Welcome to Grupo Aval's Second Quarter 2024 Consolidated Results Conference Call. My name is Regina, 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 SEC. 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. Unconsolidated financial information of our subsidiaries and the Colombian banking system are presented in accordance with the Colombian IFRS as reported, the Superintendency of Finance. Details of the calculations of non-IFRS 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, expect, 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 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. With us today are Ms. Maria Gutierrez Botero, Chief Executive Officer; Mr. Diego Solano, Chief Financial Officer; Mrs. Paula Durán, Corporate VP of Sustainability and Strategic Projects; and Mr. Camila Perez, Banco de Bogota Chief Economist. I will now turn the call over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin.

Good morning, everyone and thank you for joining us for our second quarter 2024 conference call. I am here with Diego Solano, our CFO; Camila Perez, Chief Economist of Banco de Bogota; Paula Durán, our Corporate VP of Sustainability and Strategic Projects and people of the company. Let me start with some ESG highlight. To better support the execution of our strategy, we are taking actions to renew and strengthen our management teams, at the first and second levels, both at our main businesses and at holding company level. Juan Camilo Angel resigned as CEO of Banco AV Villas after 30 years of service. Gerardo Hernandez was appointed as his successor. Mr. Hernandez is the former Chief Legal Officer of Banco de Bogotá and previously served as part of the Board of Directors of Colombia Central Bank and as Superintendent of Finance. We also appointed Mrs. Milena López, replacing me as CEO of Corficolombiana. Milena has over 20 years of experience in the private and public sector, most recently serving as CFO to Ecopetrol and CENIT. Also in July, we strengthened our structure at the holding level with the creation of two new Corporate Vice Presidents. The VP of Sustainability and Strategic Projects led by Paula Durán and the Corporate Vice President of Financial Assets and Efficiency led by Jorge Castaño. Paula is the former VP of Strategy and Sustainability at Corficolombiana and Jorge is the former Financial Superintendent. They both have more than 20 years of experience in the public and private sectors. I am confident that the personal and professional qualities of our team will continue to strengthen our market position and help achieve our group of our long-term strategic goals. Now, I will invite Paula to go over additional ESG achievements during this quarter. Paula Durán: Thank…

Thanks, Paula. Now on the macro side, let me mention some relevant issues in this quarter. Inflation continues to trend down in July. Further supporting our view of an over Colombia's Central Bank that could cut rates faster, reducing real interest rates from current levels above 6%, and continuing to improve corporate, the banking sector and economic recovery. Economic growth has continued to be slow and investment remains well below historical levels. The country's fiscal accounts remain undisputed, even after spending cut program. The government is working on a second wave of spending costs and considering a tax reform or financial law, including surcharges to additional sectors while lowering the general corporate tax rate. Camila will further comment on this and share our view on the economy.

Thank you, Maria Lorena. Good morning to all candidates. Economic activity has turned out better than expected at the beginning of 2024, with an annual growth of 2% so far this year through May, compared with projections between 1.5% and 1.8% for the year. The improvement has been influenced, first by the recovery of the global economy, which has been reflected in a better performance of foreign trade. Secondly in the local context, better dynamics in sectors such as public administration, agriculture, recreation and utilities, especially electricity have also explained the positive surprise in economic performance. In contrast, more traditional sectors of the economy, such as construction, commerce and manufacturing, maintained construction rates at the beginning of the year. This is evidence of the current dispersion impacts our performance. Growth in 2024 is likely to exceed the 0.6% of 2023. However, it will remain below that of the long-term. A slow recovery in investment, affected by low levels of confidence for both businesses and households, coupled with still high interest rates, has had a negative impact on the present and has also reduced the outlook for future growth. The 12-month aggregate investment rate as of March 2024 approached its lowest level since the beginning of the series in 2005, that 13% of GDP, which will have a negative impact on economic growth in the coming years. Thus, potential growth is now estimated to be between 2.5% and 3%, lower than the pre-pandemic estimate of between 3% and 3.5%. Nevertheless, some modest signs from the consumer suggest that the worst is behind. The national employment rate show annual increase of just 0.2 percentage points in the first half of 2024 to 11.1%, benefiting from higher public and services hiring, which has compensated to some extent for job losses in sectors that…

Thank you, Camila. We strongly believe that the country's recovery needs to be driven by government policies that lead to a stronger investment, effective execution and confidence on the legal environment and physical security. However, we believe that in addition to these forwarding efforts, private sector initiatives will add to recovery. We have set ourselves to contribute and support the country's economic recovery by launching a group-wide plan to contribute to sustainable growth and employment generation in key sectors such as, SMEs, housing, energy transition, agriculture and the popular solidarity economy. These sectors have immediate effects on economic activity and employment. We have committed to provide funds at preferential rates to these key growth sectors, ensuring strong risk management processes. We will also continue our ambitious plan of more than COP1.9 trillion in priority sectors such as infrastructure, gas, agribusiness and tourism. Before Diego gives the details of our results, let me go over the highlights of our financial results. The second quarter showed stronger loan and deposit growth that allowed us to continue increasing our market share. Over the quarter, our bank combined gross loans grew 1.8%, reaching a 25% market share by March of this year. Cost of risk and asset quality improved relative to the previous quarter and operating expenses remained under control. Regarding asset quality, it seems we have finally reached the peak in cost of risk and delinquency for consumer loans. On commercial loans, the increase in delinquency has been milder that -- what could be expected in this cycle. We remain vigilant for potential climate signals or weaker sectors. We are currently designing an ambitious corporate synergies and efficiency plan, which we will launch over the coming months. I expect to provide you details on our following calls. Finally, the Central Bank continues to…

Thank you, Maria Lorena. I will start on pages 8 and 9 with a few charts regarding the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system. For comparability reasons, these figures are unconsolidated under Colombian IFRS published by the Superintendency of Finance. We continued to outgrow our competitors in all loan categories. This yielded by end of May, year-on-year market share gains of 83 basis points in total loans, 108 basis points in commercial loans, 125 basis points in consumer loans and 57 basis points in mortgages. On Page 9, the quality of consumer loans appears to have begun to improve in the Colombian banking system, while commercial loans and mortgages slightly deteriorated. As mentioned in the past, Aval's portfolio composition is skewed towards lower consumer risk products resulting in a better credit quality than the system average. I will now move to the consolidated results of Grupo Aval under IFRS. Starting on Page 10. Assets grew 3.2% over the quarter to COP317 trillion accumulating a 6.2% increase year-on-year. Gross loans, our main asset reached COP193 trillion, growing 2.4% during the quarter and 4.8% year-on-year. An 8% depreciation of the Colombian peso during the quarter had a positive effect on quarter-on-quarter metrics, contributing 1.3 percentage points to quarterly growth. Over the year, the peso appreciated 0.7% having no material impact on growth metrics. Commercial loans and mortgages continue driving our nominal growth, while consumer loans resumed growth following two consecutive quarters of contraction. Commercial loans expanded 2.9% in the quarter and 5.9% year-on-year, with peso depreciation contributing 1.8 percentage points to quarterly growth. Consumer loan growth, even though still at a soft 0.9%, improved during the quarter. Payroll loans and auto loans grew 1.6% and 2.6% respectively during the quarter, while…

Thank you, Diego. Finally, let me mention that we are focused on sustainable growth and expect that a better macroeconomic scenario in the second half of the year will support better profitability going into 2025. So may we have questions.

[Operator Instructions] Our first question comes from the line of Julian Ausique with Davivienda Corredores.

First of all, I would like to confirm the guidance.

We cannot understand what you were saying. Could you speak a little higher, please?

Okay. Can you hear me now? Is it better?

Go ahead, but it's still difficult to understand.

Okay. So first of all, I would like to confirm the guidance in terms of demand ROE. And my second question is regarding the impact of Banco Popular, due to the equity issuance that made -- that was announced yesterday. And why will the participation that Grupo Aval would have to take in that sense? And the third question is regarding if you already have any view about 2025 results, a little bit of what is the call or what are the expectations for 2025?

Could you please repeat your first question?

Yes. Could you confirm the ROE guidance?

Yes. ROE guidance is 6.5%. As you might remember, we give out two different sets of guidance for the banking segment and growth for our full year numbers and also consolidated [indiscernible] interest expense and in internal engine. So NIM of our banking segment is a 4.5% area with minimum loans of the banking segment in the 4.25% area. That implies of the remaining of 3.75% area, with retail loans in the 4.5% area, that's your first one. Then regarding Banco Popular, the issuance are supported by Grupo Aval as we financed in the past. So that's what we expect to see. We will be answering those. And finally, on the year 2025, here we can only be directional as Maria Lorena mentioned and [Paula Durán] emphasized a positive trend NIM and cost or risk and are returned to normal numbers from Central Bank somewhere at the middle of next year. If we had a positive results, we have given out quantitative guidance.

[Operator Instructions] Our next question comes from the line of Nick Dimitrov with Morgan Stanley.

I have a couple of questions, and apologies, the connection seems to be pretty bad. So I don't know you might have already answered this, but I have a question about your capital allocation decisions. So it became clear that Banco Popular shareholders have agreed to raise COP100 billion yesterday. Can you walk me through the rationale for that? Because I know that the entity has been struggling for 1.5 years. But when I look at capital, it's 18% -- 18.2% to be exact. At the same time, this is the strongest or the best capitalized subsidiary within the group. At the same time, there's banks such as Banco Occidente's, whose capital is significantly lower. So I was just kind of wondering about the rationale to raise equity for Banco Popular when it's the strongest capitalized entity within the group and why not Banco de Occidente? So that is the first question. And the second one is on -- I understand that there is also a decision to raise COP100 billion of Tier 2 capital, again for Banco Popular. So I was looking to get an update in terms of where you are in the process of raising the Tier 2 money?

Could you go over the first question just to make sure I got it right?

I'm sorry, say that again?

Could you repeat your first question just to make sure I got it right?

Yes. So the first question is the rationale for Banco Popular to raise money when optically it looks that it's well capitalized.

Sorry. Number two. Let me answer the first two and then you can repeat the third one. The decision to strengthen Banco Popular is two sided. Number one, we look not only at a consolidated number, but also the unconsolidated numbers and the only bank that’s there is a material difference between those numbers, in fact, when I went through the numbers, I will point out for Banco Popular. Then Banco Popular has a combination of two things happening with cycle. Number one, it's ha been losing money therefore, it's been destroying capital over several periods. And then we see a very strong potential for growth moving forward. So we're also capitalizing as because refinishing part of what was lost in the process. And also we expect the management of the bank to be able to execute a much more aggressive growth strategy, that we'll be requiring that sort of capitalization. Then moving into an Banco de Occidente. The Banco de Occidente is somehow different than Banco Popular because they've been quite topical throughout the cycle. We will continue strengthening the bank before the required is demanded by growth. At this point, the use of capital seems to be the right amount. But as we said in the past, if we see our bank enable to outflow our expectations, we can build and review that plan. And then could you repeat your question?

Yes. The second question is regarding COP100 billion of Tier 2 capital for Banco Popular. Where are you in the process of raising the money?

Okay. I think that was the previous question. I would say we are ready to support it from the group. So we do not see a market execution risk in that essence.

There are no further questions at this time. Ms. Maria Lorena Gutierrez Botero, I turn the call back over to you.

Thank you to all to be with us in this call. And as you know, if you have question comment in the coming months, you can call us. And see you in the next call. Have a good day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.