Grupo Aval Acciones y Valores SA (AVAL) 2025 Q4 法說會逐字稿

(Operator Instructions)

Welcome to Grupo Aval Acciones y Valores fourth quarter 2025 consolidated results conference call. My name is Regina, and I will be your operator for today's call. Grupooval Axianesevallorea Grupooval 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 US securities regulation.

Grupo Aval Acciones y Valores is also subject to the inspection and supervision of the superintendency of finance as holding company of the AVAL Financial conglomerates. 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 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. On November 20th, 2025, Banco de Bogota's subsidiary Multi Financial Holding Inc. MFG entered into a share purchase agreement with BAC International Corporation BIC, a subsidiary of BAC Holding International Corp, for the disposal of 99.57% of the issued and outstanding shares of Multi Financial Group Inc. MFG, the parent company of Multibank Inc.

For comparability purposes only, we have prepared and presented supplemental unaudited pro forma financial information for the periods prior to Q4 2025, which reflects the reclassification of the operations relating to MFG as non-current assets and liabilities held for sale and discontinued operations.

This supplemental unaudited pro forma financial information does not intend to represent and should not be considered indicative of the results of operations or financial position that would have been achieved had the transaction occurred on the dates assumed. Nor is it intended to project our results of operations or financial position for any future period or date. The {pro forma} financial information is unaudited, and the completion of the external audit for the year ended December 30th, 2025, may result in adjustments to the unaudited pro forma financial information presented herein.

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 Valorus Esaurus} 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 financial statements of Grupo Aval Acciones y Valore in accordance with Colombian regulations must be filed with the market and with the superintendency of finance with the opinion of an external auditor at the time of this quarterly call.

This process is still ongoing. 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 Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin.

Thank you. Good morning and thank you for joining Grupo Aval Acciones y Valores Award fourth quarter and full year to 2025 earning call. I'm so sorry, but I have a little flu or a terrible flu}, but I, I'm trying to, that you can understand me. I am joined today by Diego Solano Saravia, our Chief Financial Officer, Camilo Perez, Chief economist at Banco de Bogota, and Paula Duran Fernandez, corporate Vice President of Sustainability and strategic projects.

I would like to start by highlighting the positive evolution of our results during 2025, despite the challenging and volatile local and global environment. We reached COP1.7 trillion in net income during 2025, a 70% increase compared to the previous year and more than twice that of 2023.

This improvement was primarily driven by stronger contributions from our banking business and a record performance here by Paul Benito.

Since our last call, we completed important milestones in line with our strategic focus to strengthen our strategic priorities.

First, we completed the merger of our trust company. Second, we reached an agreement to acquire Banco Ita Colombian retail business.

Third, we reached an agreement to divest MFG and fourth, {Corfi} has successfully completed transaction that will grow in business in the short-term.

On January 2, 2026, we successfully merge our fishery businesses from {FY Sierra Bogota, Sierra Ocienta, and Fusierra Popular into Aval Fia.}

This transaction consolidates our truck services into a single stroke entity enhancing our value for position for existing and new customers and generating operational efficiencies.

We expect this to result in an increase of our market share trust fee income and AUM and improve the profitability of this business.

On December 23, 2025. Banco de Bogota announced the acquisition of Banco Itau. We Are banking business in Colombia and Panama. This move reinforces Bank of Bogota's focus on the affluent segment, enhancing the quality of our client needs, and strengthen our competitive positioning in Colombia.

The acquisition is expected to add around 267,000 clients with $6.5 trillion in loans and $4.1 trillion in deposits.

The deal excludes ITA's corporate banking and is pending regulatory approval. On November 27, Banco de Bogota announced that it has reached an agreement to sell {MFG}, a Panamanian bank, to back.

That is the Central American Bank. This unit has delivered more modest results since its acquisition in 2020 and require a large scale to achieve the desired performance.

The divestment of MFG {strengthensco's} position to pursue a stronger growth in its core market and reallocate capital towards businesses with a stronger strategic alignment and long-term potential.

The sale process for this operation is expected to close over the following months following regulatory approvals in Panama. This must be financial groups, balance sheet and P&L have been classified.

And discontinue operations. {Cy} announced two major acquisitions.

The first one, {Corfi} announced the agreement to participate with a 51% stake in Cena, the concessionary of the 2029, year public-private partnership for the renovation, construction, operation, and maintenance of Banco de Bogota Nemesio Camacho Stadium complex.

{Cencia} will develop a $2.4 trillion project includes a new 50,000 city stadium, cultural and commercial components, public space development, and mobility solutions.

In the energy and gas sector, {Promiga} signed an agreement to acquire 100% of {Celestra's} renewable energy generation platform, reinforcement, reinforcing, sorry, its transformation into a multi-energy platform with operations in Colombia, Chile, and Peru.

The transactions are. A portfolio of more than 19 solar and storage projects to 1.4-gigawatts of contracted capacity and over 2.1 gigawatts under development, supporting diversification for of non-regulated businesses and a stable long-term contracted revenues subject to regulatory approvals in Colombia and Peru.

You got it? Results from continued operation for the quarter. Positive trends continue to consolidate during the quarter. Our risk adjusted on loans for the quarter stood at 3.34%, the highest level in three years, while our cost of risk continues its positive trend.

Return on average equity came in slightly below our initial expectations, mainly due to a weaker than expected minimum investment triggered by volatile local and international capital markets and the one-time effects related to the {MFFG} sale agreement, which Diego will explain in detail.

I will now pass on to Paula, who will go over our sustainability achievements for the year, Paula.

Thank you, Maria Lorena. Good morning, everyone. In the fourth quarter, we closed an extraordinary year for sustainability, further consolidating our ESG strategy. One more profitability is built by integrating strong financial performance, measurable social impact, and responsible environmental management.

Our framework is structured around three pillars returns with purpose, opportunities for all, and environmental values. Under our first pillar, returns with purpose, we continue to scale sustainable finance.

Our sustainable loan portfolio reached MXN44.9 trillion, including MXN36.2 trillion in social lending and MXN8.7 trillion in green lending. Social lending included targeted credit lines for senior citizens, housing, women entrepreneurs, coffee growers, and microbusinesses. Green lending supported renewable energy, infrastructure, sustainable mobility, and water management projects, among others.

In our investment portfolio, Maria Lorena already mentioned our agreement with {CElestra} that reinforces our commitment to clean energy.

We also received important external recognition in the S&P corporate sustainability assessment. We achieved a historic score of 81 out of 100 and were included in the S&P Sustainability yearbook. Additionally, Banco de Bogota, {Puerti Colombiano, Bancodoiente, and Progra} were also included in the yearbook, demonstrating the consistency and consolidation of our sustainability strategy across the group.

In the MSCI assessment, we improved our rating to {3BB}, driven by stronger social impact metrics and enhanced responsible investment practices.

On our second pillar, opportunities for all, this pillar focuses on generating inclusive growth and shared value. We calculated the total economic value generated and distributed which reached MXN41 trillion in 2025.

In this, this value distributed with to more than 31,000 suppliers that received MXN11 trillion.

Our 67500 employees also earned MXN3.8 trillion. We also paid MXN3.4 trillion in taxes and generated MXN13 trillion in return for our clients.

Additionally, we invested MXN70 billion in voluntary social programs benefiting more than 2 million people, focusing on community infrastructure, education and research, socioeconomic development, and the promotion of culture, arts, and sports.

Through {Museion La Guajira}, the most significant private sector social initiative in Colombia, we fulfilled our commitments benefiting more than 21,500 people across 80 communities with portable water, electricity, and connectivity. The program also included financial education initiatives and supported over 1,500 Wayuu artisans, fostering sustainable livelihoods.

We also supporting the {Ramos Falantes} scholarship program exceeding our fundraising goal and reaching MXN11.1 billion, sorry, benefiting more than 1,200 students. On our third pillar, environmental balance.

We joined the Partnership for Carbon Accounting Financials to cap, committing to measuring disclose emissions associated with our financial activities. We also launched our nature strategy aligned with the NFC and began its pilot implementation with one of our entities. At the group level, we also achieved tangible eco-efficiency improvements. Energy consumption reduced by 9.6%, renewable energy use increased to 38%, water consumption reduced by 2%. And waste generation decreased by 9%. In summer, we closed 2025 with meaningful progress across all three pillars, reinforcing our position as the van that drives support, that drives and supports and transforms the youth.

We continue to generate opportunities, promote sustainable development, and create long-term value for our shareholders and all stakeholders. Thank.

Thank you, Paula. Now moving to the microenvironment. A lot has happened since our last call that has changed our expectation for 2026.

A massive and technical increase in minimum wages has triggered a substantial increase in inflation expectations and has prompted a stronger stance from the central bank to control inflation expectations.

These recent events add to the increasing real interest rate expectations that result from growing concerns in the current administration's fiscal discipline.

As a result, since our last call, we have raised 200 basic points. Our expectation on 2026 inflation. And 350 basic points year in 2026 central bank intervention rate, changing the improvement trends we previously anticipate. 2025 was characterized by elevated global uncertainty.

The year was marked by abrupt changes in US economic policy, increased trade pensions, and greater economic fragmentation. Despite these challenges, global growth proved resilient, reaching an estimated 3.3% supported by a second half recovery, higher investment, and accelerated adoption of artificial intelligence technology.

In Colombia. Economic activity remains resilient. GDP growth close at 2.6% for 2025, driven primarily by household consumption and public spending.

However, the GDP outlook remains challenging. Investment levels stand at historically low levels, and the country's fiscal deficit is among the largest globally, despite interest savings achieved through the government's liability management strategy. Household consumptions and government spending alone cannot sustain a structural economic growth if investment remains absent and the government continues to crowd out the private sector. Inflation closed the year at 5.1%, remaining above the central bank bank's target range.

Furthermore, inflationary pressures derived from derived from the 23.7% increase in the minimum wage led to the beginning of a new restrictive cycle in monetary policy, as evidenced by 100 basic points increase in the central bank rate in January. Moving on to exchange rate, the weaker US dollar and the heavy dollar inflows from remittances and the national government liability management strategies led to 14.8% appreciation of the Colombian peso relative to the US dollar.

Camilo will now elaborate on our economic outlook. Camilo.

Thank you, Lorena. Good morning.

The Colombian economy grew by 2.6% in 2025, below the consensus estimate and that of technical staff of the central bank. The surprise came from investment results, with growth peaks in formation growing only 1.3%. The weak growth in investment was offset by the dynamism of machinery and equipment, which registered an annual increase of 9% due to the needs faced by businesses to meet higher domestic demand.

Meanwhile, investment in housing, infrastructure, and intellectual properties contracted annually. As a result, Colombia ended 2025 with an investment rate of 16.6% of GDP, the lowest level so far this century.

Ultimately, high levels of uncertainty elevated interest rates due to persistent inflation and large fiscal deficits have led the country to face a complex investment landscape with the financial, mining and energy construction and communication sectors being the most impacted.

Conversely, the economy found support in household and public sector spending. On the household side, higher income from wages, remittances, government transfers, coffee exports, and tourism led to an acceleration in private consumption growth from 1.6% in 2024 to 3.6% in 2025.

The growth in goods expenditure surpassed that of services. As a result, sectors such as commerce, lodging, food, transportation, recreation, and services in general continue their upward trend.

In manufacturing, while growth was observed in line with the increased household demand for goods, the appreciation of the peso reduced the competitiveness of local production. Meanwhile, amid the suspension of the fiscal rule and the higher budget execution, public spending increased from 0.6% growth in 2024 to 7.1% in 2025, the highest rate since 2021.

Although public spending boosted local activity, it was financed with increased debt, leading to a widening of the primary fiscal deficit. Thus, the fiscal stimulus appears unsustainable and ultimately displaced the private sector in an example of carrying out.

In the external sector, lower national competitiveness explained by the depreciation of the Colombian peso against the dollar and higher labor hiring costs led to exports moderating the growth rate from 3.2% in 2024 to 1.8% in 2025.

By 2026, amid more adverse financial conditions, weakening private consumption, a more challenging fiscal situation, and high uncertainty surrounding the elections, the Colombian economy is projected to moderate its growth rate to 2.4%. Turning to prices, inflation ended 2025 at 5.1%, virtually unchanged from 2024. Here, inflation improvements in rents and regulated prices were offset by increased pressure of food, goods and services different from rents.

At this point, higher labor costs resulting from the significant minimum wage increase, the reduction in working hours, and the approval of labor reform weighed on inflation of goods and services. Meanwhile, high household and government spending limited the scope of improvement in inflation.

By 2026, the minimum wage increase of over 23%, which in real terms was the highest in history, will lead to a resurgence of inflation. Specifically, inflation is expected to end 2026 at around 6.2%. The impact on inflation is also greater thanks to the appreciation of the Colombian peso and its effect on the prices of imports, as well as the policy of reducing gasoline prices and the lower indexation based on rents.

On the fiscal front, the government closed 2025 with the highest primary fiscal deficit, which excludes interest payments since the crisis of the 1990s and the pandemic.

The government addressed the high spending pressures with active debt issues using alternative mechanisms such as the direct sale test to an important investment fund and swap of short and long-term debt during the year.

Calculations by our economic research team indicate that the Ministry of Finance issued more than COP110 billion of Treasury bonds in 2025 when the stipulated limit was COP95 billion.

For 2026, no major changes are anticipated on the fiscal front. In fact, the deficit could exceed 7% of GDP given the absence of the fiscal rule and again considering higher spending and weak revenues.

With this scenario where inflation is rebounding and the fiscal situation remains vulnerable, the central bank will consolidate an upward trend in interest rates. Our economic research team expects the benchmark interest rate to rise from 9.25% at the end of the end of 2025 to 11.25% by mid-2026, a level at which it would remain for at least the remainder of the year. The risks are tilted upwards. With a scenario of higher domestic interest rates, a weak dollar globally due to the United States trade policies, and expectations of lower rates from the Federal Reserve, the exchange rate closed 2025 at COP3,780 per dollar, 50% lower than at the end of 2024.

However, in the second half of the year, the downward trading the exchange rate intensified due to the government sale of dollars. In the second half of the year, the government sold more than $7 billion an amount not seen since the pandemic.

In 2026, the Colombian peso is expected to continue finding support from the wider interest rate differential, the international outlook, and the nation's ample dollar availability. However, the election results will be crucial. Currently, the exchange rate is expected to remain below COP4,000 per dollar throughout the year. Regarding the dynamics of dollar flows in the Colombian economy, it's important to note that for the first time in history, remittances surpassed oil exports as the primary source of dollars of the economy.

This further consolidated diversification of the export basket.

Finally, the legislative and Presidential elections to be held in the first half of 2026 will define the country's economic future. It is too early to draw conclusions about the election results, but the central scenario is based on the expectation that Colombia will have a more fiscally disciplined government which will reduce uncertainty and promote investment and in general will make public policy decisions based on technical criteria that boost economic growth.

Thank you. Back to you, Maria Lauren.

Thank you, Camilo. Turning to our financial results, 2025 was a transition year. In the banking segment, gross loans ended the year at COP190.1 trillion, increasing by 4.8% compared to 2024.

Profitability improved meaningfully, supported by a sharp decline in funding costs that expanded the spread between low yields and funding costs by 41 basis points.

Cost of risk improved from 2.3% to 1.9%, reflecting a stronger consumer portfolio performance and discipline on the rating.

Expense growth remained below the increase in the minimum wage, improving efficiency metrics. As a result, return on equity in the banking sector reached double-digits.

Banco Populo and {coviass} returned to the profitability, and {Banco Guatam Banco} continue improving the results despite of weak markets results at the year end, but when it delivered is the strongest annual performance to date.

Assets under management reach {COP271.2 trillion}, and increase pesos, sorry, an increase 14.9% and ROAE reached 21.2%. {COI} worked throughout the year to lay the foundation for a new growth cycle driven by portfolio rotation and entry into high potential sectors.

The leveraging efforts and decline in rates led to a sisteen reduction in funding costs, reflecting lower debt levels and more favorable interest rates.

Finally, operational efficiencies continue to materialize following the exit from financial services. Now, I would like to pass the call to Diego, who will give details of our results. Diego.

Thank you, Maria Lorena. I will start on pages eleventh and twelfth with a new chart showing the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system.

For comparability reasons, these are unconsolidated figures under Colombian IFRS as published by the Superintendency of Finance.

Starting on page eleventh, during 2025, loans for the banking system grew 2.1% in real terms, with mortgages growing 6.3%, consumer loans 1.48%, commercial loans, 0.7%, all in real terms.

During 2025, we continued to focus on profit on profitable growth. We focused on local currency, commercial loans, and segments other than large corporates, and on personal loans and credit cards and consumer lending.

Peso-nominated commercial loan market share remained unchanged at 26.3%. We are selective in large corporates, corporate commercial, lending given the aggressive pricing competition present throughout the year, where we lost 204 basis points. However, we gained 131 basis points of market share in local currency denominated commercial loans other than large corporates.

We gained market share in products and segments where we were underweighted, such as factoring where we gained 543 basis points to 24.2%, and government loans where we gained 219 basis points to 23%.

Regarding our dollar denominated commercial loans, where we have historically been overweighted, we reduced our market share by 356 basis points to 35.3%. In addition, in peso terms, the balances of dollar-denominated commercial loans were negatively impacted by the 14.8% appreciation of the Colombian peso over the year.

As a result of the above, our market share for commercial loans fell 37 basis points. Consumer loans, we focused on diversifying our portfolio toward higher yielding and short-term loans, reducing our concentration in payroll lending. We gained 138 basis points of market share on personal loans to 21.5%. The consumer business acquisition will take us to market weight. To strengthen our credit card business, where we lost 132 basis points to 17.4%, we launched the FIFA Visa alliance and other initiatives.

All of this while maintaining our leadership position in parallel payroll lending where we have 42.2% market share.

Overall, our market share for consumer loans closed at 28.9% with a 53 basis points decrease. Moving on to mortgages, we continued gain market share with 117 basis points increase throughout the year. As a result of the above mentioned, we closed our market share in total loans at 25%. 28 basis points lower than in 2024.

On page twelfth, loan quality for both the system and of all banks showed an improvement in the year across all categories. Our banks continue to exhibit better loan quality portfolio in the system in all categories. I will now move to the consolidated results approval under IFRS.

As mentioned by Maria Lorena, {Bancobota} entered into a share purchase agreement to sell MFG a Panamanian bank. As a result, in December 2025, we classified this operation as non-current assets and liabilities held for sale and discontinued operations. For reason of comparison with previously reported periods, we're showing res retrospectively on this for formal balances and ratios, classifying MFG as non-current assets and liabilities for sale and discontinued operations.

On page thirteen, we present assets and loans. Assets grew 6.4% year on year and 1.5% with a quarter to COP349 trillion. Fixed income investments, which account for 15.8% of our assets, reached a COP52.2 to COP55.2 trillion, growing 21.2% year on year and decreasing 0.2% of the quarter.

Gross loans, which account for 54.7% of our assets, reached COP190.9 trillion, growing 46% year on year and 1.5% over the quarter. Growth metrics were affected by a 44.2% appreciation of the Colombian peso during the quarter and 14.8% over the year.

Peso denominated that now accounts for 91.3% of gross loans grew 6.8% year on year and 1.7% during the quarter. Commercial loans expanded by 1.9% year on year and 1.1% over the quarter. Peso-denominated commercial loans that account for a 4.7% of gross loans to 5.5% year on year and 1.4% during the quarter.

Dollar denominated commercial loans, which account for 15.3% of commercial loans, {grew 0.4%} in dollar terms year on year and 3.9% during the quarter. In peso terms are dollar denominated loans contracted 14.5% year on year and 0.5% quarter on quarter.

Consumer loans grew 4.7% year on year and 1.2% during the quarter. Personal loans grew 12% year on year and 5% during the quarter. Credit cards contracted 1.5% year on year and increased 2.9% during the quarter. Other loans {grew 0.6%} year on year and 1.1% during the quarter. Payroll loans increased 3.2% year on year and decreased 0.9% during the quarter. Mortgages grew 19.6% year on year and 3.9% during the quarter.

On page Fourteen, we present the evolution of funding and deposits. Total funding increased 8.7% year on year and 1.4% in the quarter. The bank borrowings grew 28% year on year in line with the expansion of our trading investment portfolio as mentioned before and account for 8.2% of total funding.

Deposits that account for around 3/4 of our funding grew 11.2% year on year and 3.6% quarter on quarter Our deposit to net loan ratio closed at 113%.

On page Fifteen, we present the evolution of our total capitalization, or accrue to all shareholders' equity, and the capital equity ratio of our banks. Our total equity increased {0.3%} over the quarter and 4.8% year on year, while our total equity increased 0.2% over the quarter and 5.7% year on year. Total solvency and tier one ratios evidence a relative stability in most of our banks.

On page Sixteen, we present {NI}, our net interest margin. Net interest income reached {COP59.3 trillion} for the year, increasing 17.4% compared to 2024. Total {NE} for the year increased 28 basis points to 3.78% in 2025. Consolidated Nieman loans expanded by 28 basis points year on year to 4.71% while Nieman Investments decreased by 8 basis points to {0.82%}. {Neiman Loans} incorporates an 84 year on year expansion of Niman retail loans to 6.33%, and an 18 basis points year on year contraction and Neiman commercial loans to 3.5%. Focusing on our banking segment, the total name of our banking segment expanded 8 basis points over the year to 4.47% due to the same dynamics that affected our consolidated net interest market.

{Neiman} loans were 5.24%, increasing 9 basis points year on year.

This incorporates a 69 basis points year on year increase in Neiman retail loans to 6.9% and a 39 basis points year on year decrease in Neiman commercial loans to 4.02%. Partly NI was negatively impacted by adverse capital market performance driven by a 3.48% negative Neiman on investments. In contrast, Nieman loans for the quarter reached 5.05% 8 basis points higher than the previous quarter and the best result in twelfth quarters.

As discussed by Maria Lorena, the recent shift in the monetary cycle in response to recent government decisions will act as a headwind for him over the next quarters.

The development of our financial diversification strategic pillar continues to pay off. We have diversified our funding sources towards less sensitive non-naturing deposits, including deposits from individuals and cash management in deposits. Our banks lowered maturities and repricing gaps and actively implemented interest rate hedging strategies.

On page seventeen we present our yields on loans, cost of funds spreads. On a consolidated basis, the average yield unknowns for the year decreased 126 basis points to 12.06%, while the annual average three-month IDR decreased 158 basis points to 9.4%. Consolidated cost of deposits decreased 148 basis points during the year to 6.63% while our cost of funds decreased 141 basis points to 6.8%. On pages Eighteenth to Twenty present several portfolio quality ratios.

Sorry. Starting on page eleventh, loan portfolio quality ratios continue to improve during the quarter. PDL metrics continue to improve in all categories. {38 PL} formation for the year reached COP4.2 trillion, 32.8% lower than for 2024.

38 {PDLs} were 4.37%, and 98 basis points improvement over twelve months and 27 basis points over the quarter. 98 {PDLs} were 3.29%, 77 basis points improvement were twelve months, and 11 basis points improvement over the quarter. Commercial loans.

38 {PDLs} were 3.84%, a 101-improvement year on year, and 38 basis points improvement quarter on quarter. 98 {PDLs} were 3.48%, and 91 basis points improvement over the year, and 19 basis points over the quarter. Consumer 38 {PDLs} improved {1$0.00} in basis points year on year and 16 basis points over the quarter to 4.67%. 98 {PDLs} improved 63 basis points year on year and 5 basis points during the quarter to 2.79%. Mortgage, 38 {PDLs} and 98 {PDLs} improved 8 basis points and 10 basis points respectively over the quarter to 6.18% and 3.75% respectively.

Finally, the ratio of charge-offs to average nineteen {APDLs} for 2025 was 0.82 times.

On page nineteenth, the share of our portfolio classified as stage one grew to 89.8%, while stage three decreased for a six-month consecutive quarter, a six consecutive quarter to 5.7%, driven by improvements in our consumer portfolio.

Coverage measured as allowances for stages two and three as a percentage of stages two and three was 33.6% decreasing 545 basis points relative to a year earlier due to improvement in the mix.

On page Twentieth. In 2025, cost of risk, net of recovery still 38 basis points to 1.9% in line with our expectation for the year. For consumer loans, cost of risk net of recoveries includes 157 basis points to 4.2%. This includes a 449 basis points improvement in personal loans to 8.4%. For commercial loans, cost of risk net of recoveries was {0.7%}. During the fourth quarter of 2025, cost of risk net of recoveries fell 27 basis points to 1.7%, the lowest in twelfth quarters, driven by an increase both in commercial and consumer portfolios of 36 basis points to {0.6%} and 23 basis points to 3.8% respectively.

On page twenty-one we present nets and other in.

Annual gross fee income grew 6.8% while net fee increased 5.3%. Partly gross and net fee income increased 8.5% and 9.6% year on year. In terms of annual gross fees, pension and trust fees grew 9.1% and 14.9%, boosted by performance-based management fees that followed the positive returns of the financial markets throughout the year.

Our annual income from the non-financial sector was 84% of that recorded in 2024, mainly due to a lower contribution from the infrastructure sector. Quarterly income was affected by a lower income from the energy and gas sector and the infrastructure sector as well. This was partially upset by income from hotels.

Finally, at the bottom of the page, the annual increase in the operating income is mainly driven by a COP605 billion improvement in derivatives and FX gains. Hedging strategies relative to the non-financial sector are registered under foreign exchange gains and account for COP863 billion yearly improvement.

Drink of water, one of {Promiga's} transportation pipelines measured as per value reverted to the company as {TPNE} and implied a one-time fair value recognition of COP303 billion. This effect was registered on the net income from other financial instruments mandatory at {par} value to P&L.

This positive effect was offset by a one-timely measurement of the deferred tax liabilities. To COP359 billion, {net}, the transaction had a {COP56 billion} negative effect on net income and {COP12 billion} negative effects on attributable net income.

On page twenty-two, we present some efficiency ratios. Cost to assets remained flat at 2.6%. Annual cost to income improved 101 basis points to 52.2% to the quarter. On a quarterly basis, it reached 54.9%, 550 basis points lower than a year earlier.

Annual expenses grew 9.6% during the year, general and admin expenses grew 9.4% year on year. Personnel expenses grew 6.9% year on year, well below the 9.5% increase in Colombia's minimum wage.

Finally, on page 23, we present our net income and profitability ratios. Attributable net income from continued operations for the quarter was COP474 million, 67.5% higher than the same quarter of the previous year. Total attributable net income for the year reached COP1.72 trillion or 72.5 pesos per share, increasing close to 70% compared to the previous year. Our annual return on average assets was 1% and our average The annual return on average equity was 9.6%, 28 basis points, and 366 basis points above 2024 respectively.

In terms of discontinued operations, the results contributed by MFG's operations, as I said, are unattributable net income, adding up COP18 billion. To wrap up, we're updating our guidance to reflect changes in the macroenvironment impacting our business.

We expect Loan growth in the 10% {AR} with commercial loans growing at 7% and retail loans growing at 14%. Total {NIM} in the 4.3% area with minimum loans in the 4.7% area. Our name of the banking segment in the 5.1% area with minimum loans in the 5.4% area. Cost of risk net of recoveries in the 2% area.

Costs to assets in the 2.8% area. Income from the non-financial sector, 1.3 times that of 2025. A fee income ratio in the 21% area. And finally, we expect a 2026 return on average equity to be in the 10.5% area. This guidance does not incorporate the recently announced wealth tax, which we estimate would have the impact of on our {ROE} of 1% point.

Back to you, Maria.

Oh, Diego, okay, thanks. Before moving into questions and answers, I would like to share some final thoughts of Colombia in 2026.

We expect 2026 to continue to be challenging in Colombia, given the effects of political volatility and electoral uncertainty. Economic conditions are expected to remain challenging both locally and globally.

We expect GDP growth to remain moderate in 2026. And we are restrictive monetary environment. The massive minimum wage increase will put pressure on our cost base.

That of ours. Inflation will remain above the central bank's target range, which implies a return to a higher for longer interest rate environment. Despite this backdrop, we strongly believe that we should remain focused in our strategy and improving our business and abstain from echoing.

Uncertainty. The financial sector will continue to be a pillar of trust and investment. We expect to continue growing our financial business and invest through curbing the non-financial sector in the region during 2026. As a result, we expect to continue strengthening our core business, supported on an expansion of risk adjusted on loans, commercial and operational effectiveness, and a stronger fee generation.

In 2026, we will continue delivering new and innovative products. In addition, during this year, we expect to see increases in efficiencies from shared services and IT integration initiatives and strengthening a client-centered unified corporate culture. So, we are now open for questions.

(Operator Instructions)

Thank you. We will now begin the question-and-answer session. Our first question will come from the line of Daniel Mora, Credicorp Capital. Please go ahead.

Hi, good morning. Thank you for the presentation. I have a couple of questions. The first one is regarding the new wealth tax for companies. I would like to know what do you understand for liquid equity, as it says that it is gross equity minus debt or the wealth tax, and also I would like to understand how it will be applied for banks of about you already mentioned a 1% point for the consolidated {ROEs}, but I would like to understand what will be the impact across banks of about. That will be the first question. Thank you.

And second one is also on regulatory issues and regarding taxes. Considering the previous economic emergency decree was put on hold, what is the effective tax rate that you are using in your numbers? Are you considering the 15% tax surcharge or paying, for example, deferred taxes? Thank you so much.

Okay. I, I'll try to answer your calls. I can't be a tax advisor here for you, but our understanding of how the network, tax works is similar to what we've done. We've seen experience in the past, and it says subtracting from the tax base, the equity tax base of a the bank or the company. It's a tax and acquisition price of the shares it holds in its taxable balance sheet. That's the way it is expected to work and it is similar to what it has been in the past, the kind of language that we've seen in what has come up to date is basically the same that we saw in 2014.

Regarding what happens to the group, yes, attributable should be something in the order of magnitude, 1% point. And if you think that, the attributable net, the attributable equity of group of value is roughly 55% to 60% of the consolidated group. If you add what our group will be contributing to, the tax in that sense would be almost twice of what we do attributable to our shareholders.

Regarding how we calculate our tax in our guidance, the number comes out something similar to a 35%. That is a combination of the taxes that we have to pay for our financial companies that have a surcharge in our numbers of 5%. And then the taxes that other companies pay less those that have some exemptions. So but.

But it means that is without the, economic emergency. So, the situation that we have before the.

Exactly. That is what we expect on our base and as I mentioned, the equity tax would add up to that, around 5% points you were to make our calculation, and all based on marginal tax.

Perfect, thank you so much.

Very good. Thank you.

Our next question will come from the line of Brian Flores, Citibank. Please go ahead.

Hi Tim, thank you for the opportunity.

Can you provide an update on the guidance you provided in the third quarter regarding loan growth, cost of risk, and ROE, I think it would be very useful. And then just to confirm, basically you're saying your base case is no change in the tax rate, right? You're basically saying, we have no surcharge and we have no wealth tax. That is the base case in place in the guidelines, right? Thank you.

Yeah, the 10.5% basically takes taxes that were not the taxes from the emergency, and that's why we are guiding into an additional effect that we could have from the wealth tax. Regarding our guidance, we have slightly reduced our guidance and growth, and regarding ROE, there is an implied 150 basis points reduction in guidance on {ROE} compared to our last call.

Okay, so just to confirm here, you were, if I'm not mistaken, guiding for a range of 12% to 12.5%?

We're basically going to 11% or close to 11%.

Is this yeah just restating we are in the 10.5% area guiding last time we were in the 12% area with an upward bias at that point.

Okay, If I made you. You basically are explaining that you are assuming no changes in the tax rate, slightly lower longer. So which is the driver here on the reduction? Is it, I know you're liability sensitive or not as asset sensitive as other banks, so it could be the name, or do you think this is more related to cost of risk because you mentioned the efficiencies should be better in 2026 and onwards from what I understood.

Yeah, it's a combination of several things. One, and the main driver is a better mix of our loan portfolio that is also helping us to cope with the kind of behavior of the central bank rate that will imply a relatively better year on year.

There could be a reduction if you take the numbers that we had for the 4th quarter. That was the best quarter in, as I mentioned. However, year on year that there's an improvement.

There's other things that are going to happen and it is we expect for Benin to have a better performance than what we had guided before, basically for two reasons. One, higher minimum wage implies higher fees from contributions from our customers, and then a higher interest rate environment is positive for for Benin.

On top of that, we have the other inorganic discussions that Maria Lorena pointed out that we expect to help us. We expect to see our mix improved. You, you've seen that throughout the past years, we've been moving towards retailer to the retail segment. We've been working strongly on putting that organically and mechanically. That also improves our performance.

And actually, when we compare, our cost of risk, there's no change in cost of risk. The other area that where we could see a substantial improvement is {NI} coming from investments. In general terms, we've seen a volatility in this year, and there's been points in time, as was the fourth quarter where Nieman and investments was negative on our results.

No, super clear. I am very sorry to insist here. It's just that I don't understand because if you're assuming no change in cost of risk and you're assuming a better mix and what I understood is a stable name.

But then you're mentioning basically the reduction on {ROE} is of 1{00 BPS} year over year in the guidance.

Is this only coming directly from a reduction in your expectations of long growth, which I assume they were around 8%, no, in the last call?

Yeah, I have to correct myself. I just pulled out our guidance last time. We have actually a slight pick up on retail. And we also have, as I mentioned before, when you look at our effective tax rate, we're also building in a higher tax rate for this year.

Understood. Thank you very much for the clarifications.

Okay, sorry to take so long.

Again, if you would like to ask a question. There are no further questions at this time, Ms. Maria Lorena Gutierrez Botero. I turn the call back over to you.

I just want to say thank you for being here with us and I'll see you in three months.

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