Grupo Aval Acciones y Valores S.A. (GRUPOAVAL) Earnings Call Transcript & Summary

Welcome to Grupo Aval's First 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 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, expects, plans, anticipates, believes, estimates, predicts, potential or continue or the negative of these and other comparable words. Actual results and events may differ materially from those anticipated herein as a consequence of changes in general, economic and business conditions, changes in interest and currency rates and other risks described from time to time in our filings with the Registro Nacional de Valores 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. [Operator Instructions] 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 to you all. I'm delighted to be hosting this First Quarter 2024 Conference Call. Before we begin, let me introduce myself. My name is Maria Lorena Gutierrez Botero. I joined Aval in 2018, having the privilege [Technical Difficulty]. With this extraordinary team [Technical Difficulty] financial results, I'm proud to have managed to position Corfi as one of the Colombia's leading companies in services and [Technical Difficulty]. Last year, we generated COP 883 billion in net earnings as part of the over COP 13.5 trillion in value generated to our stakeholders. I'm passionate about contributing to Colombia's growth. Before coming to Aval, I served several leadership roles in the Colombian government between 2010 and 2016 and previously, I was a Dean of the Business School at Universidad de los Andes. I want to take this opportunity to acknowledge Luis Carlos Sarmiento Gutierrez and Luis Carlos Sarmiento Angulo for their outstanding leadership over the years. They served as CEO and Chairman of Grupo Aval and want to congratulate Mr. Sarmiento Gutierrez for his new role as Chairman of Grupo Aval. It is an honor to succeed him as CEO and to work beside him. I expect to consolidate Grupo Aval's position as the leading financial conglomerate in the Colombian market, recognized for its sound profitability, sustainability, innovation and its contribution to key economic sectors, maximizing value for our investors and our stakeholders. Before Diego goes over our numbers for the quarter, I will summarize my view of Colombia's macro scenario, refer some key events on the ESG front and finish with some highlights of our financial performance and our overall view for 2024. The global economy has performed better than anticipated. Fears of a recessionary scenario for developed countries have dissipated and now seem unlikely. Resilient economic data in the United States sustained a soft landing scenario, consistent with a higher for longer interest rate stance. U.S. inflation accelerated to 3.5% in March, is still far from the short-term target of 2%. The Federal Reserve plans on lowering rates later in the year with a maximum of 225 basic point cut this year, down from the 6 cuts previously anticipated by the end of 2023. Commodity prices are and are projected to stay high due to ongoing geopolitical tensions and supply chain disruptions, benefiting commodity exporting nations in Latin America, Colombia included. On the domestic front, we maintain Colombia's growth projections of 0.75% to 1.25%. The economic activity index increased by 2.5% year-on-year in February 2024, surpassing consensus projections. Peer views suggest that the Colombian economy dipped at the end of 2023 and has since started to rebound, fueled by the momentum in agriculture and mining sector and policy administration. Nevertheless, a primary challenge persists in maintaining the trajectory of recovering the secondary sectors to ensure positive annual growth in the months ahead. Inflation has decelerated from 9.3% in December 2023 to 7.16% in April and is expected to continue declining to the 5.75% area by the end of 2024. This disinflationary process may face headwinds in the second quarter due to transitory effects like El Nino on prices of perishables foods and electricity. However, a significant portion of expected disinflation, particularly in service and regulated sectors, has already taken place and core inflation is anticipated to continue trending downward in the coming months. Moving to the monitory policy. The Central Bank's Board has cut its policy rate from 13% to 11.75%, with decreases of 25 basic points in January and 50 basic points in the subsequent two meetings. The Central Bank might have been too cautious in the magnitude of its rate cut considering the upsurge and expected disinflation, imposing a tolerant economic speed. The real interest rates have remained contractual through this year, standing at 7% at the end of April when considering a 4.7% year-ahead expected inflation. We, as does the market, to look for a more decisive interest rate reduction phase, in line with the positive evolution of inflation. We estimate our year-end rate of 8.5% area by the end of 2024. There has been a substantial weakening since 2022 of gross fixed capital investment in infrastructure, building construction and main sectors that have a considerable contribution on the supply side of GDP. We expect that [Technical Difficulty] will continue to underpin established economic performance in 2024. The recovery of GDP growth is Colombia that followed the COVID-19 pandemic was driven by household consumption. Even though a still strong household consumption is the key driver to GDP dynamics over the last 2 years has moderated significantly and is forecast to experience more growth into 2024. Looking beyond 2024, there are concerns that if the current low fixed investment rate persists, Colombia's potential growth will decline to a range between 2.2%, 2.5%, down from 3% and 3.5% before the pandemic. Total investment that includes inventories, fell close to [ 25 ] in 2023. Reaching the investment level of 2022 will require substantial growth in gross fixed capital formation. Immediate and decided public action intended to stimulate investment in critical sectors such as infrastructure and energy is [indiscernible]. In this context, we highlight the government's role as the orchestrator of Colombia's economic reactivation. As such, efficient public spending will be crucial in boosting its multiplier and the counter-cyclical effect. However, public investment reached an underwhelming 14% of execution, the lowest in at least 8 years. In addition, low gross domestic savings hinders a substantial pickup in investment and GDP growth over the following years. The post-COVID-19 construction rebounded in Colombia that contributed to inflationary pressures, being connected to an increase in the financial quality of households both through their investments and higher interest rates. The postponed consumption of durable goods and services was encompassed by a marked improvement in employment figures well below pre-pandemic levels, leaving households well positioned to consume. Consistent with the contraction of retail lending in the Colombian banking system observed since the beginning of 2022, the financial burden on households reported by the Superintendency of Finance has already receded to pre-pandemic levels. This behavior favors an improvement in the delinquency of our consumer loan portfolio. However, the sharp economic slowdown since the last quarter of 2022 and a weaker labor market since mid-2023 have contributed to an increase in delinquency across the banking system. We expect the yearly average national employment rate to be 11% in 2024, up from 10.2% in 2023. In the fiscal term without additional spending cuts, it is projected that Colombian central government deficit will rise to 5.6% of GDP, exceeding the 5.3% allowed by the fiscal rule. This shortfall is a cue to lower economic growth, impacting tax revenue and adjustments in an expected revenues due to intense tax administration and litigation efficiency. To meet the fiscal rule, an additional cut in primary spending of COP 14.2 trillion will be necessary. We are watchful on the recent discussions regarding eventual changes to the fiscal rule, even significantly regarding future fiscal deficits with an eventful implication on interest rate level, investor confidence and country risk premiums. The reduction in currency demand due to a weak domestic demand has led to a substantial appreciation of the exchange rate, with the dollar falling below COP 3,750 in early April, its lowest level since June 2022. Nonetheless, the Colombian peso has been fully adjusted in the recent decline in macroeconomic fundamentals. Risks associated with fiscal accounts, long-term growth projections, oil production and a narrow interest rate gap compared to the United States could potentially trigger a depreciation of the U.S. dollar Colombian peso exchange rate to a level above the COP 4,000 in the latter half of the year. On the social front, we launched the Mision La Guajira project in December 2023. This is a joint effort between ourselves, the government and the community intending to bring potable water, food security and energy to over 80 communities in this extremely poor region in the country. We expect this to be an initial phase of a project that we aspire will have a broader long-lasting impact in this region. This project will impact 5 of the sustainable development both, including no poverty, good health and well-being, clean water and sanitation, affordable and clean energy and reducing inequality. Regarding our tally among several Aval subsidiaries that were certified by Great Place to Work, I am proud to highlight that Banco de Occidente was recognized as the best place to work for women in 2023 in companies with over 1,500 employees. On the governance front, changes were implemented throughout the group's Board of Directors intended to represent and to adhere to international standards. We increased the proportion of independent members and the number of women in our Board. At Grupo Aval, the General Shareholder Meeting approved the Board to be reduced from 14 members, 7 principals and 7 alternates to only 9 principals and increase the ratio of independent Board members to 2/3. In the environmental front, Banco [indiscernible] Colombiana are carbon neutral, and we will continue working to achieve this status in the remaining direct subsidiaries between '24 and 2025. In addition, our most relevant financial subsidiaries are currently working on building their respective climate change risk matrices in accordance with the CCFC principles. Regarding our financial results, Diego will [indiscernible] our financial performance during the first quarter of 2024. However, I will highlight the following. This quarter's lackluster performance was driven by a pickup in cost of risk. Other key business metrics such as growth, net interest margin and cost to asset efficiency fell largely in line with our expectations and last quarter's guidance. Despite the challenging environment for our banking activities and restricted credit origination policies that took place in 2021, we increased our market share in all main lending categories. During this quarter, we gained 32 basis points in total loans, 39 basis points in commercial loans, 42 basis points in consumer loans and 17 basis points in mortgages. We gained 32 basis points in total loans, 39 basis points in commercial loans and 42 basis points in consumer loans. In the first quarter of the year, 10 banks out of a total of 28 posted net losses. When excluding equity methods, dividends and no recurring income from their organization, this number increases to 13 banks. On a consolidated basis, although still depressed, we have begun to see a recovery of the net interest margin on loans and expect this to continue as the Central Bank maintains its rate cut cycle through the year. The slower-than-anticipated decrease in the benchmark rate has delayed the recovery path than what we had initial anticipated. In addition, price competition has increased in the corporate segment in an environment of lower-than-expected growth of the banking system. Cost of risk in the system remains high despite having shown signs of stabilization in new risks. Notwithstanding a high ratio of charge-offs from some of our competitors, delinquency metrics remain well above historical levels. Our lower-risk consumer loan mix differentiates us from our main competitors with a higher ratio of payroll lending, a lower share of unsecured consumer lending and has favored us in this credit cycle relative to the rest of the banking system. Finally, we expect the risk management actions taken throughout this credit cycle, the review of our bank's strategies and cost control initiatives deployed throughout our bank will reflect on our results in the latter part of the year. The speed of improvement will be determined by the decisiveness of the Central Bank to reduce rates and the actions taken by the government to stimulate recovery of economic activity. Headwinds from higher cost of risk and [indiscernible] growth in net interest margin will continue to undermine our performance during the following quarters. I thank you for your attention. And now I pass the presentation to Diego, who will explain in detail our business results and provide guidance for 2024.

Thank you, Maria Lorena. Before moving into our results, I would like to take a moment to highlight some aspects that characterize our banking operation that differentiate us from others in the Colombian banking system and explain our performance throughout the post-pandemic cycle. Pages 9 and 10, you can find several charts regarding the quality and growth rate of our loan portfolio. For comparability reasons, these figures are unconsolidated under Colombian IFRS as published by the Superintendency of Finance. As mentioned in the past, Aval's portfolio composition is skewed towards lower-risk consumer lending products and in line with our underwriting standards, we were at a more cautious pace during the boom that followed the post-pandemic rebound. Consistent with this risk profile, our banks have experienced a milder impact of the credit cycle and despite tightening underwriting policies, we have been in a better position to grow in this challenging environment. As a result, our banks in Colombia have gained market share in all major loan categories over the 12-month period ending on February while experiencing a better evolution of the credit quality of the consumer portfolio and [Technical Difficulty]. I will now move to the consolidated results of Grupo Aval under IFRS. Starting on Page 11, assets grew 2.7% over the year and 1.9% over the quarter to COP 307 trillion. The year marked a 17.2% year-on-year appreciation of the Colombian peso that had a negative effect on year-end growth metrics, particularly of net loans and leases. For the quarter, the peso appreciated 0.5% and had no material impact on growth metrics. Our dollar-denominated loans account for 16.6% of our total portfolio. These are contributed mainly by MFH in Panama by the U.S. agencies of Banco de Bogota, our trade finance activities and offshore subsidiaries of Banco de Bogota and Banco de Occidente. The bottom of the page, gross loans grew 2.2% over the year and 1.5% in the quarter. Our peso-denominated loans increased 5.1% and 1.3%, respectively, while U.S. dollar-denominated loans grew 8.6% and 2% in dollar terms, respectively. We continued to outgrow our peers across all loan categories despite having tightened our origination policy several times over the cycle. This yielded, at the end of February, year-on-year market share gains of 89 basis points in total loans, 138 basis points in commercial loans, 110 basis points in consumer and 28 basis points in mortgages. Commercial loans grew 3.1% year-on-year and 2.3% over the quarter. Peso-denominated commercial loans grew 7.1% and 3% year-on-year and quarter-on-quarter, while U.S. dollar-denominated commercial loans grew 10.5% and 2.5% in dollar terms, respectively. Consumer loans contracted 0.2% year-on-year and grew 0.1% over the quarter. Peso-denominated consumer loans grew 0.6% year-on-year and remained flat quarter-on-quarter, while U.S. dollar-denominated consumer loans grew 6.4% and 1.7% in dollar terms, respectively. The sluggish dynamics of consumer loans have been driven by high interest rate environment and tighter underwriting policies in line with the slow economic activity and softer macro outlook. Consumer loan growth was slow across all main products. Federal loans that account for 55% of our consumer loans contracted 1.7% year-on-year and grew 0.6% over the quarter. Demand for this product has gained traction as the reduction in incoming rates allows for lower interest rates and new disbursements. Personal loans that account for 24% of our consumer book grew 1.7% over the year and contracted 0.1% during the quarter. Credit cards that account for 12% grew 4% year-on-year and contracted 1.6% quarter-on-quarter. Automobile loans that account for 9% of our consumer loans decreased 1.5% year-on-year and grew 0.4% quarter-on-quarter. Finally, mortgages grew 4.6% year-on-year and 2% over the quarter. Peso-denominated loans grew 11.1% and 2.4%, respectively, while dollar-denominated mortgage loans booked by MFH grew 2.5% and decreased 0.8%, respectively, in dollar terms. We expect our 2024 loan growth to continue exceeding the banking system albeit remaining soft across products and sectors. Dynamics in the system will fall largely in line with sluggish domestic demand and investment dynamics. Loan growth rates in the system are expected to pick up later during the year and into 2025, driven by the normalization of the monetary policy and its positive effects on GDP growth. On Page 12, we present funding and deposit evolution. Total funding increased 2.8% year-on-year and 3.1% during the quarter. Peso-denominated funding grew 11.5% year-on-year and 3.6% during the quarter. U.S. denominated funding decreased 1.4% in dollar terms year-on-year and increased 1% in the quarter. Deposits accounted for 74.1% of our funding, growing 4% quarter-on-quarter and 6.1% year-on-year. Peso-denominated deposits increased 8.9% year-on-year and 3.9% quarter-on-quarter. U.S.-denominated deposits increased 11.7% and 4.1% in dollar terms, respectively, over 12 and 3 months. Time deposits that remain the most sought-after type of funding continue driving overall deposit performance and gained share in our mix. Time deposits grew 7.1% year-on-year and 5.3% during the quarter. Our deposits to net loans ratio stood at 106%. On Page 13, we present the evolution of our total capitalization, our attributable shareholders' equity and the capital equity ratios of our banks. Our total equity decreased 1.4% over the quarter and increased 2.8% year-on-year. Our attributable equity decreased 2% over the quarter and increased 1.7% year-on-year. Dividends of COP 570 billion were declared to our shareholders during the quarter. In addition, minorities at our subsidiaries received dividends of COP 623 billion. Lower core equity Tier 1 ratio in Banco de Bogota and Banco del Occidente correspond to dividends declared during the quarter. Lower Tier 2 ratios in these banks reflect the decrease in capital contribution of subordinated debt in accordance with the regulatory amortization schedules. As a recent event, [indiscernible] reflected in these figures on May 7, Banco de Occidente issued its inaugural $175 million Tier 2 notes with a maturity of 10.25 [ years non-co 5 ], which we estimate would add approximately 150 basis points to total solvency. Banco Popular and consolidated ratios were 12.7% for total solvency and 11% for core equity Tier 1. On Page 14, we present our yield on loans, cost of funds, spreads and NIM. The consolidated NIM on loans expanded 16 basis points quarter-on-quarter to 4.3%. NIM on commercial loans predominantly floated over IBR decreased 14 basis points to 3.9%, while NIM on retail loans predominantly priced at fixed rates expanded 58 basis points to 4.9%. Despite of the above-mentioned positive results in NIM on loans, total NIM fell 49 basis points to 3.4% quarter-on-quarter due to a sharp contraction in our NIM on investments to minus 0.2%. Focusing on our banking segment, NIM on loans of our banking segment improved 8 basis points quarter-over-quarter to 5.1%, still substantially lower than historical levels. This incorporates a NIM on commercial loans that decreased 16 basis points to 4.7% and the NIM on retail loans had expanded 41 basis points to 5.6%. The total NIM of our banking segment contracted 21 basis points to 4.2% due to the same dynamics that affected our consolidated NIM. The [ decrease ] of our NIM on investments is explained by 2 drivers. First, a softer quarter-on-quarter, yet still double-digit NIM on investments from our pension and severance fund management segments; and second, a negative result in our banking and merchant banking segments that mitigated by strong results in FX and derivatives under other income in connection with hedging strategies. Interest rating dynamics of our loans and funding are driven by the movements in the average benchmark rate in Colombia. On a consolidated basis, the average yield on loans for the quarter decreased 54 basis points to 13.7% over 3 months, while the average Central Bank rate decreased 42 basis points to 12.8% in first quarter '24. And average 3-month IBR decreased 64 basis points to 12.3%. Commercial portfolios reduced their yield by 84 basis points to 13.3% over the quarter. In addition to lower IBR, a preference for low-risk sectors has implied lower spreads on new loans. The average yield on consumer loans decreased 22 basis points over the quarter due to a sharp decrease in Colombia's lending rate cap after changes in calculation methodologies implemented by the regulators. This change reduced the rates of some unsecured lending products, mainly credit cards. It was partially offset by a continued repricing of loans with longer maturity, such as payrolls. On the cost of funding side, our banks recorded a 68 basis points quarter-on-quarter decrease in cost of funds. Average rates on time deposits and saving accounts fell 53 basis points and 88 basis points quarterly, respectively. As we have mentioned in previous calls, last year, time deposits were issued at abnormally high spread to a sovereign triggered by changes in the net stable funding regulation. A portion of those will mature over the following months, contributing to the downward trend in cost of funds. On Pages 15 through 17, we present several loan portfolio quality ratios. On Page 15, 90-day PDLs were 4.15%, a 17 basis points deterioration relative to last quarter and 70 basis points deterioration over 12 months. 30-day PDLs increased to 5.85%, a 39 basis points change over 3 months and 99 basis points deterioration over 12 months. Loan rates between 30 days and 90-day PDLs remain contained as a result of the collection strategies developed by our banks. 90-day PDLs formation increased 5% quarter-on-quarter after an 18% increase in 30-day PDL formation a quarter earlier. Commercial 30-day PDLs were 5.1% and 33 basis points increase over 3 months. 90-day PDLs were 4.48%, 8 basis points deterioration over the quarter. We recorded a 53 basis points increase in consumers 30-day PDLs to 6.81%s, while 9-day PDLs decreased 35 basis points to 3.91%. Mortgages 30-day PDLs and 90-day PDLs increased 33 basis points and 8 basis points, respectively, and 120-day metrics PDLs were 3.5% or 11 basis points higher during the quarter. Finally, the ratio of charge-offs to average 90-day PDLs was 0.62x. On Page 16, the share of our loan portfolio classified as Stage 1 portfolio fell slightly over the quarter, mostly driven by a mild deterioration in retail loans. Regarding coverage, the allowance for Stage 2 and Stage 3 as a percentage of loans classified as Stage 2 and Stage 3 was materially stable during the quarter for total loans. The coverage for commercial loans continued increasing during the quarter. The allowance ratio for consumer loans and mortgages slightly increased over the quarter, reflecting an improvement in the mix of probabilities of defaults inside Stage 2 loans. On Page 17, as we anticipated in our last earnings call, the cost of risk remained high during the quarter, driven by a high cost of risk for consumer loans. Cost of risk net for consumer loans improved 4 basis points to 7.5% despite a slight contraction in average balances. The cost of risk of credit cards and personal loans improved quarter-on-quarter, falling 63 basis points to 15.2% and 237 basis points to 15.4%, respectively. The increase in cost of risk on commercial loans is mainly explained by strong end-of-period loan growth in the quarter. On Page 18, we present net fees and other income. Gross fee income grew 5.6% quarter-on-quarter and 3.9% year-on-year. Net fee income increased 16.3% and 5.9%, respectively. Net pension and severance fees grew quarter-on-quarter and year-on-year, driven by performance-based fees that incorporates a strong capital market performance at the end of 2023. As guided, income from the nonfinancial sector was around 70% of that reported in the first quarter of 2023 as some toll road concessions transitioned from the construction to the operations phase. In contrast, the energy and gas sector outperformed during the quarter due to the favorable effect of the El Nino phenomenon and Promigas' businesses due to the higher natural gas consumption. Finally, on the bottom of the page, the quarterly increase in other operating income is mainly explained by higher derivatives and FX gains that, as mentioned before, partially compensate lower results in NIM on investments. In addition, even seasonality further adds to the improvement relative to fourth quarter of 2023. On Page 19, we present some efficiency ratios. The result of our cost control initiatives, total other expenses increased 0.8% year-on-year and fell 3.8% quarter-on-quarter. General and administrative expenses grew 0.2% year-on-year and contracted 7.9% quarter-on-quarter. General and administrative expenses are determined by operating taxes and deposit insurance that now account for 41% of these expenses. These line items grew 8.1% and 9%, respectively, year-on-year. Other general and administrative expenses decreased 4.8% year-on-year. Cost to assets for the quarter was 2.76%, improving 15 basis points quarter-on-quarter and 4 basis points year-on-year. Our quarterly cost-to-income improved to 50.4% over the quarter and deteriorated year-on-year, mainly due to a lower NIM on investments and income from the nonfinancial sector. Finally, on Page 20, we present our net income and profitability ratios. Attributable net income for the quarter was COP 114 billion or COP 4.8 per share. Return on average assets and return on average equity for the quarter were 0.6% and 2.7%, respectively. Before we move into questions and answers, I will now summarize our general guidance for 2024. We expect loan growth between 7.5% and 8% with commercial loans growing between 9% and 9.5% and retail loans growing between 5% and 6%. NIM in the 4% area with NIM no loans in the [ 4.75% ] area. [ NIM of ] our banking segment in the [ 0.25% and 0.5% ] area with NIM on loans between 5.25% and 5.5%. Cost of risk net of recoveries in the 2.2% area. Cost to assets in the 2.7% area. Income from the nonfinancial sector of 70% of that for 2023 at the income ratio between 20% and 25%. Finally, we expect our 2024 return on average equity to be in the 6.5% area. We are now available to address your questions.

[Operator Instructions] Our first question comes from the line of Nicolas Riva with Bank of America.

Diego and Maria Lorena. A few questions. So the first one on provisions for loan losses, which were up 72% year-on-year and 10% quarter-on-quarter, cost of risk at 2.9% in the quarter. If you can discuss any thoughts in terms of the outlook for provisions for loan losses for the rest of the year? That's my first question. And then I have a few questions on your stand-alone balance sheet for the holding company. Diego, you mentioned the Tier 2 raise from Banco de Occidente after the end of the quarter, the $175 million. I want to confirm that transaction is not going to have any impact on the stand-alone balance sheet of the holding company. I assume that Grupo Aval, in this case, did not buy any of the Tier 2 issue, but if you can confirm that. And also, if you can tell us what's the amount of the AT1 issue from BAC, Central America that is owned by Aval and that is included in the double leverage that the holding company reports of 123% at the end of the quarter. And finally, Diego, you gave us guidance for 2024 on a consolidated basis. Can you share your projection for double leverage for the holding company by the end of the year?

Okay, Nicolas. Let me take each one of those. Regarding provision expenses, cost of risk, you might have noticed that we raised our expectation cost of risk for the year. Basically, what we are reflecting here is the credit cycle has been longer than what we expected. If you look at what has happened, you will find that there's been improvement as we had guided into before, but we haven't yet seen a turning point, particularly for consumer loans. From the macro side, there is a number of positives going on. We see the numbers reported by the Superintendency of Finance of household leverage improving. So that correlates to the contraction in consumer and retail loans that we've seen before. But we still have some caution on what is going to happen with unemployment. So that's perhaps the main change in the guidance for this call is a higher cost of risk with an expectation to trend to better numbers as the economy recovers. Even though it's data-dependent, we see positives going on, on the inflation front. We see positives on the Central Bank front and also from the growth -- the GDP growth perspective. So even though cautious, we see an improvement in that area, and that would help us to trend back to a sub 2% cost of risk that we are more familiar with. Regarding the -- our stand-alone balance sheet, yes, Aval didn't buy bonds from Banco de Occidente. It was a particularly small issue, and we wanted this to be the inaugural bond for Banco de Occidente. It was not a benchmark-sized transaction because of the needs of the banks. But still, they were able to tap the market. Regarding the AT1, we are -- we will be looking at the call of the bond during next year. At this point, I would say the probability of that call is relevant given the trend of rates going on. And we have to wait a few months to see that happening, but it is a possible scenario that it will be called. And then you had a few other questions.

And in the case, Diego, so again, assuming it's called, what would be the -- so right now, what's the amount of the AT1 issue from...

It's a -- yes, no -- yes, your question on double leverage. It's a very relevant event. What we are working on is trending down that to 120%. That is basically a ratio that rating agencies have pointed to. And the AT1 represents close to 11 percentage points of double leverage. So if the bond is called and we doing nothing else, we would be around 110% or under that number.