Welcome to the Third Quarter 2016 Consolidated Results under IFRS Conference Call. My name is Sophia and I’ll be your operator for today’s call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Grupo Aval Acciones y Valores S.A., Grupo Aval, is an issuer of securities in Colombia and in the United States, registered with Colombia’s National Registry of Shares and Issuers and the United States Securities and Exchange Commission, SEC. As such, it is subject to the control of the Superintendency of Finance and compliance with applicable US securities regulation as a foreign private issuer under Rule 405 of the US Securities Act of 1933. Grupo Aval is not a financial institution and is not supervised or regulated as a financial institution in Colombia. As an issuer of securities in Colombia, Grupo Aval is required to comply with periodic reporting requirements and corporate governance. However, it is not regulated as a financial institution or as a holding company of banking subsidiaries and, thus, is not required to comply with capital adequacy regulations applicable to banks and other financial institutions. All of our banking subsidiaries, Banco de Bogotá, Banco de Occidente, Banco Popular, Banco AV Villas, Porvenir and Corficolombiana, are subject to inspection and surveillance as a financial institution by the Superintendency of Finance. Although we are not a financial institution until December 31, 2014, we prepared the unaudited consolidated financial information included in our quarterly reports in accordance with the regulations of the Superintendency of Finance for financial institutions and generally accepted accounting principles for banks to operate in Colombia, also known as Colombian Banking GAAP because we believe that presentation on that basis most appropriately reflected our activities as a holding company of group of banks and other financial institutions.…

Thank you, Sophia. Good morning and thank you very much for joining our call. It is my pleasure to report that amidst a dynamic economic, political and financial environment, our third quarter results met our expectations. In the next few minutes, I will highlight a few of these results and later on in the call Diego will explain these and other points in detail. But first let me refer briefly to some of the events in Colombia that have been taken up most of the front page space in our major newspapers. For starters, it seems like ages ago but it was less than two months ago that we had a Brexit like shocker in Colombian politics when a majority of voters opted for opposing the then existing draft of the peace accord with the FARC Guerrilla. I guess people were afraid of expressing their true feelings in countless mistaken polls. The good news is that less than two months later, Congress is getting ready to ratify a new draft of the accord that reflects some of the points that the leaders of the opposition wanted in the document albeit not the most important ones. In any case, in general, our perception is that this issue has dragged on long enough and that in general the population will be relieved when something else makes headlines. And we can’t forget that residents of areas still under some sort of influence by the FARC will probably be the most relieved. As if that wasn't enough, the much announced fiscal reform was finally presented to Congress only a few weeks ago. There is currently a lot of debating going on within Congress and between Congress and interested constituents about possible changes and about clarification of diverse interpretations around certain issues presented in the…

Thank you Luis Carlos, I will now move to the presentation on a chart by chart basis. I will start with an update on the macroeconomic environment in Colombia and Central America. On Page 5, we present the evolution of some key macro drivers in Colombia. The most relevant change since our last call has been real GDP growth. Last week, the market was negatively surprised with a 1.2 we sold for the third quarter of this year, well below market expectations of 1.6 to 1.8. With this result, the year to date growth of the Colombian economy was 1.9 as of September. The truckers strike that occurred during the beginning of the third quarter was one of the main drivers of the slower than expected growth, sectors such as transportation and agro industry both affected by this strike declined in real terms versus the third quarter of 2015. Mining continues to be the sector with the strongest contraction. Construction financials and manufacturing grew at stronger pace. Uncertainty derived from the tax reform discussions is expected to affect the year-end GDP growth as investment decisions get postponed in this environment. With this data points, market consensus on real GDP growth estimates for 2016 and 2017 growth as reported by Bloomberg were adjusted down 20 basis points to 2.1 for 2016 and 2.8 for 2017. We expect 2016 growth to be close to 2% area as well as the market, we expect improvement in 2017 during which we expect to see figures in the 2.5% to 3% range. We believe certain tailwinds should result in stronger growth during 2017. These are; first, more stable oil prices in the $45 to $50 per barrel range. Second, the contribution of the construction of the fourth generation concessions. Third, a more controlled current account…

[Operator Instructions] And our first question comes from Jason Mollin from ScotiaBank.

Hello. Good morning. Thank you for the presentation. Two questions. First on -- you just mentioned that it's difficult to come up with expectations for ROE for 2017 based on the fiscal reform. Can you help us frame the outcomes perhaps with a bullish and bearish scenario to look at the upside and downside from this 15% ROE or versus the 16% ROE that we saw in the third quarter results. And I'll hold off on my second question.

Thank you, Jason. We don't really foresee a scenario where downside is higher than upside. Actually the tax reform is taking us back to a time where our ROE was substantially higher. We are cautious because the debate is still ongoing, therefore, we can't really commit to a result of the tax reform. But all what is being debated is positive for ROE and credit quality of corporations. Basically, the discussion here is on how fast we get there, the tax reform is bringing us down back to taxes that even though higher than other countries in the region, look more like what we had a few years ago. The discussion on [rate duality] [ph] is perhaps what we are more concerned with. And it is if we're going to get back to the 32% that is being announced by the tax reform pretty soon or it's going to take a few years, any way you look at it, it's a positive. Then there is also other benefits with the wealth tax going away. Plus the way the taxes and dividends came out in the draft that was one of the concerns we had in the past is pretty benign. Therefore, the effect on shareholders after taxes should be at all neutral. So even going to what could be negative that perhaps was the way you were pointing it out, the tax reform is positive for companies.

So we’ll just have to see what happens on the preferred share, how the tax structure that but maybe I can just switch to a specific operating question. You posted very good net interest income and net interest margin in the quarter and you talked about some guidance for NIM. But can you talk about the sensitivity of your operations to the policy interest rate in Colombia and as well as in the US, I guess for the Central American operations, how does the 100 basis points move down or up in Colombia and I don't know [inaudible] in the US, some kind of sensitivity to [Technical Difficulty]?

Yeah. Jason, you were cutting out, but what I understood was you wanted to understand the sensitivity to the Central Bank policy rate. The kind of sensitivity that we have is in the 15 to 20 basis points range for every 100 basis points.

The sensitivity to the Central Bank -- to your Central American Operations to US interest rates?

Well, Central America is a combination of local rates even though the numbers that you end up seeing reported are based on dollars. Countries do have dual currencies, therefore, a part of the result comes as well from what happens with their local currencies. It's been more the dynamic of the local currencies that has affected net interest margins on Central America rather than the US policy rate.

Our next question comes from Nicolas Riva from Citi.

Yes. Thanks, Luis and Diego for taking my questions. The first one on loan growth. We did see that your loan book grew less than peers in the third quarter, but in particular, your commercial book which only grew 1% year on year in nominal terms and was down 1% quarter on quarter, so if you can explain maybe what was behind the lower growth in the commercial book? And then the second question on taxes, so I understand based on the tax reform bill that next year, there would be a reduction in the corporate income tax rate of 1% and then another 2% in 2018, and then long term, the corporate income tax rate would be 32%. So can you talk about what will be -- assuming that there are no changes to the structure for MIL, what will be the outlook for your effective income tax rate. And also if there's any chance that you might lose any tax benefits from the reduction of goodwill amortization. And in that case, where will be the impact on your effective income tax rate. Thanks.

Well, let me take first the commercial book discussion. What we have seen has been a combination of two main drivers. One has been on the demand side, once the fiscal reform discussion started, we saw the delay in decision making on new investments and companies, therefore, reducing new demand for loans. In addition given the volatility of the Colombian peso US dollar exchange rate, we've seen people retrenching away from a dollar denominated loans borrowing, which combined with an appreciation as of the end of period September compared to the beginning of the year, we started the year at 31.50. So even though, we're back to that kind of level as of today, at the end of the quarter, the numbers were lower. So a combination of those issues have been what has contracted on one side demand and then when we expressed into pesos, the corporate book. In our case, we actually had thought of taking advantage of goodwill depreciation in the past year that the mass of our goodwill are booked in Central America. That was the concept behind at some point the idea we had of merging leasing Bogota Panama with Banco de Bogota [ph] to be able to take advantage of those benefits. We should have done that a few years earlier. Therefore, when the time for the tax reform came, we don't really have a change compared to the numbers that we were running before. I would say that our figures nowadays might be some of the figures that best reflect the full regulatory rate. Therefore, we'll get the full benefit of having lower taxes. The way to think of our taxes to be able to go to a specific number is, as of today, we have around one-third of our operation roughly coming from Central America being taxed at 28% plus the remaining portion coming from Colombia being taxed nowadays at 40%. So we're taking two-thirds and we're lowering the taxes from 40% to 32%. So that’s the magnitude of the impact we will have.

Our next question comes from Sebastian Gallego from Credicorp Capital.

Hi. Good morning, everyone. Thanks for the call. I have two questions. The first one is on asset quality, regarding the potential impact of the mass transportation system, particularly in Bogota and other cities in Colombia. Could you provide an estimate or the magnitude that we could expect from that situation and the other question is regarding the leverage at the holding level? We have been seeing an increase in major indicators and we have a significant maturity scheduled for that in 2017, can you comment on that and can you just provide some color on what do you feel comfortable? Thank you.

All right. Let me take your second question first and then Diego will take the question on mass transportation, but as far as the leverage on the holding company, I must say that we're going exactly on the opposite way. One of the things that we did yesterday was that we prepaid our 2017 bond, the one that you're referring to, the $600 million bond. We prepaid it yesterday, so it's not on our books anymore. And then secondly on double leverage, actually we've been reducing our exposure on double leverage. So I would say that maybe, we’re looking at different numbers, but we’ll be more than happy to sharing with you just to give you some color as you asked for our double leverage is around 110% now, which is probably at the lowest it's been in the last three, four, five years. So in terms of absolute, just nominal leverage, we have reduced it significantly and we still have just the one bond that matures in 2022. And that's a $1 billion bond and we prepaid the other one as I said before and in double leverage, we’re really at a very low point, but obviously if we were looking at different numbers, we’ll be more than happy to share them with you. And I guess on the mass transportation, there's not much that we know at this point on mass transportation. I guess you're referring to the subway in Bogota or whatever means of fast mass transportation to come up with. We're way, way, too far away from even discussing what sort of credit we would extend to that initiative here in any other city in the country. So it's -- yeah, all that I can say is it's just too quick to talk about that. We don't have any numbers. In terms of 4G, we have been pretty active and as you know, we're active participants not only on the construction side, on the -- as far as we are the largest concessionaire of toll roads in Colombia at this point with the ones that we currently operate and the ones that we will construct and operate. And then, we’re actively financing projects where we’re not majority shareholders and projects of third parties. But again sorry to disappoint, but on your mass transportation question, we just don’t have any number to come up with. There is one additional and final comment on, we just issued a $100 million equivalent local bond in Colombia. We wanted to test back the fixed rate capital markets in Colombia and we were pleasantly surprised with the amount of interest that we received on that bond. We issued it, last, just a couple of days ago, but we used that to replace debt -- peso denominated debt that was on our books. So even that didn't increase our leverage and I guess that's what, I don't know, Diego, if you want to say something about mass transportation.

Regarding mass transportation, I would say what you covered before. If you were referring to the SITP, that’s the local transportation in Colombia, we do have some exposure to that sector of the companies we’re lending to are companies that are in quite strong relative to the rest of the system. So we don't have anything else to comment on that at this point.

Our next question comes from [Gabriel Noriega] [ph] with UBS.

Hi, everyone. Thank you for taking my call. I actually have one question about loan growth. We saw the commercial loans only grew 0.6% year over year and you guys are expecting 8% and 10% next year. I just want to understand what types of loans will be growing more. And my second question, it's on your yield on average loans, it's been growing over the past few quarters and I just want to understand what's the approximate level for this year and for next year. Thank you?

Okay. So back to the growth discussion for Colombia, part of what we will see growing next year, as mentioned through the call is recovery of some of the areas that either were postponed this year due to the tax discussion, the tax reform discussion. Then, we also have the fourth generation concessions coming in for corporates that will be relevant for growth. And in addition, even though, we are cautious on next year's growth, we do see some progress on GDP for next year. And as our demand is dependent on loan growth, on GDP growth, we expect to see that being translated into loan portfolio growth. As you might have noticed, we have had -- we have reduced our guidance for this year and for next year, trying to reflect the last data we received during this week that we should expect to see affecting lower numbers, we’re however more positive on next year than this year. The other part that you should also consider is we expect to see a change in the monetary policy cycle, happening at some point early next year. That should help to boost demand throughout the year. The magnitude expected by the market is quite relevant and it should happen early next year, so we should see the results being translated into a year and growth as a result of a better environment. And I know that covered. I think that covered your question.

Our next question comes from Maria Barriga from Davivienda Corredores.

Hello. Thank you very much for taking my call. The first question comes from the conglomerates financial. I wanted to know how does that financial impacts your operation if it's approved and the other one is your cost of risk guidance, considering the electric [indiscernible]. Thank you.

Okay. Starting with the last one, as Luis Carlos mentioned, this would effect in and around our full year cost of risk. So we highlighted it, because it's been a relevant event recently, but from the cost of risk standpoint, this is not a very relevant issue. As a matter of fact, I would say, we’re comparable to what other Colombian banks are exposed to electric capital. Regarding the conglomerates law, in our case, we have voluntarily been doing a lot of what the law brings. We have been disclosing the way our conglomerate structure, the ownership structure of our conglomerate. We have been consolidating risks since we registered with the SEC six years ago. In addition, we’ve been subject to transactions with related parties as we have been very transparent in the ownership and relationships of the group. In addition, we have been closely paying attention to double that step would be something that would come in the conglomerates law and this has been driven by the fact that we've been a great debt for many years already with our international bond. So summarizing, we have been doing what the conglomerates law calls for. So in our case, yes, there is a difference from doing it voluntarily to see it, written in the last. But this change might have more effect on other conglomerates in the country than your case.

Our next question comes from Aníbal Valdés from Barclays. Aníbal Valdés: Hi. Good morning. I have a specific question on fees and commissions. I think compared to some of your largest peers in Colombia, with so weaker growth in fees and commission at the Banco de Bogota level. So I wanted to know if there is -- in your view, is there any room for improvement in that front for Grupo Aval and its banks. And also if you can comment a little bit on the competitive landscape in Colombia and how do you expect that to evolve next year? Thank you.

Okay. Regarding commissions, I can't really comment on banks outside of the group because I don’t know exactly our structure is driven. I can comment on what has been done at Grupo Aval. I do agree with what you say there is a huge potential for increasing fees in the case of Aval. We've been working on that for many years because when we benchmark against our competitors having the same rack rates, we have understood that we haven't been as successful bringing in all the fees that we should be bringing in. So we've been working on that with some progress. We've been taking action on some particular products, for example, bank insurance is something that we had disregarded for many years and it has become relevant in our fee structure. Then on the retail side, as the group moves slowly to a portfolio that has a higher weight of individuals, we’re also bringing in fees from credit cards and these kind of products. In addition on the corporate side, our banks have begun to get fees from syndicate, syndication of loans. I think that was not charged for, in the past, in Colombia. So these are kind of some of the sources that we've been working on to try to improve our numbers. But to your comment, we do agree that there is still a lot of work to be done and a lot of potential to increase our fee income at the group level. Something to bear in mind is, we're growing at a multiple of our loan portfolio at this point. So, yes, we would like to see more growth on that front. But there's something to show when you grow at 16% your fees and your assets are growing at 7%. On your second question, on the competitive landscape, Colombia has been very competitive for many years, going through the structure of the market, when you add up Grupo Aval, Bancolombia, WVA, you add up around for 80% of the market and the following entrant would be Itau. Itau has been in the market for the banks for several years already. So the initial impact of Itau should already be there. We don't underestimate any competitors. So, we watch carefully on a segment by segment and product by product basis, who is coming to the market and expect the Colombian market to continue being quite competitive. Regarding changes in structure is not something substantial in ownership of banks or consolidation of banks that we foresee. Going perhaps away from market structure, something that we are working on and we assume other competitors are doing so is digital banking. That is perhaps the other front, not next year front, but the next ten year front where some of the competition will be happening. Therefore, we are getting our homework done.

Our final question comes from Natalia Casas from Ultraserfinco.

Hi. Thank you for the call. I’d like to know something about solvency ratio, have you talked with rating agencies regarding this aspect on the negative [indiscernible] because of this ratio?

Well, we had discussions a few times since we had the credit watch and the negative watch. Actually, we saw a Banco quite recently, therefore it was reviewed by the credit agency. I can't really tell you what their decision will be, but we think that we've made progress on our balance sheet that at Banco, we see our tangible common equity being very good compared to other peers as well as the quality of our capitalization is strong. Having the highest tangible equity and solvency ratio of the larger banks in Colombia, we would expect to see at some point some reaction from the rating agencies. But we have to let them in.

No further questions at this time.

All right. With that, we appreciate everybody joining on the call as always and we'll see you in our next call and in the meantime, obviously, if anybody has any questions, we’ll be more than happy to take them by phone or email. And we hope to see you next time. Thanks a lot.

Thank you. Ladies and gentlemen, this concludes today’s conference. Thank you for participating. You may now disconnect.