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

Welcome to Grupo Aval's Second Quarter 2026 Consolidated Results Conference Call. My name is Regina, and I will be your operator for today's call. Grupo Aval Acciones 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. Details of the calculations of non-IFRS measures such as ROAA and ROAE, among others, are explained when required in this report. On November 27, 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. On March 18, 2026, after obtaining the required regulatory authorizations and fulfilling all agreed conditions precedent, the transaction was completed. For comparability purposes only, we have prepared and present supplemental unaudited pro forma financial information for the periods prior to 4Q '25, which reflects the reclassification of the operations relating to MFG as noncurrent assets and liabilities held for sale and discontinued operations. The supplemental unaudited pro forma financial information is not intended 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 31, 2026, 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 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 financial statements of Grupo Aval Acciones y Valores S.A., in accordance with Colombian regulations, must be filed with the market and with the Superintendencia Financiera, with the opinion of an external auditor. At the time of this solicitation, 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 Gutiérrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutiérrez Boteros, you may begin.

Thank you. Good morning, everyone, and thank you for joining us for our second quarter 2026 conference call. I am here with Diego Solano, our CFO; Camilo Pedro, Chief Economic of Banco Bogota; and Ernesto Gutiafñares, Chief Technology Officer. Before discussing our quarterly results, I want to address the earthquake that took place in Colombia this week. On behalf of Grupo Aval, our thoughts are with everyone affected. Our priority has been the safety of our employees, our clients and communities we touch. We took immediate action to leverage our transactional and logistical capabilities to support emergency relief efforts. We enabled our network of over 2,700 ATMs, mobile banking platforms and dale! to channel donations to the Colombia Red Cross and the Colombia un solo corazón initiative. Through Sencia, Corficolombiana, we also set up a campaign in stadium as a collection center for essential supplies. Yesterday, we have more than 1,000 people there in the city. Regarding our operations in the areas most affected by the earthquake, we have temporary service interruptions in several service points to ensure the safety of our clients and employees. In addition, these regions were initially affected by widespread electricity and communication failures. Our operations and services have been progressively restored. Turning now to our corporate highlights. Our attributed net income reached COP 577 billion, up 17% compared to the second quarter of 2025 and the highest quarterly result since March 2022, reflecting the continued strengthening of profitability. ROA reached 12.7% for the quarter. The quarter was marked by solid loan and deposit growth and strong contributions from our investment portfolio and stable asset quality and continued efficiency gains. In addition, we continue to deploy strategic initiatives focused on deepening retail customer presence and strengthening our payments ecosystem. Through our alliance with Visa, we delivered unique customer experiences, reaching more than 750,000 participants in the brand activation activities launched during the FIFA World Cup 2026. In parallel, our bank has been working in QR-based instant payment collection solution for businesses further enhancing our transaction banking offering and deposit franchise. As for the recent developments, on July 31, Banco de Bogota completed the transfer of the retail banking assets liabilities and contracts from Banco Itaú in Colombia. The transaction has more than 250,000 retail banking customers and reinforces Banco de Bogota's strategy to grow and strengthen its retail banking franchise, especially in the affluent segment. On June 9, Grupo Aval Holding Bogota, Banco de Occidente and Banco Popular contributed their investments in Corficolombiana to a special purpose vehicle. Each entity retained its indirect stake in Corfi. This transaction is primarily aimed at simplifying Corficolombiana's ownership structure, consolidating the stake into a single jointly controlled vehicle within Grupo Aval. Diego will touch on this in more detail later on. We will begin this call discussing some key elements of our technology strategy, a key driver of Grupo Aval's transformation and future growth. Before passing the call on to Ernesto Gutiérrez, our Chief Technology Officer, I want to highlight this. At Grupo Aval, we are deploying a technology strategy to support faster innovation and more efficient operations and to improve our customers' experience. This strategy seeks to build advantages to compete in a more digital and connected financial system, shaped by data analytics and artificial intelligence and to redirect operational CapEx to transformation investment aligned with best practices for the financial industry. To achieve these results, we are working on 4 key strategies. First, improving our service platforms to allow us to better understand and serve our customers. Second, reengineering our digital course to accelerate our time to market. Third, migrating to Grupo Aval cloud, a modern and resilient platform that will support this evolution by speeding up our adoption of new solutions, improving the resilience of our operational platform and capturing synergies across the group. And finally, strengthening our data platforms to improve real-time decision. I will turn the call over to Ernesto, who will provide additional color on our technology strategy. Ernesto?

Thank you, Mariana. Good morning, everyone. I would like to give you a brief update on the execution of our technology strategy and more importantly, on how it is beginning to translate into growth, total efficiency and resilience of the Grupo Aval. As Maria has already outlined it, technology innovation, data and artificial intelligence are key enablers of our long-term strategy. Our focus now is execution. We start from an important competitive advantage, our scale. Grupo Aval is a multi-financial group and our technology strategy is designed to turn that scale into economic advantage by building shared capabilities that can be developed on and developed across the group. This is the foundation of our common digital GOU, a secure, scalable and architecture designed to operate increasingly in real time, connect with partners and ecosystem and prepare the group for the opportunities created by open finance and -- we are executing this strategy across 4 main pillars. The first one is Aval 360, knowledge and serving our customers better. Aval 360 is creating a more integrated view of our customers across the group, allowing us to improve continuity across channels, personalized interactions and process increase our ability to cross-sell products and service across our entities. The business objective is straightforward, higher conversion and stronger retention and greater value per customer. Artificial intelligence is becoming an important part of this strategy. For example, in Nexa BPO company, we expect the 30% of the person installed to be handled through the AI-enabled solution. This should increase scalability and response capacity while maintaining the service quality and customer experience for our customers. At the same time, digital adoption continues to expand. Today, 67% of our customers already conduct transactions through the digital channels. The second point is our digital course. We are accelerating our digital business. We are building shared capabilities to design, launch and scale digital products faster while progressively reducing dependency on traditional core system and making it easier to connect with external ecosystem and partners. Our new digital personal loan solution is on track to go live in the fourth quarter of the year. In parallel, we continue to advance our capabilities for credit cards and customer loans and retail banking transactional services. Together, these initiatives address a significant part of the financial needs of our retail customers. The value proposition is clear: shorter time to market and lower structural cost per product. Importantly, these are not capabilities designed for a single entity. They are being built to be reused and scaled across Grupo Aval. The third point is Delos, turning data into better decisions. Delos is our management intelligence platform, and it serves as digital twin of our banking operations. Delos is already integrated 9 business dimensions into a common management view. Through this integration with Augusta, our strategic platform, we are increasing our ability to understand relationships among customer products and companies across Grupo Aval. The objective is to move progressively from analyzing what happened to understanding what is happening and what may happen next. This will support better decisions in areas such as customer management, risk, capital allocation, and operational efficiency. The last point is Aurora. Aurora is our cloud platform strategy. Aurora is the platform through which we are modernizing the technology infrastructure for the group. This architecture combines public cloud capabilities, including AWS and Microsoft Azure, with private cloud capability development through our partnerships with IBM and Kyndryl. The objective is to improve resilience, availability, scalability, and security, while structurally we are releasing our infrastructure obsolescence. Aurora also changed the economics of our infrastructure, moving progressively from a procuring capital-intensive technology invest toward a more flexible and management capability model. There is another important dimension to Aurora. The efficiency generated by Aurora will be reinvested to help fund the next stage of our technology transformation. This creates a virtuous cycle in which transformation generates savings, and those savings help to fund the further transformation. In that sense, Aurora is not only modernizing our infrastructure, it is also helping us build a more sustainable funding model for our broader technology agenda. Taken together, these four pillars are designed to deliver 3 fundamental outcomes. The first is growth. Faster product launch, stronger digital capabilities, better customer knowledge, and greater ability to build relationships across the different entities of Grupo Aval. The second point is structural efficiency. We are redesigning the way that Grupo Aval operates through the more real-time processing, greater automation, increased use of artificial intelligence, shared platform, and lower levels of manual intervention. This is not a one-time cost reduction effort. It is about creating and structuring more efficient operational model for Grupo Aval. The third point is trust and resilience. Security, controls, data governance, and operational continuity remain embedded in the design of every capability that we build. In the financial services, true trust is a prerequisite for sustainable growth. All of this supported by a strong principle: capital discipline. We are moving from a management technology as an inventory of products to prioritizing investments based on strategic contribution, expected returns, and value creation. In summary, Grupo Aval is moving from strategy to execution. We are scaling shared capabilities across the Grupo Aval, developing artificial intelligence into our real operation, accelerating our digital products roadmap, and using data to make better decisions. Importantly, we are doing this with a model in which technology increasingly generates efficiencies that help us in our own evolution. Technology is becoming a business capability from Grupo Aval, with the customers always in the center. Thank you.

Thank you, Ernesto. Let me walk you through the key macroeconomic developments of the quarter. The global environment remained challenging during the quarter. Oil prices peaked after ceasefire and the U.S.-Iran agreement in June. However, renewed tensions resurfaced in early July, showing that the situation remains fragile, weighing on global growth expectations for the year. In Colombia, economic activity continued to expand, although dependent on short-term factors. Consumption has remained relatively resilient, supported by remittances and employment. In contrast, investment continues to lag and needs a more certain environment. Recent indicators suggest some improvement relative to the start of the year, and we currently expect GDP growth of approximately 2.4% in 2026. Inflationary pressures increased during the quarter, with annual inflation reaching 6.0% in July, moving further off from the central bank's target. Markets have raised their expectation on this year inflation, putting pressure on the central bank decisions. At the same time, the Colombian peso continues trending, supported by remittances inflows and a weaker U.S. dollar environment, helping mitigate import inflation pressures. Against this backdrop, Banco de la República raised its policy rate to 12% in June. However, at its most recent meeting in July, the board decided to keep rates unchanged. Even though further rate increases can be expected, this pause reflects prudent stance to assess the cumulative effects on the monetary tightening already in place and to evaluate incoming economic data. Looking forward, Colombia has significant opportunities to accelerate investment and productivity. Materializing this potential will require from the new administration improvement in physical and regulatory safety, as well as a firm commitment reflected in public policies to create an environment that promotes long-term investment. In addition, restoring a credible path to reverse fiscal deficit trend will be essential to building confidence required to support sustainable growth in Colombia. With that, I will turn the call over to Camilo, who will provide additional color on our economic outlook. Camilo?

Thank you, María Lorena. Good morning. The Colombian economy registered growth of 2.3% in the second quarter of the year, marking its highest expansion in almost a year. While positive, growth was supported by temporary factors. The first of these is the increased household spending associated with the FIFA World Cup 2026. This event boosted economic activities through greater dynamism in commerce, leisure, entertainment, restaurants, and sports betting. Likewise, the public administration continues to contribute to economic activity due to increase in personnel at the national registry for the local elections, as well as higher budget execution, which reached a four-year high, significantly contributing to the growth of national activity. Another sector that performed well was utilities, driven by the increasing energy demand from households due to intensive use of air conditioning and refrigeration systems, given the high temperatures experienced in several cities across the country. In contrast to these sectors, agriculture, mining, manufacturing, and construction continued to exhibit weak or negative results. In agriculture, the weather and high input costs were detrimental. In construction, high-interest rates and the slow execution of major infrastructure projects weakened the sector. In mining, the decline is structural, and in manufacturing, the appreciation of the peso has harmed the sector's competitiveness. This suggests that the economic recovery maintains a K-shaped dynamic, in which some sectors show improvement while others continue to lag. For the remainder of the year, tighter local financial conditions, the diminishing effects of the transitory factors, the impact of the war in the Middle East, the arrival of El Niño, and the expected fiscal adjustment will lead the Colombian economy to grow 2.4% in 2026. Turning to prices, inflation jumped from 5.6% at the end of March to 6% in July 2026, near its highest level since July 2024. Services dependent on the minimum wage saw a variant exceeding 9%, while rents maintained inflation close to 5%, more evidence of the indexation problem. Meanwhile, inflation in regulated goods accelerated due to higher fuel prices resulting from the war in the Middle East. Additionally, energy and gas prices increased as a result of the greater use of thermal power plants for electricity generation as a precaution against the arrival of El Niño. In the food sector, fertilizer prices and weather conditions also exerted upward pressure. For the remainder of the year, the upward trending inflation is expected to continue given the intensification of the aforementioned factors, ending the year at 6.8%. On the fiscal front, the government finalized the TRS operation in May and updated the medium-term fiscal framework in June. With the closure of the TRS and other debt management operations during the quarter, the government carried out a significant swap of external debt for domestic debt. As of June, the share of external debt in total debt was 23%, the lowest in the 21st century, also supported by the appreciation of the peso. Regarding the fiscal framework, while the revenue forecast for 2026 is reasonable, the expenditure forecast is not. Higher spending pressures are expected, leading to a total fiscal deficit of 6.7% of GDP in 2026, above the target of 5.3% of GDP. Given this outlook, with inflation still high and inflation expectations too, and a still vulnerable fiscal situation, the Central Bank of Colombia raised its policy rate by 75 basis points in June and left it unchanged at 12% in July. The Central Bank is likely to continue raising rates, taking the policy rate to a peak of 12.50% in the coming months, as it seeks to bring inflation back to our target and after seven consecutive years of missing it. With a scenario of higher domestic interest rates and a favorable reading of the elections, the local exchange rate extended its downward trend, reaching its lowest level since 2019 at around COP 3,100 per dollar. The potential misalignment of the exchange rate led the central bank to implement a program to accumulate international reserves for up to $4 billion, restarting that of 2 options of put options. Following the election results, the country's premium fell to 140 basis points, near its lowest level since 2021. This lower premium reflects investor expectations that under the new government, Colombia will implement macroprudential measures, contain the fiscal deficit, oversee negotiated minimum wage increases, and promote investment incentives, among other policies that foster a better business environment and strengthen the local currency. However, the passage of reforms in a highly divided Congress will be crucial for the fulfillment of these expectations and their corresponding impact on the economy and local assets. Thank you. Back to you, Maria Lorena.

Thank you, Camilo. Turning now to our financial results. Loan growth continued to accelerate during the quarter, with both loans and deposits increasing 2.1% over the quarter to COP 198 million and deposits COP 222 million respectively. Our total money deposit growth has outpaced loan growth. This incorporates a strong growth of our retained deposit base. Net interest margin improved to 5.5% in the quarter. This improvement incorporates a strong contribution of needs from our investment portfolios that are benefiting from a particularly strong capital market cycle. In addition, we delivered a 21 basis point improvement on loans in the banking segment. Our credit quality was substantially stable, with cost of risk well controlled at 1.49%, and we maintain a disciplined cost structure with cost to assets at 2.7%. Regarding our non-banking subsidiaries, Corficolombiana had a particularly strong quarter, benefiting from the strong fixed income and equity market. Corficolombiana also contributed good results with energy and infrastructure revenues up on a last 12-month base. Now, I would like to pass the call to Diego, who will give you the details in our results. Diego?

Thank you, Maria Lorena. I will start on Pages 8 and 9 with a few charts showing the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system based on unconsolidated figures under Colombian IFRS as published by the Superintendencia Financiera. Starting on Page 8, for the 12-month period ended in May 2026, our last loan growth accelerated, driven especially by commercial loans, while growth of the rest of the banking system was primarily driven by consumer loans, in particular personal loans and credit cards. We continue to prioritize growth in local currency commercial loans and within consumer in personal loans and credit cards. Our market share in commercial loans increased 32 basis points over the year and 1219 basis points over the quarter. Our market share of peso-denominated commercial loans increased 57 basis points year-on-year to 26.2% and decreased 6 basis points over the quarter. Market share of dollar-denominated commercial loans fell 166 basis points over the quarter to 35.1%, reflecting Banco de Bogota's relocation of part of its foreign currency loan portfolio from its Colombian book to the Banco de Occidente book. Consumer loans, we continue diversifying our portfolio towards higher-yielding loans, moderating our overweight in payroll lending. We gained 189 basis points of share in personal loans year-on-year and 68 basis points over the quarter, raising our market share to 22.6%. Looking ahead, dale! consumer business acquisition will help us close our remaining gap to market weight in personal loans. We maintain our leadership position in payroll lending with 41.1% market share. However, we reduced our share in payroll loans by 62 basis points from the quarter, accumulating 222 basis points year-on-year. Overall, our market share for consumer loans closed at 28.4%, a 30 basis points decrease over the quarter and 125 basis points year-on-year, given the underweight in personal loans, the main driver of consumer lending growth. Finally, we continued gaining market share in mortgages with 14 basis points increase over the quarter and 69 basis points year-on-year, reaching 17.6%. As a result of the above mentioned, we closed the quarter with a market share in total loans of 24.8%, 18 basis points up over the quarter, and 16 basis points lower than a year earlier. On Page 9, loan quality trends remain positive across all categories, both for Aval and for the system alike, with the Aval banks continuing to show stronger portfolio quality in most categories. I will now move to the consolidated results of Grupo Aval under IFRS, starting on Page 10. Assets grew 3.9% over the quarter and 4.5% over the year to COP 351 trillion. Fixed income investments that at the end of the quarter accounted for 17.2% of our total assets increased 11.6% over the quarter and 20.5% over 12 months, driven by higher liquidity. At the bottom of the page, gross loans grew 2.1% during the quarter, accumulating 7.6% year-on-year. Our peso-denominated loans increased 2.4% quarter-on-quarter and 9.3% year-on-year. Commercial loans grew 2.4% over the quarter and 7.7% year-on-year. Peso-denominated commercial loans grew 3% quarter-on-quarter and 10.9% year-on-year, while U.S. dollar-denominated commercial loans grew 5.2% quarter-on-quarter in dollar terms and 7.7% year-on-year. Following the MFH divestiture in March, dollar-denominated loans account for 7.9% of our loan portfolio and come primarily from Banco de Bogota's U.S. agencies, our trade finance business, and the offshore subsidiaries of Banco de Bogota and Banco de Occidente. These loans were affected by the appreciation of the Colombian peso of 6% over the quarter and 15.5% over 12 months. Consumer loans grew 1.1% during the quarter and 4.7% year-on-year. Payrolls that account for 53% of our consumer loans contracted 1.2% both over the quarter and over the year. Personal loans that account for 28% of our consumer loans grew 4.5% during the quarter and 18.2% over the year. Credit cards that account for 12% of our consumer loans grew 4.5% quarter-on-quarter and 6.5% year-on-year. Automobile loans that account for 7% of our consumer loans increased 0.8% quarter-on-quarter and 3% year-on-year. Finally, mortgages grew 2.9% over the quarter and 15.7% year-on-year. On Page 11, we present funding and deposit evolution. Total funding reached COP 292 trillion, growing 3.8% over the quarter and 11% year-on-year. Total deposits that account for around 3/4 of our funding needs reached COP 221 trillion, growing 2.1% over the quarter and 11.5% year-on-year. Our deposits to net loans ratio increased to 117%, a healthy position and a protection for potential volatility associated with the presidential election. On Page 12, we present the evolution of our total capitalization, our accrued total shareholders' equity, and the capital and equity ratio of our banks. Our total equity increased 3.4% over the quarter and 3.3% year-on-year, while our accrued total equity increased 4.4% over the quarter and 4.6% year-on-year. During the quarter, Banco de Bogota, Banco de Occidente, Banco Popular, and Grupo Aval Holding concluded their stakes in Corficolombiana through an SPE in exchange for shares of such SPE while maintaining their indirect shares in Corficolombiana. This change implies measuring the new investment in each entity, impacting the solvency ratios of Banco de Bogota and with a minor effect in Banco de Occidente. Banco de Bogotá ended the quarter at a solid 14.9% of total solvency and 14% of tier 1 capitalization. In addition, AV Villas just issued COP 100 billion coordinated bond during the quarter, strengthening its tier 2 capital. Net income and the improvement in OCI from fixed income added as well to our solvency ratios. On Page 13, we present our net interest income, which reached COP 3.6 trillion in second quarter 2026, up 68.4% from first quarter 2026 and 43.1% from second quarter 2025. Results benefited from a solid trading investment income driven by exceptionally strong capital markets. A portion of the quarterly trading investment income was offset by hedging and derivatives, which I will discuss later when covering other income. As anticipated, NIM and loans for the banking segment expanded, driven by the repricing of commercial floating loans. At the consolidated level, NIM and loans remain stable as the higher rate environment continues to weigh on Corficolombiana's contribution, and in fact, we expect to ease as rates normalize. Total NIM increased 217 basis points to 5.51% quarter-on-quarter and 130 basis points year-on-year. Our consolidated NIM and loans reached 4.41% during the quarter, stable relative to 4.4% during the first quarter of 2026. Our consolidated NIM investments increased to 8.68%, up from 0.25% in first quarter 2026, driven by a significant improvement in the test market performance connected to the June presidential election. Net of derivatives, net NIM investments would have been 5.1%, and total NIM would have been 4.6%. Focusing on our banking segment, the total NIM of our banking segment expanded 192 basis points from the quarter to 6.07%, due to the same dynamics that affected our consolidated NIM. NIM on loans was 5.19%, increasing 21 basis points quarter-on-quarter. This incorporates a 44 basis points quarter-on-quarter increase in NIM on commercial loans to 4.3%, and nine basis points quarter-on-quarter decrease in NIM on retail loans to 6.39%. On Page 14, we present yield and cost of funds. Interest rate dynamics of our loans and of our funding are driven by the movements in average benchmark rates in Colombia. The average central bank intervention rate increased approximately 135 basis points during second quarter 2026, while our consolidated cost of deposits increased 59 basis points to 7.34%, reflecting a lower pass-through. Our total cost of funds increased 75 basis points to 7.75%. These quarter results reflect the combined benefits of disciplined repricing and the strong high yield on investments. Our banking segment spread between yield on loans and cost of deposits reached 5.68%, its highest level in 10 quarters, as our lower deposit pass-through translated directly into margin expansion. On Pages 15 through 17, we present several loan portfolio quality ratios. On Page 15, overall loan quality trends were materially stable during the quarter, with 90-day PDLs across commercial, consumer, and mortgage loans holding at levels consistent with their historical levels. 90-day PDLs were 3.13%, stable relative to the last quarter and 44 basis points improvement relative to 12 months before. 30-day PDLs were 4.41%, a 10 basis points increase over three months and 45 basis points improvement over 12 months. New 90-day PDLs in the quarter were COP 1.11 trillion, up from COP 1.08 trillion a year earlier and COP 766 billion during first quarter 2026. Coverage on 90-day PDLs was 137%, in line with the first quarter 2026. Commercial 30-day PDLs were 3.86%, stable over three months and improving 50 basis points over the year. 90-day PDLs were 3.26%, a seven basis points decrease over the quarter and 60 basis points over the year. We reported an annual 52 basis points decrease in consumer 30-day PDLs to 4.71%, while 90-day PDLs improved 30 basis points to 2.68%. Mortgages, 30-day PDLs and 90-day PDLs improved 13 basis points and 10 basis points year-on-year. Finally, the ratio of charge-offs to average 90-day PDLs was 0.65x. On Page 16, the share of our loan portfolio classified as Stage 1 reached 90% of the total portfolio, up from 89.1% in second quarter 2025, and slightly lower than the 90.3% reported a quarter earlier, reflecting stabilization of our loan portfolio profile. The allowance for Stage 2 and 3 as a percentage of loans classified as Stage 2 and 3 reached 33.3% for all loans, decreasing 47 basis points during the quarter. On Page 17, our net cost of risk was 1.9%, 8 basis points higher quarter-on-quarter, and 5 basis points year-on-year. The gross cost of risk was 2.2% in second quarter 2026, increasing 12 basis points quarter-on-quarter and decreasing 18 basis points year-on-year. The net cost of risk for consumer loans was stable at 4.1%. Meanwhile, the net cost of risk for commercial loans was 0.9%, up from 0.7% during first quarter 2026. On Page 18, we present net fees and other income. Gross fee income grew 4.1% year-on-year and increased 3.7% quarter-on-quarter. Net fee income increased 3.3% year-on-year and decreased 5.2% quarter-on-quarter. Gross fee income was driven by an annual 1.7% increase in banking fees, 8.1% in pension fees, and 9.8% in trust fees. Income from the non-financial sector was around 1.14x that reported during second quarter 2025 due to a positive impact of higher inflation and consumption revenues. Energy and gas contributed COP 281 billion, roughly in line with prior periods. As mentioned earlier, the year-on-year variation in other operating income mainly reflects lower derivative incomes. COP 962 billion of this quarter's variation is related, is connected to derivatives to hedge the income from investments that I mentioned when discussing reference to market. On Page 19, we present some efficiency ratios. Total other expenses reached COP 2.36 billion during the second quarter of 2026, increasing 7.4% year-on-year and decreasing 8.1% quarter-on-quarter. Quarterly variation is largely explained by COP 312 billion equity tax reported under general and administrative expenses from the first quarter of the year. Total other expenses, including equity taxes, increased 4.6% quarterly, driven by other tax expense. Personnel expenses increased 4.6% year-on-year to COP 839 billion, impacted by the 23% minimum wage increase on part of our workforce. Cost to assets for the quarter was 2.7%, slightly higher than year-on-year. Our quarterly cost to income improved to 49.3%, mainly due to the increase in net trading income. Finally, on Page 21, we present our net income and profitability ratios. Actual net income was COP 577 billion or COP 24.2 per share, our highest level for a quarter in four years. Our return on average assets and our return on average equity for the quarter reached 1.1% and 12.7% respective. I'll now summarize our general guidance for 2026. We expect loan growth in the 10.5% area of commercial loans growing the 8% area and retail loans growing in the 14% area, including the contribution of the Itaú retail business transaction. We expect our consolidated NIM in the 4.2% area with NIM on loans in the 4.4% area. The NIM of our banking segment in the 4.9% area with NIM on loans in the 5.2% area. Our cost of risk net of recoveries in the 1.9% area. Our cost to assets in the 2.9% area. Income from the non-financial sector of 1.3x that for 2025. The income ratio in the 22% area. Finally, we expect our 2026 return on average equity to be in the 9.25% area. Back to Maria Lorena.

Thank you, Diego. Before moving into questions and answers, I would like to leave you with a final thought. We continue to navigate a demanding environment with global uncertainty, elevated inflation, and pressures for higher interest rates. As Colombia enters a new political cycle, the focus will increasingly shift toward restoring confidence, encouraging investment, and addressing the country's fiscal challenges to support strong long-term growth. Energy security is one of the key challenges ahead. Colombia has moved from having one of the most reliable energy systems in the region to facing increasing pressures on both electricity and natural gas supply. Delays in strategic generation and transmission projects, together with declining domestic gas production, highlight the need to accelerate investment and execution. Ensuring a reliable energy supply will be critical not only for households and businesses but also for competitiveness, investment, and economic growth. Restoring physical and regulatory safety and accelerating the pace of infrastructure projects and of construction to generate future growth, recovering the health system effectiveness are some of the fronts demanding decisive public policy actions. Despite the macro regulatory challenges that we have faced, this quarter reaffirms the resilience of Grupo Aval and our ability to execute long-term strategic priorities. Our diversified businesses discipline, risk management, and a strong balance sheet continue to provide stability across economic cycles. Meanwhile, we continue to execute key initiatives such as the successful integration of the former Itaú retail operations into Banco de Bogota that will strengthen our retail banking platform and positioning the group for future growth. The results achieved during the first half of the year reinforce our confidence in targets for 2026. While the environment will remain challenging with high funding rates and market volatility, during the remainder of the year, we remain on track to deliver our ROAE in the 9.25% area for the full year, as Diego mentioned. We remain confident in our strategy, our execution capabilities, and our ability to continue creating long-term value for shareholders while contributing to the development of Colombia's economy. Thank you.

[Operator Instructions] Our first question will come from the line of Brian Flores with Citibank.

Congrats on the results. Two questions here. The first one is a bit more contextual. Wanted to get your views on what we should expect, what you're expecting as the base case in terms of tax rate for 2027. Just wondering if you perceive maybe a lower risk in terms of banks being included for higher tax rates in the tax reform. And then a second one is a bit more structural. I think your strategy is definitely paying off in terms of the diversification of profitability. You have a very strong quarter in terms of the investment portfolio. Just wanted to check with you if going forward with the recent structures, the recent changes, and also the new government, you might think that also Corficolombiana and Porvenir could start really providing some upside risks here for the contribution of profits.

Let me maybe to answer the first part of the question. I think, and we hope that we are not having more taxes, and President Gustavo Petro announced that he's going to, for example, the equity tax, maybe we are not going to have. This is difficult for me that maybe he can leave some taxes, but we hope that we don't have an increase. We are a little worried with the local taxes. Because our mayor here in Bogota presented like a law, like a project to the Bogota council, that is like a congress here in Colombia, but for the city. It increases one of the local tax, that is ICA, 30%. So for us, because this is a tax on income. So for us and for the financial sector in general, we are a little concerned about that. And before Diego talk about the portfolio, let me mention that we are going to start the construction of the new stadium, Corficolombiana. This, I think, on maybe September, October, we will start to. It is important because, as you know, when Corficolombiana start to build, we can generate income. The other stadium is working. So we have both. We are building, but we have the business of the actual cities. So Diego?

Yes. Adding to what Maria Lorena said, also to give you some context, you might have seen that we were conservative on our guidance on customer income, and one of the reasons we were conservative on that is we are seeing a heavy burden on taxes adding to our operational expenses. Regarding Corficolombiana and Porvenir, we basically grow based on the country's growth. In the case of Corficolombiana, we grow because of the country investing and developing many of the projects that have been delayed or were canceled during the previous administration. Therefore, yes, we are very positive on the new administration and Corficolombiana. On the Porvenir side, we are going to get clarity on the pension reform. That is something we have already started to see moving in Congress, and a positive performance of the market, as well, will help our portfolios. You have to remember that in the numbers of the central bank, one of the numbers that has a lot of weight is the risk of a fiscal deficit moving into the future. We expect that the new administration will move in the right direction to give some confidence that this will have some relief. In that sense, we see an upside from the central bank rate as we have clarity from public policy on what is going to happen with fiscal deficit.

Additional to the fiscal deficit, for me, it is so important that the government in this month organized the projects and everything with the energy. Because we are going to have the El Niño phenomenon. I do not know how to say that. Phenomenon is the name. Very strong. So we need to start to have new projects. Otherwise, we are going to have more inflation and problems in the economy.

No, super clear, Maria Lorena. If I may, something very interesting that you commented was, do you have a sensitivity as to if this local tax passes in Bogotá, how much would it impact the effective tax rate that you pay?

I will tell you for the financial sector because Asobancaria did an exercise, it will be like COP 500,000 million more.

We will pass that on our public call once we have clarity there.

We know that. They are going to start to discuss the project. As you know, with the problems that Colombia may be, the project stop without discussing there. It's just to mention, but it's not a concern right now. We are working on numbers and everything to it.