Grupo Aval(US:AVAL)2019-11-19 19:48Financial Data and Key Metrics Changes - Attributable net income for Q3 2019 was Ps. 743 billion or Ps. 33.4 per share, with an adjusted figure of Ps. 891 billion or Ps. 40 per share excluding provisions for CRDS [16][35] - Unadjusted accumulated attributable net income for the nine months ended September 30 was Ps. 2.3 trillion, reflecting a 12.5% increase compared to the same period in 2018 [16] - Return on average equity for the quarter was approximately 16%, increasing to 19% when excluding provisions for CRDS [17] Business Line Data and Key Metrics Changes - Loan portfolio grew by approximately 11% year-on-year and 5% in the quarter, with notable growth in the commercial portfolio [17][26] - Net interest margin for the quarter was 5.7%, driven by a 6.4% NIM on loans and 2.3% NIM on investments [17][31] - Net fee income for the nine months ended September 30 increased by 12% compared to the same period in 2018 [17][32] Market Data and Key Metrics Changes - Colombian assets grew by 9.8% year-on-year and 1.2% in the quarter, while Central America delivered 4.5% and 0.5% growth in dollar terms [26] - The exchange rate fluctuated between Ps. 3,170 and Ps. 3,480 per dollar, averaging around Ps. 3,400 [15] - Central America is expected to grow slightly less than 3% during 2019, with Nicaragua's economy expected to contract by 5% [15] Company Strategy and Development Direction - The company announced an agreement to acquire Multi Financial Group holding of Multibank in Panama, aiming to strengthen its presence in Central America and expand its customer base [23] - The acquisition is expected to close in Q2 2020, pending regulatory approvals, and will add approximately $3.5 billion in loans and $3 billion in deposits to the consolidated balance sheet [24] - The company is focusing on digitalization, with digital sales in Colombia representing 40% of total retail sales, up from 23% in Q4 2018 [19] Management's Comments on Operating Environment and Future Outlook - The Colombian economy is expected to grow by 3.2% in 2019, with a slight improvement to 3.3% in 2020, driven by private consumption and investment [10][11] - Inflation is projected to be around 3.8% for 2019, with expectations of easing to 3.5% in 2020 [12] - The management expressed confidence in the stability of the Central Bank's repo rate at 4.25% throughout 2019 and most of 2020 [12] Other Important Information - The company has adopted IFRS 16 retrospectively from January 1, 2019, impacting the comparability of quarterly results for 2019 with previous periods [5] - The company recorded a provision expense of Ps. 295 billion for Ruta del Sol, reaching an 86% coverage [28] Q&A Session Summary Question: Financing options for the acquisition of Multibank Panama - The company confirmed that no new capital influx is needed for the acquisition and is considering various funding options, including upstreaming dividends from BAC [39] Question: Outlook for provisions and cost of risk - The guidance for cost of risk has been reduced from 2.3% to 2.2%, with major cases like Ruta del Sol expected to be fully provisioned by year-end [40][41] Question: Strategies to increase ROE for Multibank - The company plans to implement synergies with its shared services center in Costa Rica to improve efficiency and extend better funding rates to the acquired bank [46] Question: NIM guidance and competition impact - The expected NIM contraction is attributed to increased competition and a shift towards a more historical average NIM [47] Question: NPL ratio in Central America - The company acknowledged past increases in NPLs, particularly in Nicaragua and Costa Rica, but noted positive trends and improvements in both countries [50][51] Question: Capital planning ahead of Basel III implementation - The company plans to be an early adopter of Basel III, expecting a substantial increase in regulatory capital due to changes in risk-weighted assets and inclusion of OCI accounts [70]