colombia for approximately 39 trillion pesos, representing approximately 30% of our consolidated Colombian loan portfolio. Because we mostly granted reliefs to those who specifically requested them, 92% of these reliefs were requested by customers, and only 8% were granted automatically. As of July 31st, though, 24 trillion of those reliefs are still active, representing 18% of our consolidated Colombian portfolio, while the rest of the affected loan portfolio is back to normal. In Central America, we had granted reliefs for approximately $9.6 billion as of last July 31st, representing 47% of the total consolidated portfolio of the region. In Central America, we had to abide by local regulations, and therefore 60% of the reliefs were granted automatically and 40% when requested by customers. As of July 31st, $4.6 billion of those reliefs are still active, representing 22% of our consolidated Central American loan portfolio, while the rest of the affected loan portfolio is back to normal. In order to proactively book provisions, we have run models to try to estimate the effect that the current economic juncture will have on our borrowers. Consequently, starting March, we set out to conduct a review of all the economic sectors to which we lend via the industries that participate in these sectors, or our clients who are employed by them. We then establish different categories of risk of the sectors and of our borrowers, whether companies or consumers within those sectors. This risk matrix led our cost of risk for this quarter. In fact, during the quarter, approximately 40% of provisions booked were COVID related. Since the pandemic started, we have seen a significant increase in the use of our digital channels. AvalPay Center, our digital payment platform through which customers pay utilities, loans, and others, experienced a 167% increase in monetary transactions during the first half of 2020 when compared to the same period of 2019. Banking transactions through our web pages and mobile banking apps increased 50% and 23% respectively during the semester. Of those, Monetary transactions increased 140% through those two channels combined since the pandemic started. We recently launched our QR code tied to our credit and debit cards to give our clients a contactless payment solution. The program has received positive comments, especially from health authorities. Last but not least, we were extremely pleased with Banco de Bogotá's award by Global Finance as the best digital lender in Latin America. We have taken advantage of the government's program to make funding available for banks to lend to SMEs and micro-businesses, mainly for payroll payments and working capital, and have disbursed already 4 trillion pesos in loans. Moving on, regarding ongoing legal matters with respect to Ruta del Sol, the main development relates to the antitrust investigation. On July 23, 2020, the Informe Motivado was released. Informe Motivado is a document prepared by the Deputy Superintendent of Antitrust with a non-binding recommendation to the Superintendent of Industry and Commerce with respect to the course of action in reference to the charges of the investigation. In this report, the Deputy Superintendent recommends dismissal of charges in the investigation with respect to an alleged conflict of interest in the bidding process. This recommendation covers all the defendants, including Grupo Aval, Diego Solano, myself, Corfe Colombiana and its officials, and Episol. The report also recommends fining all the defendants, including Corfe Colombiana and Episol, with respect to a charge named quote-unquote, payment of a bribe. In the case of Corfi Colombiana and Episol, the report argues that although our two companies were not involved in the payment of the bribe made by Odebrecht, a former officer of Corfi Colombiana did have knowledge of such bribe and had allegedly agreed to its reimbursement with funds of the Ruta del Sol Sector 2 project. We have submitted our responses to this report restating our legal arguments and presenting evidence to support our request for the dismissal of this charge against our companies. The matter must be decided by the superintendent of industry and commerce. Even though we believe that the legal basis and evidence supporting our defense are sound, if we're not successful, based on the deputy superintendent's informe motivado, if the maximum statutory fines were to be imposed, it would impact Aval's attributable net income by approximately 68,000 million pesos or $18 million, which represents less than 0.3% of the company's attributable equity as of June 30, 2020. Moving on, as expected, our results for the quarter were impacted by an increasing cost of risk, lower fee income, and lower income from our non-financial businesses, especially toll roads and hotels. However, we benefited during this quarter from our pension fund management and from those non-financial businesses less exposed to the changes in the macroeconomic outlook. Central America, even though negatively affected by the pandemic, is positively affected when oil prices decrease, as opposed to Colombia. Although Diego will refer in detail to our financial performance, these are a few highlights for the quarter. On May 22nd, we closed on the Multifinancial Group, the MFG acquisition in Panama. MFG added to our June 2020 consolidated balance sheet 18.6 trillion pesos in assets, which is about $5 billion, $12.7 trillion in gross loans, about $3.4 billion, and $11 trillion in deposits, about $2.9 billion. Including the acquisition of MFG, Aval consolidated assets grew by 25.8% year-on-year and 3.9% in the quarter to P333 trillion. Consolidated gross loans grew by 22.6% year-on-year and 4.3% in the quarter to P209 trillion. And consolidated deposits grew by 27.8% year-on-year and 4.4% in the quarter to P212 trillion. Cost of risk during the semester increased significantly to 2.7% when compared to 2.1% during the first semester of 2019 and 2.3% during the second semester of last year. During the quarter, cost of risk increased to 3.1% versus 2.2 register both in the first quarter of 2020 and in the second quarter of 2019. During the quarter, we increased the coverage for our exposure to Avianca up to 20%. Total net interest margin during the semester was 5.1%, a decrease of almost 70 basis points versus total NIM during the first half of 2019, and of 60 basis points versus total NIM recorded during the second half of last year. However, total NIM during the second quarter of 2020 improved by 50 basis points versus total NIM during the first quarter, and it was driven by a 456 basis points increase in NIM on investments. Although gross fee income during the first semester was in line with gross fee income during the first semester of last year, a sharp decrease of almost 19% was recorded in fee income from banking activities versus the previous quarter, mostly related to the region's quarantine that resulted in a material decrease in credit card usage and less commissions on the ATM network. Income from non-financial sector operations contracted by 8.6% versus the first half of 2019, and by 10.6% versus the second semester of 2019, mainly driven by a contraction in revenues from investments in toll roads and airports, which decreased by 8.9% and 11.7% versus the first and second semesters of 2019. This decrease was driven by the lockdown in Colombia that halted air travel and construction in our 4G concessions. However, the government has already lifted most restrictions and construction has restarted. We continue to observe strong funding and liquidity positions as evidenced by the deposits to net loans ratio and the cash to deposits ratios. As a result of the aforementioned net income for the quarter was 323.4 billion pesos, or 14.5% per share. Return on average equity was 6.6%. Return on average assets and return on average equity for the semester were 1.3% and 10.4% respectively. Diego 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. Grupo Aval's second quarter results reflect the impacts of the first full quarter of lockdowns under loan growth, fee income, cost of risk, other income, and other income performance. However, as expected, our business line and regional diversification reduced the magnitude of the pandemic's negative effects on our Colombian banking business. Even though the impact of the crisis has had an economy-wide effect, The recovery of our pension fund and merchant banking business has arrived earlier, contributing around half of our accrual net income in the quarter. Central America, as a region, is expected to experience a milder macro cycle with a lower impact on expected credit loss calculations. In addition, the reduction in its exposure to high-risk products such as credit cards and personal loans further reduced its cost of risk during the quarter. Starting on page 8, asset growth was boosted by the acquisition of MFG, which added 18.6 trillion pesos of assets for balance sheets, representing 5.8 and 7.0 percent of our quarterly and 12-month growth, respectively. Excluding the acquisition of MFG and FX movements in our Central American operation, total assets grew 13 percent over the 12 months, and 0.5% during the quarter. Colombian assets grew 14.6% year-on-year and decreased 0.8% during the quarter. Central America recorded 30.3% and 22.7% growth in dollar terms over the same periods, with MSG contributing 20.4% and 19.2% respectively. A 12-month 17.2% growth End of period depreciation and a 7.4% quarterly appreciation take annual and quarterly growths of Central America to 52.7% and 13.7% when translated into Colombian pesos. As a result, the weight of this region increased from 33% to 36% of our book. Moving to page 9. Loans grew 4.3% over the quarter, reaching 22.6% year-on-year. In addition to positive organic growth over the quarter, the acquisition of MSG added 12.7 trillion pesos or $3.4 billion to our loan portfolio. MSG contributed with $1.9 billion in commercial loans, $0.8 billion in consumer loans, and 0.7% in mortgages. MSG added 6.3% and 7.5% of quarterly and 12-month consolidated growth in peso terms. Excluding the acquisition of MFE and FX movements on our Central American operations, consolidated loans grew 9.5% year-on-year and 0.5% over the quarter. Our Colombian gross loan portfolio increased 1% during the quarter and 11.5% over the year. This reflected a strong performance of our Colombian corporate loan portfolio, which grew 2.1% over the quarter and 13.9% over 12 months. when excluding repos. Corporate lending came mainly from large corporates and from loans with guarantees from government-sponsored programs from Fondo Nacional de Garantias during this quarter. The performance of our Colombian consumer portfolio was impacted by a tightening of our risk appetite, weaker loan demand, and a temporary reduction in effectiveness of our sales network, giving sanitary restrictions and lockdowns. Consumer loans in Colombia contracted by 1.3% in the quarter and grew 6.7% over the last 12 months. Quarterly performance was driven by a reduction in unsecured consumer products. Credit cards contracted 6.3% and personal loans 2.6%. These products account for 14% and 22% of our Colombian consumer portfolio respectively. In contrast, Secured products such as payroll lending that accounts for 56% of our Colombian consumer portfolio grew 0.3%, and auto financing that accounts for 7% grew 1.6%. As other secured retail products, mortgages were dynamic in Colombia, expanding 2.1% over the quarter and 13.1% year on year. Moving to Central America, our gross loan portfolio increased by 19.2% in dollar terms, during the quarter and 26.6% over the year. These results incorporate the completion of the acquisition of MFG, which contributed with 19.8% of quarterly growth and 21.1% of 12-month growth. Excluding the impact of the acquisition of MFG, Central America contracted 0.6% in dollar terms during the quarter and grew 5.6% year-on-year. Quarterly performance resulted from a 3.4% contraction of consumer loans and a 1% growth of both commercial loans and mortgages. Consumer loans were mainly driven by a 4.6% contraction in credit cards. We expect the lockdowns and their effects to continue putting pressure on loan growth over the following quarters. On pages 10 and 11, we present several loan portfolio quality ratios. Delinquency metrics continue to improve during the quarter, driven by the positive effect of loan reliefs on 30 and 90-day pass-through loan formation. As of the end of July, 20% of our loan portfolio had active reliefs down from 36% that were relieved at some point in time. Active reliefs were 18% for Colombia and 22% for Central America as of end of July. Corporating MFG during the quarter had a mild positive impact of 14 basis points in 30-day PDLs and 9 basis points on 90-day PDLs ratios. Quarterly past due loan formation includes the addition of MFGs 250 billion pesos in 30-day PDLs and 202 billion pesos in 90-day PDLs. Consumer delinquency ratios show an improvement over the quarter. In Colombia, 30-day consumer PDLs remain stable at 4.3% while 90-day PDLs improved 40 basis points to 2.7%. In Central America, 30-day consumer PDLs improved by 81 basis points to 3.0%, while 98 PDLs improved 100 basis points to 0.9%. MFG explains 28 basis points and five basis points of these improvements. Commercial loan portfolio was materially stable at 4.1% on 30-day PDL basis and deteriorated 14 basis points to 3.6% on 90-day basis over the quarter. In Colombia, our 30-day commercial PDLs deteriorated four basis points to 5.3%, and 17 basis points to 4.7% on a 90-day basis. Ruta del Sol, which is yet to be charged off, weighs 96 basis points on these ratios. In Central America, 30-day commercial PDLs deteriorated 17 basis points to 1.4%, while 90-day PDLs deteriorated 44 basis points to 1%. MFG contributed with 26 basis points and 27 basis points of the deterioration. Mortgage PDLs improved 27 basis points on a 90-day basis and deteriorated 7 basis points on a 30-day basis. Even though the magnitude is still uncertain, we expect a pickup in delinquency once the effect of lockdowns fully unfolds and reliefs expire during the following quarters. Our provision expenses deteriorated during the quarter, reflecting increases in expected losses, given the deterioration in the macroeconomic outlook in the geographies in which we operate and the results from a risk profile reassessment of our customer base under the current juncture that Ms. Carlos previously explained. Our risk models operate on a 12-month forward-looking window, incorporating the negative macro outlook for 2020 followed by a recover during the first half of 2021. Changes in the macro outlook for 2020 and 2021 could imply further adjustments in our expected losses. Cost of risk deteriorated 94 basis points for the quarter, 116 basis points in Colombia, and 61 basis points in Central America. Differences between regions result from diverging expected economy effects of COVID-19 in the countries where we operate, with a stronger expected impact in Colombia than that we expect for Central American operations. In addition, the cost of risk in Central America benefited during the quarter from $73 million COVID provisions from MFD that were recognized by former owners prior to the acquisition, reducing the impact of charges needed during the quarter. Finally, Central America cost of risk benefited from the 4.6% reduction in banks' credit card loans with 36 basis points positive impact in cost of risk and an expected of a milder cycle than that of Colombia. In order to evaluate expected credit losses and determine impairment charges, our banks profiled their credit risk exposures into low, medium, and high risk affecting the stages under IFRS 9. This resulted in an increase of Stage 2 exposures and individually assessed commercial loans under Stage 3. The increase in Stage 3 loans was partially offset by the acquisition of MFG. This process resulted in impairment charges that are approximately 40% related to the impact of COVID-19 pandemic. Most of our impairment charges in the period are due to expected deterioration rather than from our actual behavior. Even though the impact of COVID-19 We'll have a substantial toll on the performance of our lending activity. We're hopeful that our historic bias toward lower risk segments and products could help us face this challenge. We have been historically overweighted in lower risk products such as payroll loans that constitute 44% of our consolidated consumer loan portfolio and underweighted high risk products and segments such as unsecured consumer lending and loans to SMEs. As mentioned in previous calls, our consolidated exposure to the Avianca Group is approximately $185 million, equivalent to approximately 700 billion pesos as of June 30, 2020. 73% of this exposure is secured with international billings and 20% is secured with Avianca's headquarter buildings in Bogota. Our coverage for Avianca reached 20% as of the end of June. Recoveries of charged-off assets were lowered during the quarter as collection efforts were negatively impacted by the juncture. Even though we are uncertain and largely dependent on the evolution of the macro environment and on customer behavior, we expect that our provision expenses could remain high for the remainder of the year. Finally, our PDL coverage of 90-day PDLs increased to 1.5 times. On page 12, we present funding and deposit evolution. Funding growth during the quarter continued to reflect a conservative liquidity profile to face the uncertainties associated with the pandemic. Part of this funding has been deployed in cash and liquid investments with a tall unmet interest margin. As a result, our deposit to net loans ratio remained at 104% while our cash to deposit ended the quarter at 18.9%. Funding structure remained materially stable, with deposits accounting for 75% of total funding. Deposits grew 4.4% during the quarter and 27.8% year-on-year. Colombia remained materially stable. Central America grew 21.8% in dollar terms during the quarter, with MFG accounting for 16.6% of this increase. Over the 12-month period, Colombia grew at 14.4% and Central America at 35% in the dollar terms, with 18.4% explained by MSG. On page 13, we present the evolution of our total capitalization, our total shareholders' equity, and the capital and equity ratio of our banks. Our total equity grew 11.6% year-on-year, while our total equity grew 8.9%, mainly driven by our earnings. Quarterly growths were 3.4% and 2.4%, respectively. As of second quarter of 2020, our banks show appropriate Tier 1 and total solvency ratios. The impact of additional risk-weighted assets contributed by MFG on Banco de Bogota's solvency ratio was compensated by a $520 million AT1 instrument issued by BAC during the quarter. The quarterly increase in Tier 1 for Banco de Occidente and Banco Popular were mainly explained by the strong risk-weighted asset growth, particularly of their loan portfolios, which grew by 4.6% and 4.3% respectively. We expect that the solvency ratios for Occidente, Popular, and Villas will increase a few percentage points with the transition to Basel III. On page 14, we present our yield and loans, cost of funds, and spread and net interest margins. Our NIM performance during the quarter was driven by a recovery of NIM on investments. This was partially offset by a downward pressure on NIM on loans. NIM on loans fell 27 basis points during the quarter due to a 98 basis points reduction in the average central bank rate, a 74 billion reduction in interest income, recognizing the decrease in net present value of loans due to relief terms, and finally, a bias towards higher quality, lower interest rate products, and segments. We expect further pressure on NIMAN loans as these factors could persist throughout the second half of the year. NIMAN investments will greatly depend on global liquidity and geopolitical events for the second half of this year. On page 15, we present net fees and other income. Gross fee income for the quarter reflects the full effect of lower activity due to the lockdowns and of temporary waivers on transactional and other fees. Pension fund fees were affected by lower contributions to mandatory and severance funds given an increase in unemployment. Quarterly gross fees decreased 16.6% in Colombia and 25.3% in dollar terms in Central America. Recovery is expected during the second half of this year as fee waivers expire and transactional volumes increase in line with an improvement in economic activity. The performance of the non-financial sector was driven by the impact of lockdowns on infrastructure and gas sectors, our two main non-financial businesses. Although the lockdowns in Colombia initially halted construction in our 40 concessions, the government has already lifted most restrictions on this sector, allowing us to be positive on construction progress throughout the remainder of the year. We'll have to comply with strict biosecurity measures throughout the duration of the pandemic. Regarding energy and gas, its performance was negatively impacted by reduced demand for industrial gas. However, income in this line of business is diversified and includes some activities that are less sensitive or even counter cyclical to a lockdown such as gas transportation and residential gas distribution. Hotels, the most affected sector in which we participate is immaterial to our results as it used to contribute less than 2% of our income from the non-financial sector. Finally, on the bottom of the page, higher order income during the first quarter is mainly explained by seasonality in dividend income. On page 16, we present some efficiency ratios. As part of our response to the COVID-19 challenges, all of our business units have launched cost contention and reduction initiatives. As a result, cost to assets improved to 3.2% down from 3.7% a year earlier and 3.4% in the previous quarter. Despite our tight cost control, cost to income deteriorated during the quarter to 51%, reflecting our weaker income under the current environment. We will continue working on the expense control plan to mitigate the negative impacts of COVID-19 on our income. Other expenses growth rates were affected both by the acquisition of MSG and by FX fluctuations. Excluding these effects, other expenses contracted by 0.8% compared to the same quarter a year earlier and contracted 4% to the previous quarter. Without adjusting for MFG and FX fluctuations, quarterly other expenses grew 8.8% year-on-year. Quarterly, Colombian other expenses increased by 2.5% year-on-year, while Central American expenses remained flat in dollar terms despite incorporating one month of expenses from MFG. Quarterly, personal expenses increased 9.2% year-on-year or decreased 0.3% when excluding the effect of MFG and FX fluctuations. Personal expenses increased 3.7% in Colombia and fell 2% in dollar terms compared to the same quarter a year earlier, despite the incorporation of MFG. Quarterly, general and administrative expenses increased 2% year-on-year or decreased 5.5% when excluding the effect of MFG and FX fluctuations. General and administrative expenses fell 3.8% in Colombia and 5.2% in Central America in dollar terms, despite the incorporation of MFG. Starting this quarter, other expenses incorporate MFG's reassurance expense in addition to the donations and provisions of PORPENIB for expenses related to the pension plan transfer from the private to the public pension fund system. Finally, on page 17, we present are net income and profitability ratios. A total net income for second quarter 2020 was 323 billion pesos, or 15 pesos per share. First half year to date, a total net income reached 1 trillion Colombian pesos, or 45.9 pesos per share. A return on average assets and a return on average equity for the quarter were 0.8% and 6.6% respectively. First half, return on average assets and return on average equity reached 1.3% and 10.4% respectively. We are now available to address your questions.