Business Context and Reporting Period
Company: Grupo Aval Acciones Y Valores S.A. (NYSE: AVAL)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Second Quarter 2022 (Ended June 30, 2022)
Key Context: The company reported results following the March 29, 2022, spin-off of a 75% equity stake in BAC Holding International, Corp (BHI). Consequently, 2Q22 results exclude net income from discontinued operations (BHI), which totaled Ps 1.6 trillion in 1Q22. For comparability, the filing presents supplemental unaudited pro forma financial information for 2Q21 and 1Q22 excluding BHI's contribution.
Key Financial Metrics (2Q22)
| Metric | Value (Ps. Billions) | Ratio / % |
|---|---|---|
| Attributable Net Income | 675.5 | Ps 29.7 per share |
| Net Interest Income | 1,974.4 | - |
| Net Impairment Loss | 566.8 | - |
| Gross Loans (Excl. Interbank) | 166,589.5 | - |
| Customer Deposits | 160,029.3 | - |
| Total Assets | 276,111.0 | - |
| ROAE | - | 16.6% |
| ROAA | - | 2.1% |
| Net Interest Margin (Total) | - | 3.64% |
| Cost of Risk | - | 1.4% |
| Efficiency Ratio | - | 41.1% |
| 90+ Days Past Due Loans | - | 3.33% |
Material Changes vs. Prior Periods
- Profitability: Attributable net income decreased 60.9% quarter-over-quarter (vs. 1Q22) and 28.9% year-over-year (vs. 2Q21). This decline is primarily due to the absence of Ps 1.1 trillion in attributable net income from discontinued operations (BHI spin-off) recorded in 1Q22. On a pro forma basis (excluding BHI), attributable net income for continued operations increased 7% vs. 1Q22.
- Loan Portfolio: Gross loans grew 12.8% year-over-year (pro forma) to Ps 166.6 trillion, driven by increases in mortgages (+18.1%), consumer loans (+14.7%), and commercial loans (+11.0%).
- Asset Quality: Loan quality improved significantly. The ratio of +30 days past due loans improved by 115 basis points year-over-year to 4.38%. The +90 days past due ratio improved by 94 basis points to 3.33%.
- Cost of Risk: Improved by 65 basis points year-over-year to 1.4%, reflecting lower impairment losses relative to average gross loans.
- Margins: Total Net Interest Margin (NIM) contracted 50 basis points quarter-over-quarter to 3.64%, driven largely by a 187 basis point decrease in NIM on investments. NIM on loans decreased 19 basis points to 4.91%.
- Non-Financial Sector: Income from the non-financial sector grew 53% year-over-year, primarily due to robust contributions from the infrastructure sector.
Guidance, Outlook, and Risks
- Macroeconomic Outlook: Management notes a challenging global economic outlook but cites early indicators of approximately 11% GDP growth in Colombia for 2Q22 compared to 2Q21.
- Forward-Looking Statements: The filing includes standard disclaimers that actual results may differ materially due to changes in economic conditions, interest rates, and currency rates.
- Pro Forma Caveats: The supplemental pro forma information is unaudited and assumes the BHI spin-off occurred on January 1, 2021. It does not project future results and may be subject to material adjustments upon completion of the external audit for the year ended December 31, 2022.
- Liquidity and Debt: As of June 30, 2022, the combined holding company (Grupo Aval Acciones y Valores S.A. and Grupo Aval Limited) held Ps 5,779.0 billion in liquid assets against Ps 10,065.0 billion in gross indebtedness, resulting in net indebtedness of Ps 4,286.0 billion. The double leverage ratio was 1.25x.
Investor Verification Checklist
- Discontinued Operations Impact: Verify the specific impact of the BHI spin-off on year-over-year comparisons, as 1Q22 included a one-time gain of Ps 720 billion related to the realization of OCI accounts.
- Pro Forma Adjustments: Review the unaudited pro forma calculations for 2Q21 and 1Q22 to ensure accurate trend analysis excluding BHI.
- Investment Margin Volatility: Investigate the drivers behind the 187 basis point contraction in NIM on investments, which significantly impacted total NIM.
- Non-Financial Sector Growth: Assess the sustainability of the 53% year-over-year growth in the non-financial sector, specifically the infrastructure segment.
- Debt Service Coverage: Monitor the Core Earnings / Interest Expense ratio, which declined to 1.8x in 2Q22 from 3.1x in 1Q22.