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

Welcome to Grupo Aval's first quarter 2021 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 ROA-A, 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 here 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 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 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 Gutiérrez, you may begin.

Good morning, and thank you all for joining our first quarter 2021 conference call. I trust that all of you and your families are keeping healthy. It is with great pride in our company and its employees that I will share with you our strong financial results for the quarter that ended on March 31st. As I usually do, I will refer to the situation of the economies of the countries in which we operate. I will provide an update on the status of our clients' loan reliefs and on our digitalization program, and I will refer to the main reasons for our financial results. Let's start with a view of the macro scenario during the quarter. To begin, I will venture to say that for the first time since the pandemic began over a year ago, the global outlook has become more favorable. In fact, the United States has set an example of efficacy in the mass production of the COVID-19 vaccine, in the inoculation of its citizens and citizens of many other parts of the world, and in the distribution of the vaccine to other countries. This has, without a doubt, played a crucial role in the economic recovery of the USA and has set in motion economic recoveries of many other countries and sectors. To be sure, COVID-19 continues to claim lives, especially in some emerging countries where the third wave of the virus has hit strong, as has been the case in India or Brazil. The threat is not over by any means, but hope has advanced exponentially in a short period of time. In Colombia, the year got off to a slow start associated to a second wave of contagions in January that resulted in new mobility restrictions and lockdowns. However, economic activity picked up significantly during February and continued through March as evidenced by a strong pickup in industrial production and the retail sales as quarantines were lifted. The beginning of the vaccination campaign on February 17th and the decline in the number of infections during the first few months of the year also contributed to an overall positive sentiment. Vaccinations continue in full force at a slower pace than most of us would like, but much better than in peer countries. As a result, On a seasonally adjusted basis, during the first quarter of this year, the economy grew 2%, positively surprising the market consensus that expected a contraction for the quarter. This growth compares favorably to the contractions of 15.6%, 8.2%, and 3.4% recorded during the second, third, and fourth quarters of 2020. Examining the quarter's performance from the supply side, Eight of the 12 sectors represented 61% of GDP expanded. The most dynamic relevant sectors were manufacturing that grew 8.4%, financial services that grew 4.8%, government services that grew 3.6%, and agriculture that grew 3.4%. The remaining sectors contracted with mining falling 4.6%, construction 5.3%, utility services 1.3%, and commercial activities 0.7%. From the demand side, total consumption increased 1.6% and investment grew 1.0%. Consumption growth was driven by a 5.1% increase in government spending and a 1% increase in household consumption. Unfortunately, we're now dealing concurrently with a new wave of contagions, albeit with much milder mobility restrictions and with social unrest, which temporarily will dampen a stronger rebound of domestic demand and overall activity. Demonstrations were triggered by the proposal by the government of a fiscal reform, but have continued even after the government withdrew its proposal, followed by the resignation of the Ministry of Finance. Active negotiations are being carried as we speak between the government and the promoters of the demonstrations. In any case, for the rest of the year, we anticipate further improvement in economic activity supported by stronger business sentiment, increased consumer spending, and a favorable external backdrop. We have cautiously improved our estimate of the country's GDP growth, and we now believe that it might be as high as 5.5% in 2021. The central bank recently raised its growth rate forecast to 6% from 5.2%, while market consensus has increased to close to 5%. We continue to expect a widening of the current account deficit to 3.5% of GDP by year's end, up from the 3.3% of GDP observed at the end of 2020, mostly driven by a larger trade deficit, with an increase in imports driven by domestic demand, somewhat attenuated by better oil prices. Regarding the exchange rate, we expect a return to the 3,600 pesos per dollar level in the next few months after overshooting up to 3,800 pesos per dollar Surrounding the uncertainty of the tax reform, the social protests, and more generally, the country's fiscal outlook. As of April, 12-month inflation stood at 1.95%, up from 1.51% a month earlier. In fact, the monthly inflation figure for April was 0.59%, well above the market consensus of 0.34%. The largest contribution to April's inflation came from food, non-alcoholic beverages, and housing costs. Going forward, we expect headline inflation to continue to trend up, driven by a statistical base effect, by a pass-through of higher commodity prices, and by a short-lived effect of price increases in transportation associated to the ongoing demonstrations. We anticipate that 12-month inflation should reach the 3% area by year's end. Well-anchored medium-term expectations should give the central bank enough room to continue with its current expansionary monetary policy. We expect little action in terms of monetary policy, at least until the fourth quarter, so the repo rate is likely to remain flat for now at its current level of 1.75%. We continue to anticipate a 200 to 300 basis points improvement in the labor markets during 2021. After a 557 basis points deterioration of the average total national unemployment during 2020 to 16.1%. However, during the first quarter, the second wave of infections slowed down the recovery of jobs, and as a result, national unemployment ended the quarter at 14%. 14.2%, 155 basis points worse than the 12.6% reported 12 months earlier. However, 720 basis points lower than the peak of 20.4% recorded in May 2020. On the fiscal front, Colombia has been no exception as the countries have had to wage battle against the pandemic with more aggressive subsidy programs, increased spending in the health system, a national vaccination program, and different stimulus programs to jumpstart the economy. As a result, after reaching a fiscal deficit of 7.8% of GDP for 2020, the government expects the fiscal deficit for 2021 to approximate 8.6% of GDP. The failed tax reform sought to collect 23 trillion pesos, or 2% of GDP, in order to correct the ongoing upward trend of public debt. Consequently, the government is currently working on a new draft of the tax bill with a lower tax revenue target, which should help it gain support in Congress. Moving on to Central America, according to the IMF, the region's economy contracted 7.2% in 2020, and should recover to a positive 5.6% during 2021. As you know, Central America greatly benefits from the recovery of the U.S. economy, as certain Central American countries are materially dependent on cash remittances incoming from the United States. After contracting a whopping 17.9% during 2020, The IMF now expects Panama to rebound to a positive 12% in 2021, as it should be favored by increased usage of the Panama Canal as international trade rebounds and by an aggressive vaccination program. GDP for El Salvador and Honduras contracted 8.6% and 8% respectively during 2020. 2021, the IMF expects GDP to grow 4.5% in Honduras and 4.2% in El Salvador, driven by stronger remittances in line with the recovery of the U.S. economy and by a recovery in their exports. Costa Rica's GDP contracted 4.8% in 2020, impacted by a decrease in external demand for services, mainly tourism. The IMF expects GDP to grow 2.6% in Costa Rica during 2021. Guatemala's GDP contracted 1.5% in 2020. Its economy is expected to grow 4.5% during 2021, according to the IMF. As in the case of El Salvador and Honduras, remittances should be a key driver in 2021. Finally, Nicaragua's GDP contracted 3% during 2020. The IMF now expects its GDP to grow 0.2% during 2021 as construction, transportation, and the financial sector recover, while the recovery of sectors related with tourism lag behind. Regarding the status of our loan relief programs, as of March, we had active reliefs representing approximately 11.8% of our total consolidated loan portfolio, or approximately 24.7 trillion pesos in loans. In Colombia, payment holidays are almost over. As of March 31, active reliefs amounted to 7.9 trillion pesos, or 5.9% of the Colombia loan portfolio, including 7.3 trillion in structural agreements. In Central America, reliefs amounted to 16.8 trillion pesos, representing 22% of the region's portfolio, driven by Panama, which amounted to more than half of the region's active reliefs. Of all loans that have concluded their relief periods in both geographies, 3.7% are currently past due 90 days or more, representing 1% of our total consolidated loan portfolio, and those currently past due 30 days or more represent 1.7% of our total consolidated loan portfolio. Our cost of risk reflects our estimation of losses related to the complete unwind of these relief programs. Let's move on to the results of our digital strategy. Our active digital clients grew almost 30% from 4 million at the end of March 2020 to approximately 5.2 million on March 31st, 2021. We have continued to add digital products to our offer. In fact, in the 12 months ending March 31st, we increased the number of digital products offered by our banks by 45%. Our banks sold 532,000 products in the first quarter of 2021. In addition, During the first quarter of 2021, of the total value of monetary transactions conducted through all our channels, almost 70% was transacted through our digital channels, up from 54% in the first quarter of 2020. Conversely, our branch network decreased its share of monetary transactions during the quarter and now represents only 26% of total amounts transacted down from 43% in the first quarter of 2020. Finally, regarding our financial results, Diego will refer next in detail to our financial performance during the first quarter of 2021. However, I would highlight the following. We are encouraged, albeit cautiously, by our strong financial performance during this first quarter. All in all, We see headwinds and tailwinds, but believe that perhaps the tailwinds are stronger than those against us. Some of the tailwinds that we see are an improving economy, a resilient loan portfolio, and as a result, cost of risk at levels better than expected. A cost containment program that is yielding good results because of digital initiatives to streamline our operating processes, and from a company-wide efficiency and cost reduction culture. A decided effort by Corpi Colombiana to keep developing its infrastructure programs, including its toll roads, airport concessions, agro-industrial initiatives, and gas transportation and distribution businesses, while minimizing the damage due to the pandemic to its hotel businesses. and a faster-than-expected recovery of the bank's revenues from fees, which will be more evident as the year progresses. There are, however, headwinds that keep us alert. Among the most important, we are keeping a close eye on the current demonstrations of social unrest and their possible repercussions, and on the animosity against the financial system expressed during the first few days of the marches. Although, in all candor, these expressions, sometimes violent, against banks have subsided. We're also vigilant of the current wave of contagions and the elevated number of daily deaths and therefore hope that the vaccination program keeps gaining speed. And finally, we are expectant of the tax reform that will be eventually presented to Congress and especially of any specific provisions that it might contain affecting the financial system. I am sure that these and other similar subjects will come up in future calls later this year. In the meantime, I thank you for your attention. And now I'll pass on the presentation to Diego, who will explain in detail our business results and provide further guidance for 2021. Thank you very much.

Thank you, Ms. Carlos. I will now move to the consolidated results of the profile under IFRS. Starting on page 9. Even though not yet back to historic levels, selling growth are increasing, gaining momentum. Our assets grew 4.3% over the quarter. With this result, we accumulate a 5.1% year-on-year growth. As mentioned over our last three calls, on May last year, we completed the acquisition of MSG, contributing to our 12-month growth. Excluding these effects and that of FX movements of our Central American operations, Total asset growth grew 2.8% year-on-year. Colombian assets grew 2.7% during the quarter and 0.3% year-on-year, while Central American assets recorded a 0.3% public growth in direct terms and a 0.7% year-on-year growth. MRG contributed with 18 percentage points to year-on-year growth of Central America. Our quality depreciation at 7.2% and a 12-month appreciation at 9.3% take quarterly and annual growth in pesos of Central America to 7.5% and 15.2%. The share of Central America of our book increased slightly during the quarter to 36%. Moving to page 10. Loan growth is progressively recovering, mainly driven by a substantial performance of high-quality retail lending products and an increasing uptick in commercial loan growth in Colombia. Loans grew 3.8% over the quarter, reaching a 4.4% increase year-on-year. Excluding the acquisition of energy and ethics movements of our Central American operations, consolidated loans grew 1.4% over the quarter, The acquisition of MLG contributed with 6.3% of 12-month consolidated growth in special terms. Colombian gross loan portfolio increased 1.7% in the quarter, given by the strong growth of our retail portfolio and an improvement in the dynamics of our commercial portfolio. 12-month growth was 1.5%. Demand for consumer loans remained strong in Colombia, resulting in a 2.7% increase in the quarter and 8.1% year-on-year. Competition remains high, particularly on payroll lending. Payroll lending that accounts for 60% of our Colombian consumer portfolio grew 5.7% over the quarter. Mortgages remain dynamic in Colombia, expanding 2.6% over the quarter and 10.9% year-on-year. Artified financing that accounts for 7%, 2.6% over the quarter. In contrast, as has happened over the pandemic, Credit cards and personal loans remained soft, contracting 2.9% and 1% respectively during the quarter. This product accounts for 12% and 20% of our Colombian consumer portfolio. Colombian corporate portfolio slightly recovered its dynamic, growing 1% during this quarter after two consecutive periods of contraction. Community 12-month growth was negative at minus 2.8%, with a high comparison base a year ago. Moving to Central America, our gross loan portfolio increased 0.7% over the quarter and 21% year-on-year in dollar terms. NFG contributed 20% to year-on-year growth. Casualty performance resulted from a 1% growth of commercial loans and a 1.2% growth of mortgages. Consumer loans contracted by 0.2% over the quarter after a seasonally high for a quarter. This performance was driven by a 0.9% or a 1% growth in payroll and outlending, respectively, and by a 1.4% contraction in credit cards. We expect commercial loan growth to continue recovering as economic activity and business confidence improves throughout the year. On the retail lending front, we expect an improvement in employment outlook in we will allow our banks to increase their risk appetizing products that were de-emphasized during the shock. In spite of our year-end view, we may face temporary acceleration in the speed of recovery during the second quarter, associated with a disruption of the normal operation of some of our customers during April and May due to strikes and a new wave of COVID-related mobility restrictions. On pages 11 and 12, we present several loan portfolio quality ratios. The COVID-19 credit juncture continued unwinding during the first quarter. In the first phase of the pandemic last year, we put provisions ahead of observed delinquency in line with our view on future deterioration, looking beyond the assertions introduced by loan reliefs. In this second phase, actual delinquencies, which we have already begun to provision during the first phase, materialized once release expired. This unwind has evolved favorably for our bands up to date, although we're still cautious given that a proportion of release remains under payment holidays, particularly in Central America, and that sanitary challenges are not yet behind. As of March 31st, we had 4.8% of our gross loans under payment holidays, 230 basis points lower than last quarter. and 7% under structural payment programs in these 120 basis points higher than that quarter. Together, this accounts for 11.8% of our loan portfolio. At the same date, 6.8% of loans that have returned to active payment schedules and that in the past have benefited either from payment holidays or were restructured were paid in more than 30 days. This represents 1.7% of those loans. Former numbers are 3.7% and 1% for loans past due more than 9 days. Payments followed in Colombia are substantially over, down to 0.4% of gross loans. In Mauritian, 5.5% of our gross loans were under structural payment programs. Together, we rise to 5.9% of our loan performance. In Central America, payment holidays have extended longer, accounting for 12.4% of those loans, with Panama expanding close to 90% of its fee. In addition, 9.7% of those loans are under structural payment problems, together with this to add to 22%. Regarding delinquency metrics for 30- and 90-day PASI loans, we saw improvement during the quarter, explained by a TVL formation similar to pre-COVID levels, The ratio of charge-offs to average 98 PLs returned to its five-year average. Lower charge-offs during 2020 were associated with relief problems. Our allowance coverage of 30 days and 98 PLs slightly improved gain of water. Regarding PL formation, 69% was explained by retail products with a wide performance variation across products. Personal involvement loans contributed 24% to PEL formation, despite representing only 5% of our gross loans. Similarly, credit cards contributed 26% to PEL formation while accounting for 8% of our gross loans. In contrast, payroll lending and mortgages that weigh 16% and 12% of our total loans explained 11% and 4% of PEL formation respectively. The quality of our loan portfolio on a 30-day APL basis includes 14 basis points to 4.75% QT, and 15 basis points to 3.41% on a 90-day APL basis. Our 30-days and 90-day APLs are now 59 basis points and 27 basis points higher than they were a year earlier. Composition of a loan portfolio in terms of stages as measured by IFRS 9 remained relatively flat over the quarter with a slight increase in Stage 2 loans. Cost of risk net of recoveries was 2.2%, 129 basis points lower than the 3.5% in the previous quarter, and 7 basis points higher than a year earlier. This incorporates 187 basis points and 84 basis points improvement in retail and commercial lending respectively over the quarter. Currently, cost of risk increased by 144 basis points in Colombia and by 102 basis points in Central America. In Colombia, cost of risk of retail loans increased 196 basis points, and that of commercial loans increased 114 basis points. In Central America, the cost of risk of our retail portfolio increased 129 basis points, and commercial loans' cost of risk increased 13 basis points. On page 13, we present funding and deposit evolution. Funding growth during the quarter continued to reflect the high liquidity environment. As a result, our deposits to net loans remain high, slightly increasing to 110%, while our cash to deposit ratio ended the quarter at 15.8%. Funding structure maintains its concentration on deposits, which account for 78% of total funding. Deposits increased 4.8% in the quarter and 9.3% year-on-year. Colombia grew 1.6% in the quarter, and Central America grew 2.8% in dollar terms. In the 12-month period, Colombia grew 1.8% and Central America 36% in dollar terms. Same percentage points of growth in Central America are explained by energy. On page 14, we present the evolution of our total capitalization, our actual shareholders' equity, and the capital-to-equity ratio of our banks. Our total equity grew 6.6% year-on-year, while our actual equity increased 4.6%, mainly driven by our earnings. Earnings by 1,203 billion pesos and of 724 billion pesos were declared to our shareholders and to the minorities of our series, respectively, during the fall. This resulted in a contraction of 281 billion pesos in referral equity and 245 billion pesos in actual equity. This is the first quarter in which we report our solvency ratios on the base of three. As anticipated, all of our banks increased their solvency ratios as compared to those on the previous regulation. Bear in mind that March figures are seasonally low, impacted by the dividend distributions of our banks. On page 15, we present our yield on loans, cost of funds, spreads, and net interest margin. Neem performance in the quarter was driven by negative Neeman investments and a slight decrease in Neeman loans. Neeman investments was minus 0.4% in the quarter as a result of a global steepening of yield curves and market concerns on Colombia's sovereign rating. This took a total in advance, and for Veneo portfolios measured at per value. This was partially offset by gains in FX and derivatives recognized under other income. Net interest margin on loans contracted 8 basis points to 5.8% in the quarter, mainly due to repricing pressures in net interest income as Veneo and loans decreased 28 basis points to 8.4%, while cost of funds decreased 19 basis points to 2.4%. A conservative liquidity management appropriate on the current environment has implied a burden on net interest markets. The spread between yield and loans and cost of funds contracted 11 basis points to 6%. On page 16, we present net peace and other income. Grossly income increased 1% year-on-year and decreased 2.3% to a relatively high fourth quarter. Early fees decreased 1.3% in Colombia and 1% in dollar terms in Central America. On a year-on-year basis, loss fees increased 3% in Colombia and decreased 2.8% in Central America. Income from the non-financial sector reflects the strong performance of the infrastructure and energy and gas sectors. The infrastructure sector that is the largest contributor to our non-financial income with 24% of the quarter, mainly explained by construction in progress. The energy and gas sector income increased as compared to a year earlier due to high distribution and transportation volume. A quality decrease is explained by a high mark in fourth quarter 2020 associated with one-time event in Cundinamarca operations. Finally, our hospitality business remains underpinned by low occupancy rates during the pandemic. The bottom of the page, The year-on-year increase in our income is explained by better performance in effects and derivatives, partially upsetting the negative performance of fair value investments described earlier in the discussion. In addition, this quadrant benefited from OCI realization from fair value to OCI portfolios and from dividends received from our unconsolidated equity investments. On page 15, we present some efficiency ratios. All of our banks of our business units, continued implementing cost contention and reduction initiatives during the quarter, and capturing benefits from the digitalization of core processes. Other expenses were materially unchanged with a slight increase of 0.2% year-on-year, despite the acquisition of MFG and FX fluctuations. Excluding these effects, our expense contracted 3.9% year-on-year. Other expenses decreased 8.8% over the quarter. As a result, cost to assets improved to 3.1% down from 3.4% a year earlier. Cost to income improved to 44.7% down from 47.1% a year earlier. Colombian order expenses decreased by 2.1% year-on-year and 10.3% over the quarter. Central American expenses contracted 4.2% over the quarter and increased 2.7% year-on-year in dollar terms. Excluding MFG, Central American dollar expenses fell 6.4% year-on-year in dollar terms. Consolidated quarterly personal expenses decreased 1.5% both over the quarter and year-on-year. When excluding the effect of MFG, MFX fluctuations consolidated personal expenses decreased 5.2% year-on-year. Over the year, personal expenses fell 0.8% in Colombia and 2.9% in dollar terms in Central America. Excluding NFG, personal expenses fell 10.6% year-on-year in dollar terms in Central America. Quarterly, general and administrative expenses fell 1.7% year-on-year and 4.1% over the quarter. Year-on-year GNA expenses reduction reached a 4.1% decrease when excluding the effect of NFG and its expectations, with reductions of 1.8% in Colombia and 7.5% in dollar terms in Central America. Finally, on page 18, we present our net income and profitability ratios. Our general net income for first quarter 2020 was 792 billion pesos, or 35.5 pesos per share. This result was 24.7% and 13.1% higher than a quarter in a year earlier respect. Return on average equity and return on average assets We're 15.4% and 1.8% to respect. I will summarize our guidance for 2021. We expect loan growth to be in the 9% to 10% area. Cost of risk to be between 2.3% and 2.4%. Peace to grow in line with our loan portfolio. Expenses growth will be in the 4.5% area. Return on average equity to be in the 13.5% area. We are now I really want to address your questions.