Grupo Aval Acciones y Valores S.A. — 2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. The consolidated financial statements are audited and prepared under IFRS as issued by the IASB; amounts below are in Colombian pesos (Ps) unless noted.
Business context and reporting period
Grupo Aval is a Colombian financial holding company with banking, pension and severance fund management, and merchant banking operations. At year-end, 62.7% of assets were in Colombian entities and 37.3% in Central American entities. In March 2022, after the reporting period, Banco de Bogotá and Grupo Aval completed spin-offs of 75% of BHI. Grupo Aval retained an indirect interest of approximately 17.2%; BHI represented about 31.5% of 2021 consolidated assets and 30.7% of attributable pre-tax income. Future results will no longer consolidate BHI, while MFG remains consolidated.
Key financial metrics
| Metric | 2021 | 2020 | Change or context |
|---|---|---|---|
| Net interest income | Ps 12,728.9 billion | Ps 11,960.5 billion | Up 6.4%; interest income fell 2.8%, while interest expense fell 16.3% |
| Net income attributable to owners | Ps 3,297.7 billion | Ps 2,349.5 billion | Up 40.4% |
| Consolidated net income | Ps 5,668.5 billion | Ps 4,631.6 billion | Up 22.4% |
| Operating income before impairment losses | Ps 23,952.0 billion | Ps 23,141.9 billion | Up 3.5%; calculated from the filing’s income categories |
| Net interest margin | 4.9% | 5.1% | Down 16 basis points |
| ROAA / ROAE | 1.6% / 15.3% | 1.5% / 11.7% | Both improved |
| Cost-to-income ratio | 47.6% | 46.0% | Worsened as expenses grew faster than operating income |
| Total assets / net loans | Ps 366.9 / Ps 220.3 trillion | Ps 322.9 / Ps 195.5 trillion | Assets up 13.6%; net loans up 12.7% |
| Customer deposits | Ps 234.5 trillion | Ps 211.8 trillion | Up 10.7% |
| Total equity | Ps 39.5 trillion | Ps 35.4 trillion | Up 11.4% |
| Operating cash flow | Ps 5.9 trillion | Ps 10.0 trillion | Cash and cash equivalents ended at Ps 36.6 trillion, up Ps 2.6 trillion |
Credit quality and liquidity: Net impairment losses on financial assets declined 32.9% to Ps 4.0 trillion. Cost of risk was 2.1% (3.1% in 2020), or 1.9% net of recoveries (3.0%). Loans past due over 90 days fell to 2.9% of gross loans from 3.6%; Stage 2 and Stage 3 loans together declined to 17.8% from 19.3%. Charge-offs increased to 2.3% of average gross loans from 2.0%. The deposits-to-net-loans ratio was 106% (108%); cash-to-deposits remained 16%.
Funding and capital: Total liabilities were Ps 327.4 trillion. Customer deposits were the main funding source; other reported funding included Ps 27.1 trillion of borrowings from banks and others, Ps 32.3 trillion of issued bonds, Ps 10.7 trillion of interbank borrowings and overnight funds, and Ps 3.2 trillion of development-entity borrowings. The filing reports a consolidated tangible equity ratio of 8.2% versus 8.3%. Colombian banking subsidiaries migrated to Basel III capital requirements in 2021 and reported regulatory solvency ratios above minimum requirements.
Material changes versus the prior comparable period
- Earnings recovered from 2020, supported by lower credit impairment, stronger fee income and lower funding costs. Net fee income rose 10.2%; gross profit from sales of goods and services rose 9.8%.
- Interest margins remained under pressure as loan yields fell. Trading income declined 26.8%, and other income declined 24.6%, partly reflecting less favorable securities-sale and foreign-exchange results than in 2020.
- Other expenses rose 7.0%, and income tax expense rose 54.7% to Ps 2.9 trillion. Management attributed Ps 473.8 billion of tax expense to the 2021 tax reform’s deferred-tax effects.
- COVID-19 relief and restructuring programs contracted: 23.1% of gross loans had received relief or remained under structural programs at year-end, compared with 32.5% in 2020. Central American relief-program loans remained a larger share of that region’s book than Colombia’s.
- The March 2022 BHI spin-off will materially change the Group’s consolidation perimeter and reduce reported Central American scale.
Outlook, risks and unusual items
Management provided no formal numerical earnings guidance. It expected higher Colombian policy rates in 2022 to support Colombian net interest margin, particularly on variable-rate commercial loans, while retail-loan and investment margins could be pressured. Management also cautioned that the 2022 spin-off will affect future performance trends and that Corficolombiana’s non-financial results may be lower than in 2021 as major infrastructure projects progress toward completion.
- Macroeconomic and market risks: Colombian inflation reached 5.62% in 2021, the peso depreciated 16.0% against the U.S. dollar at year-end, and Fitch and S&P downgraded Colombia to below investment grade. The filing highlights rate, foreign-exchange, sovereign-debt, liquidity and credit-quality risks.
- Legal and contingency risk: Grupo Aval, Corficolombiana, Episol and certain officers are involved in investigations and proceedings relating to the Ruta del Sol Sector 2 project in Colombia and the United States, including DOJ and SEC investigations. The ultimate outcomes and potential financial or other consequences remain uncertain. Consolidated provisions for administrative fines, indemnifications and legal proceedings were Ps 247.5 billion at December 31, 2021.
- Other unusual items: Corficolombiana recognized a Ps 56.8 billion provision related to expected excess costs on the Pacífico 1 project. The filing also describes a SIC penalty expense connected to the Ruta del Sol investigation.
- Post-year-end context: The filing notes that the Russia-Ukraine conflict may add inflationary pressure through commodity, fertilizer and fuel prices; no significant financial impact had been identified at the financial statements’ approval date.
- Other key risks: The filing emphasizes cyber and operational risk, competition and digital disruption, regulatory and tax changes, climate exposure, and the controlling shareholder’s influence and potential conflicts of interest.
Important facts for investors to verify
- Review the audited financial statements and notes for cash-flow drivers, funding maturities, credit provisions and capital adequacy; operating cash flow fell from Ps 10.0 trillion to Ps 5.9 trillion.
- Track delinquency, charge-offs and Stage 2/Stage 3 loans as relief programs expire, particularly consumer loans and Central American commercial exposures.
- Assess the accounting and earnings effects of the BHI spin-off, including the retained equity-method interest and the fact that MFG remains consolidated.
- Review the Ruta del Sol proceedings, related provisions, and any subsequent regulatory, judicial or settlement developments.
- Test whether higher rates, peso volatility, tax changes and the reported deferred-tax effects alter margins, capital, liquidity or dividends.