Welcome to Grupo Aval's Second Quarter 2019 Consolidated Results Conference Call. My name is Hilda, and I will be your operator for today's call. Grupo Aval Acciones Y Valores S.A., Grupo Aval, is an issuer of securities in Colombia and in the United States registered with the Colombia's National Registry of Shares and Issuers, Registro Nacional de Valores y Emisores and The United States' Securities and Exchange Commission, SEC. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation.All of our banking subsidiaries, Banco de Bogotá, Banco de Occidente, Banco Popular and Banco AV Villas, Porvenir and Corficolombiana, are subject to inspection and supervision as financial institutions by the Superintendency of Finance. Grupo Aval is now also subject to the inspection and supervision of the Superintendency of Finance as a result of Law 1870 of 2017, also known as the Law of Financial Conglomerates, which came in effect on February 6, 2019.Grupo Aval, as the holding company of its financial conglomerate, is responsible for the compliance with capital adequacy requirements, corporate governance standards, risk management and internal control and criteria for identifying, managing and revealing conflicts of interest applicable to its 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-GAAP measures, such as ROAA and ROAE, among others, are explained when required in this report. Grupo Aval has adopted IFRS 16 retrospectively from January 1, 2019, but has not restated comparatives for the 2018 reporting period, as permitted under the specific transitional provisions in the standard. The reclassifications and adjustments arising from the new leasing rules are therefore recognized in the opening condensed consolidated statement of financial position on January 1, 2019. Consequently, quarterly results…

Thank you, Luis Carlos. I will now move to our consolidated results of Grupo Aval under IFRS and wrap up with our guidance for 2019. As mentioned by Luis Carlos the second quarter of 2019 was a strong quarter for Grupo Aval due to an improvement in loan dynamics during the quarter particularly in Colombia; stronger net interest margin on loans and a solid performance of our fixed income portfolio; robust fee income during the quarter mainly attributable to pension fund management and banking fees; a sustained contribution of our non-financial sector; and strict cost control discipline.Starting on page 9. Assets grew 12.8% over the year and 2.5% during the quarter. Colombian assets increased 12.7% over the last 12 months and 3% from the quarter driven by net loans, cash and intangibles and financial assets from our concessions and right-of-use assets.In spite of an annual and quarterly contraction of 19.5% and 1.6% of Nicaraguan assets, Central America delivered 3.5% and 0.2% 12-month and 3-month growth in dollar terms.Moving to page 10. Loans including repos grew 6.5% over the year and 1.3% during the quarter. Loan dynamics in Colombia continued trending positively while growth in Central America remains underpinned by the dynamics of Nicaragua.Our Colombian corporate loan portfolio increased 0.9% over the quarter and 0.8% over the year. Commercial Peso denominated loans grew 0.9% the second consecutive positive quarter figure since first quarter 2018, following three consecutive paying quarters of contraction.Strong growth of our Colombian retail portfolios continued to compensate the soft dynamics of our corporate portfolio. Colombian consumer and mortgage businesses expanded 9.9% and 16.3% respectively over the 12 months.Quarterly growths were 2% and 3.4% respectively. Central American operations excluding Nicaragua expanded 4.4% in dollar terms for the year. Nicaragua, which weighs approximately 6% of our Central American loans, contracted…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] We have a question from Andres Soto from Santander.

Good morning. Thank you for this presentation. I would like to understand better your views on asset quality. Obviously, Nicaragua's macro environment and Colombia's slowing growth doesn't help.But I would like to understand going forward what are you seeing in terms of asset quality performance? When are you expecting this to peak? And in this context, what are your views on cost of risk over the medium term after the full coverage of the corporate cases this year?

Okay. Andres regarding asset quality, I think you need to break it down in pieces. We have two different forces; one in Central America as we mentioned and the other in Colombia is consumer and corporate.And I'll go slightly back in history just to show how the cycles are working to refer to Colombia. Colombia what we saw was a consumer cycle starting earlier than the corporate cycle. Therefore, the consumer cycle has already peaked and is already recovering for the past two quarters. We expect that performance to continue.And the reason in spite of our view on unemployment is that the customers that we serve are mainly concentrated in segments that are not yet affected by that kind of effect. So, we could -- we expect to continue to see that positive performance as has been demonstrated not only in our numbers but in the system as a whole.Regarding the corporate cycle, the corporate cycle began with a lag of a few quarters to the consumer cycle. And even though it hasn't peaked yet, we haven't highlighted it in the call because it's not yet absolutely positive news, but we have started to see a slower deterioration in corporate loans.But that points to the numbers end up consolidating and that we could be one or two quarters away from peaking in the, I would say, the statistical part of the corporate portfolio. This should be flattening pretty soon and we will be very happy to be able to give you much better news in our next call.Then finally the large corporate cases that do affect how our numbers look like. We are in the process of cleaning those up. We already got that done for Nicaragua a few quarters ago. And as we mentioned, we expect to see that…

The next question comes from Jason Mollin from Scotiabank.

Hi. My first question is on the outlook for return on equity that you cited at around 16%. You closed this quarter with 18%. The first quarter set around 17%. You did mention that you're going to -- the impact of the Ruta del Sol provisioning and what that represents. So it seems like the second half of the year, I mean even including the Ruta del Sol that you're looking for much softer returns. If you can comment a little bit on the drivers there, because it seems like there are some upsides to beat that expectation.And my second question is just on the outlook for long-term rates. You mentioned the dynamics of inflation and the policy rate in Colombia. But if we look at the Colombian 10-year, we're definitely at the lows in the last five years. Just wanted to see your view on how that's impacting your view on returns for new investments, should your cost of equity be a bit lower in this construct, or do you think this is just a short-term phenomena in Colombia or globally. Thank you.

Well, I think regarding the outlook for return on equity, you're right. I believe we are looking perhaps on the same side. And the reason to do that is, one, as you mentioned Ruta del Sol. Ruta del Sol is actually quite impactful on our numbers. Then something to bear in mind is the way that which we are generating earnings therefore equity, so there's also a denominator effect there.And finally, during this quarter we had many things that went right, so there could be some things that might be change in the future. For example, the interest rate environment has favored us in fixed income. So there's some space or changes there.So at this point, we're looking to the 16% area. That is an improvement compared to what we set last time. And we're also dependent on what's happening with the global environment, particularly its effect on fixed income.Untimed assets, your question on long-term rates. What's happening with long-term rates is not a Colombian-specific event. If you look around the world first half becomes quite flat, therefore, there is some room for changes there. I'm not an expert in global fixed income, but I would say that the risks that you might see around the world could also affect Colombia. So the shape of the curve is something that I will say is idiosyncratic to Colombia that's something that we are also being affected by what's happening in the rest of the world.

Thank you. Our next question comes from Jörg Friedemann from Citibank. Jörg Friedemann: Hi. Appreciate the opportunity. Just an additional clarification or explanation in terms of the Ruta del Sol exposure. If I got it right, your pending exposure to the project is amounts to Ps 380 billion. And if I got it right, you have fixed provision Ps 170 billion, just wondering if these numbers are correct? And if I am right also looking into what you guided for the year in terms of cost of risk you told us 2.3%. Looking into what was happening in the first half, it will be implicitly that you could have cost of risk between 2.4% to 2.5% in the second half is that right?And the second question, if you could give us a bit more color about, what should be the effective tax rate for the year? I noted that last year you got an increase in the second half just wondering if this is expected to happen again or not? Thank you. Luis Carlos Sarmiento Gutiérrez: All right, Jorg. Let me take the first question and Diego will take the other ones. On Ruta del Sol, our net exposure today is about Ps 380 billion exactly as you said. That is, because we've provisioned already about 47% of the gross exposure. Then – so our banks will have to provision Ps 380 billion between now and the end of the year, and they've started to do so. The effect in Aval's and the holding company's owned attributable net income of that additional provision is Ps 170 billion and that's what I was referring to. And that's about as we said about 5% of our total income for the year.

Regarding your question on taxes and cost of risks what we're building, and let me tie this to my first answer. What we're building into why not 2.4%, but 2.3% that is what I believe you said is, we're incorporating Ruta del Sol, and we're also projecting how our consumer portfolio particularly should continue improving and taking away some of the deteriorations that we saw over this quarter. So it does reflect around 2.5% cost of risk for the second quarter that is quite high – the second half, I'm sorry, which is quite high for what we believe cost of risk for Aval should be, but with some improvement compared to what we're seeing now.Finally, on taxes what is incorporated in our guidance is something in the order of magnitude of 30% for effective tax rate. And as I've mentioned in the past that is a blended of 70% Colombia and 30% in Central America, with lower tax rates in Central America.

The next question comes from Yuri Fernandes from JPMorgan.

Hi, gentlemen. I had a question on the pension fund fee. It was a very strong quarter, and I just would like to know more details on, what is driving the growth in that line? Thank you.

Okay. On the pension funds, I mentioned that, we are generating high fees as I say a portion of the funds that we manage that are related to returns obtained in the portfolios. Some of the fees particularly those for the compulsory pension plans, where people are not adding funds to their pension fund are compensated to us based on returns. Other pension funds are also managed in that way. In addition, we have some part of what the seasonality of how AFPs are obtained affecting us positively.

Our next question comes from Sebastián Gallego from CrediCorp Capital. Sebastián Gallego: Hi, good morning, everyone. Thanks for the presentation. I have three questions. The first one, you talked about the cycle on the commercial and the consumer segment in Colombia, but I guess you didn't talk about the mortgage cycle. We have seen some upward pressure particularly on the 90-day NPL ratio on the mortgage segment. Could you comment on that and what's the outlook for the mortgage portfolio?Second question probably a follow-up or a new question on Ruta del Sol 2. Given the ruling on Ruta del Sol 2 what's the long-term outlook of Corficolombiana in terms of appetite for new infrastructure projects?And the third question is regarding DALE. I know you mentioned that you would probably comment a bit more in the upcoming conference call, but can you provide the bit more detail on what are you intending to do and how is that comparable to other peers or what other products from peers? Thank you.

Let me take the first question and pass it to Luis Carlos regarding the mortgage performance. I think, you have to bear in mind that our number is a very positive number compared to market average. We could be around 60% of where market average delinquencies stand. We have seen some deterioration there, but I would say its part of the process of getting a young portfolio to mature.In addition, there were some particular glitches in some of our banks that were already solved a couple of months ago where we were able to identify some pockets of mortgages that were not performing as we desire, but that's an issue that has already been dealt with. And regarding the environment, as also with the rest of the market, I can't really comment much more than what I've said for our portfolio. Luis Carlos Sarmiento Gutiérrez: Thank you, gentlemen. Regarding the other two questions, on one hand, you asked about Corficolombiana's long-term outlook for infrastructure and -- well to start with that. As you know, Corficolombiana's already building three of four 4G projects that it acquired some years ago. Those four projects have different advances. And starting with one of them is already up to like 51% progress and then the other ones are oscillating between 16% and 23%. So that -- those numbers give you an idea that we still have a long ways to go before we finish those.So, obviously our appetite is still very strong because, we have to on one hand finish those, we still have maybe four or five years to go. There's a fourth 4G project that we haven't even started that we're still waiting on environmental licenses and so that one still will have its own five or six years to go.And then, besides…

Our next question comes from Alonso Aramburu from BTG.

Hi, good morning and thank you for the call. I have two questions. One, a follow-up on Corficolombiana which has been contributing nicely to earnings, given the progress you've mentioned in the three projects, how should we expect earnings contribution from Corficolombiana to continue in the coming quarters? And second, can you give us the cost of risk excluding the provisions that were down for Ruta del Sol and SITP this quarter?

Regarding Corficolombiana, we expect Corficolombiana to continue contributing as it has done over the past quarters or a few years. We've mentioned in the past that the construction period have -- toll roads takes around four to five years. So during that period of time with different levels of strength, we should be advancing and generating contribution from Corficolombiana. The contribution at this point at the Aval level could have been around Ps.140 billion.Regarding provisions different from what we've mentioned in the past there hasn't been any really material provisions during the second quarter. I believe you are referring to Ruta del Sol and SITP, none of those were really material for the second quarter results.

Thank you. The next question comes from Nicolas Riva from Bank of America.

Thanks for taking my question. Just one more question on Ruta del Sol. I understand that you said that the exposure was a scenario would be Ps.170 million at the Grupo Aval level net of capital minorities. One question in that scenario, are you assuming that the banks get paid zero? Just to understand there's going to be a third payment, which is going to be Ps.211 billion and about half of that should go to Group Aval if you are assuming that case then the banks are not going to get paid in the last payment? Thanks. Luis Carlos Sarmiento Gutiérrez: Correct. We are assuming that we'll provision 100% of the loans and that the Ps.211 billion that the arbitration tribunal talked about will be tangled up in suits until the end of at least this year.

Thank you. The next question comes from Carlos Rodríguez from Ultraserfinco. Carlos Rodríguez: Good morning, everyone, and thank you for the conference call. Regarding the consumer loan and especially credit cards, we have seen this positive growth. I got a question of what has driven this growth, and how much far can you push that growth? And if you can comment on the strategy if it has been current customers increasing loans or buying loans from other banks and adding new customers? Thank you.

Yes. Okay. What we've seen is that the reason for growth in consumer has been a combination of many things. Number one, improvement in the quality of the portfolio that has enabled us to increase our appetite to grow in that area. Second, something that we've been talking about in the last few conferences is the results of our digital effort, which have simplified the process of onboarding customers. In that sense it's not only existing customers but also a substantial portion of customers that we wouldn't have had access in the past with the kind of strategy that we were deploying.So it's a combination of the many things. Number one, some recovery in the economy, some improvements in consumer confidence, a much better delivery from our siding of onboarding new customers plus a better environment on the quality side that enables us to bring more customers in. So what we're seeing is a very substantial potential to continue growing in consumer if the environment, in which we're working continues to be solved.

Thank you. The next question comes from Colin Maria [ph] from Davivienda Corredores.

Good morning. Some of my questions have already been answered, but however I would also like to know what are your strategies about Central America regarding some future acceleration from the U.S. economy? Thank you.

Well, regarding Central America, the way to think about Central America is not as a single country. Central America depends on the dynamics of different countries. We have had a black spot that has been the performance of Nicaragua that has generated some difficulties but the rest of the region even though some of the countries have had their own issues is performing pretty well. Then we have a something very positive for the region and it turns that it's a net in quarter of oil, so what is happening now should continue to help them. Luis Carlos Sarmiento Gutiérrez: Yeah. And you can't forget that Central America's our strongest business in the merchant acquiring and credit card issuance. So the whole region does sort of depend on prices of oil and oil -- and also because Central American is a big oil importer. And on the other hand, Central America is a huge receiver of remittances from the States.So, it tends to happen when the U.S. economy weakens, remittances tend to drop. And obviously that affects the economy. But as Diego was saying, obviously its economy has its own life. And the lives of all but Nicaragua's are doing okay.So at the end, I don't think we have to really change our strategy. We are looking obviously at -- always looking at growth, both organic and inorganic. And we'll see if things continue the way they are. As I said, Central America as a region will grow, in excess of 3%. And that's defined the whole group's strategy.

Thank you. Our next question comes from Brian Flores from Citi.

Hi. Thank you for taking my question, just a quick question on your net interest margin guidance for, 2019? And if you could, explain on the driver behind? Thank you.

Well. We have -- as I mentioned, the net interest margin was helped by what was happening in Central America. Central America has had some expansion in net interest margin in some of the countries. In addition, something that has been helping us has been the net interest margin of our consumer portfolio.I mentioned we've had some pressure there on rates. But on the other hand, the cost -- our asset fund is not increasing. That regarding NIM unknowns. Then something to add to get the overall interest margin is within delivering returns around 2.5% already for a couple of quarters and the fixed income side, and that is also helping us, to achieve these kind of numbers.

Thank you. We have no further questions at this time. Thank you, ladies and gentlemen. I will now return the call to Mr. Sarmiento, for closing remarks. Luis Carlos Sarmiento Gutiérrez: Thank you, Hilda. And thank you all for attending our second quarter call. And we hope to see you again soon in the third quarter call. And as always we expect to keep delivering. And thank you very much. See you next time.

This concludes today's conference. Thank you for participating. You may now disconnect.