Grupo Aval Acciones y Valores S.A. — FY2023 Form 20-F
Business context and reporting period
This is an audited annual report for the fiscal year ended December 31, 2023, not a standalone fourth-quarter filing. Grupo Aval is a Colombian financial holding company with banking, merchant banking, and pension and severance fund businesses, principally in Colombia. Its consolidated financial statements follow IFRS as issued by the IASB; amounts below are Colombian pesos (Ps) unless stated otherwise. The filing does not provide a clear standalone Q4 financial-results comparison.
Comparisons with 2022 require care: BHI was spun off and deconsolidated in March 2022, and its 2022 and 2021 results were presented as discontinued operations. 2023 continuing-operations results therefore provide the more relevant year-over-year comparison.
Key financial metrics
| Metric | FY2023 / Dec. 31, 2023 | FY2022 / Dec. 31, 2022 |
|---|---|---|
| Interest income | Ps 28,919.4 billion | Ps 19,403.0 billion |
| Interest expense | Ps 22,632.4 billion | Ps 11,664.4 billion |
| Net interest income | Ps 6,287.0 billion | Ps 7,738.6 billion |
| Net impairment losses on financial assets | Ps 4,182.4 billion | Ps 2,493.1 billion |
| Net income, continuing operations | Ps 2,177.1 billion | Ps 4,003.0 billion |
| Net income attributable to parent shareholders, continuing operations | Ps 739.0 billion | Ps 1,888.9 billion |
| Net interest margin | 2.9% on the selected-data measure; management also reports 3.44% including trading investment income | 3.8% on the selected-data measure; management reports 3.68% including trading investment income |
| ROAA / ROAE | 0.7% / 4.5% | 1.6% / 14.0% |
| Cost-to-income ratio | 52.1% | 45.8% |
| Operating cash flow | Ps 6,005.5 billion | Ps (222.1) billion |
| Total assets / total equity | Ps 301,181.6 billion / Ps 31,520.4 billion | Ps 295,591.2 billion / Ps 30,821.7 billion |
| Cash and cash equivalents | Ps 18,597.9 billion | Ps 17,032.9 billion |
| Customer deposits | Ps 181,987.4 billion | Ps 173,341.1 billion |
| Consolidated funding | Ps 247,528.7 billion | Ps 245,457.9 billion |
| Bonds issued | Ps 23,427.8 billion | Ps 28,362.2 billion |
| Loans, net | Ps 176,168.1 billion | Ps 179,115.8 billion |
Material changes versus the prior year
- Parent-attributable continuing-operations income fell 60.9%; consolidated net income fell 45.6%. The larger decline in parent-attributable earnings also reflects changes in subsidiary earnings mix and non-controlling interests.
- Interest expense rose 94.0%, outpacing the 49.0% increase in interest income. Net interest income declined 18.8%, as higher deposit and funding costs—alongside slower repricing of fixed-rate retail loans—compressed margins.
- Impairment losses on loans and other receivables rose 52.3%. Cost of risk increased to 2.6% from 1.9%, and loans more than 90 days past due reached 4.0% of gross loans from 3.3%.
- Net commission and fee income increased 15.5%. Gross profit from sales of goods and services fell 29.2%, and trading income swung from a Ps 1,559.6 billion gain to a Ps 916.0 billion loss. Other income improved to Ps 3,751.3 billion, largely reflecting foreign-exchange gains.
- Assets increased 1.9%; net loans declined 1.6%. Deposits increased 5.0%, while total funding rose 0.8%. Branches fell 9.3% and ATMs fell 8.3%, as digital and other non-physical transactions expanded.
- Operating cash flow improved to Ps 6,005.5 billion. Investing activities provided Ps 1,840.6 billion, versus using Ps 13,012.5 billion in 2022; financing activities used Ps 3,536.9 billion.
Outlook, management commentary, risks and unusual items
- Management describes 2023 as a particularly difficult year for Colombian banking, amid high interest rates, tight funding conditions and weak economic growth. Colombia’s GDP grew 0.6% in 2023; inflation was 9.28% at year-end and the policy rate was 13.00%.
- Management expects a gradual improvement in banking-segment margins during 2024 as rates and funding conditions normalize, but notes that the pace depends on repricing liabilities faster than assets. It expects banking-segment expense growth below 2023 inflation, and expects merchant-banking real-sector results to be below 2023 levels. These are expectations, not formal quantitative guidance.
- Consumer credit quality weakened, especially for personal loans and credit cards; the filing says it cannot conclude that deterioration has peaked. Risks include persistent inflation or high rates, slower growth, borrower defaults, foreign-exchange movements, sovereign exposure, regulatory change, and liquidity or funding pressures.
- Banco Popular reported a 2023 net loss attributable to owners of Ps 397.9 billion and Banco AV Villas a loss of Ps 241.6 billion. Banco Popular sold Ps 1.6 trillion of loans to other Aval banks and issued a Ps 250 billion subordinated bond. Banco AV Villas reduced its consumer loan balance by 6.7%. Banco Popular’s late-2023 consolidation of Corficolombiana significantly changed its reported asset base; the parties’ share ownership did not change.
- Corficolombiana’s construction-phase concession activity and earnings face transition and timing risks as projects move toward operations. The company recorded a Ps 253.0 billion expense related to the DOJ and SEC resolutions. The resolutions totaled US$60.6 million after credits; the filing estimates an approximately US$24 million impact on Grupo Aval’s consolidated statements based on its ownership. The DOJ brought no enforcement action against Grupo Aval; the resolutions made no allegation of corrupt knowledge or intent against Grupo Aval or Corficolombiana, other than against a former Corficolombiana executive.
- Colombia’s proposed pension reform could reduce private administrators’ contribution-based fee income; the filing says the eventual impact is uncertain. Porvenir’s third-party FONPET management agreements ended in April 2023, and a dispute over outstanding commissions remained subject to a legal opinion request.
- Banco Popular’s agreement to control Corficolombiana took effect in November 2023. In a separate BHI matter, Banco de Bogotá sold its remaining 4.11% interest in March 2023 to an affiliate of the controlling shareholder. The filing also identifies related-party transactions and controlling-shareholder influence as governance risks.
- Auditors issued unqualified opinions on the IFRS financial statements and internal control over financial reporting. Critical audit matters were the loan-loss allowance and concession revenue and fair-value estimates. The SEC filing reports the DOJ and SEC investigations concluded; other ordinary-course litigation remains subject to uncertain outcomes.
Important facts for investors to verify
- Review the audited financial statements and notes for cash flows, funding maturities, foreign-currency exposures, regulatory capital and liquidity measures; consolidated cash flow should not be read as a simple measure of holding-company cash available for dividends.
- Check the underlying definitions and calculations for the different reported NIM measures, cost of risk, and asset-quality ratios.
- Track consumer delinquencies, charge-offs, provisions and coverage, particularly in personal loans and credit cards, and assess whether deterioration continues.
- Assess subsidiary-level earnings and capital, including Banco Popular and Banco AV Villas, and account for Corficolombiana’s consolidation under Banco Popular when comparing reported periods.
- Review the final implementation and economics of pension reform, the resolution of FONPET commissions, and any material legal or regulatory developments.
- Consider the concession-project pipeline, construction-to-operation transition, funding requirements and sensitivity to inflation and exchange rates; verify the recorded DOJ/SEC settlement expense and cash payments.
- Consider dividend capacity and governance: Grupo Aval depends on subsidiary distributions, preferred shares generally have no voting rights, and the controlling shareholder has substantial voting control.