Company Quick10K Filing
Grupo Aval
20-F 2019-12-31 Filed 2020-04-27
20-F 2018-12-31 Filed 2019-04-26
20-F 2017-12-31 Filed 2018-04-27
20-F 2016-12-31 Filed 2017-04-28
20-F 2015-12-31 Filed 2016-05-02
20-F 2014-12-31 Filed 2015-04-27
20-F 2013-12-31 Filed 2014-04-28
20-F 2012-12-31 Filed 2013-04-26
20-F 2011-12-31 Filed 2012-04-30
20-F 2010-12-31 Filed 2011-06-30

AVAL 20F Annual Report

Part I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16. [Reserved]
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant’S Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Note 1 – Reporting Entity
Note 2 – Basis of Preparation of The Consolidated Financial Statements and Summary of Significant Accounting Policies
Note 3 – Judgments and Critical Accounting Estimates in Applying Accounting Policies
Note 4 – Risk Management
Note 5 – Estimation of Fair Value
Note 6 – Classification of Financial Assets and Financial Liabilities
Note 7 – Cash and Cash Equivalents
Note 8 – Trading Assets and Liabilities
Note 9 – Investment Securities
Note 10 – Hedge Accounting
Note 11 – Loans
Note 12 – Other Accounts Receivable, Net
Note 13 – Non - Current Assets Held for Sale
Note 14 – Investments in Associates and Joint Ventures
Note 15 – Tangible Assets
Note 16 – Concession Arrangements Rights
Note 17 – Goodwill
Note 18 – Other Intangible Assets
Note 19 – Income Tax
Note 20 – Customer Deposits
Note 21 – Financial Obligations
Note 22 – Employee Benefits
Note 23 – Legal and Other Provisions
Note 24 – Other Liabilities
Note 25 – Equity Attributable To Owners of The Parent
Note 26 - Non - Controlling Interest
Note 27 – Commitments and Contingencies
Note 28 – Income From Contracts with Customers
Note 29 – Net Trading Income
Note 30 – Other Income and Expense
Note 31 – Analysis of Operating Segments
Note 32 – Unconsolidated Structured Entities
Note 33 - Transfers of Financial Assets
Note 34 – Related Parties
Note 35 – Subsequent Events
Note 36 – Parent Company Information
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EX-8.1 aval-20191231ex81c5ca74c.htm
EX-12.1 aval-20191231ex121d18002.htm
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Grupo Aval Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 aval-20191231x20f.htm 20-F aval_Current_Folio_20F

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

 

 

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

 

OR

 

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 2019

 

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________

 

OR

 

 

SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report

 

Commission file number: 001-36631

GRUPO AVAL ACCIONES Y VALORES S.A.

(Exact name of Registrant as specified in its charter)

Republic of Colombia

(Jurisdiction of incorporation)

Carrera 13 No. 26A - 47

Bogotá D.C., Colombia

(Address of principal executive offices)

Jorge Adrián Rincón

Chief Legal Counsel

Grupo Aval Acciones y Valores S.A.

Carrera 13 No. 26A - 47

Bogotá D.C., Colombia

Phone: (+57 1) 743-3222

E-mail: jrincon@grupoaval.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Copies to:

Nicholas A. Kronfeld, Esq.

Yasin Keshvargar, Esq.

 Davis Polk & Wardwell LLP

450 Lexington Avenue

New York, NY 10017

Phone: (212) 450-4000

Securities registered or to be registered pursuant to Section 12(b) of the Act:

None

Securities registered or to be registered pursuant to Section 12(g) of the Act:

 

 

 

Title of each class

 

Name of each exchange on which
registered

American Depositary Shares, each representing 20 preferred shares, par value Ps 1.00 per preferred share

 

New York Stock Exchange

Preferred Shares, par value Ps 1.00 per preferred share

 

New York Stock Exchange*

 


*     Grupo Aval Acciones y Valores S.A.’s preferred shares are not listed for trading, but are only listed in connection with the registration of the American Depositary Shares, pursuant to the requirements of the New York Stock Exchange under the trading symbol(s): AVAL.

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report.

Preferred shares: 7,143,227,185

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes   No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes   No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.     

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

US GAAP

International Financial Reporting Standards as issued by the International Accounting Standards Board

Other

 

If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.

Item 17   Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act).

Yes   No

 

 

 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

 

PRESENTATION OF FINANCIAL AND OTHER INFORMATION 

1

PART I 

7

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS 

7

A. 

Directors and senior management

7

B. 

Advisers

7

C. 

Auditors

7

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 

7

A. 

Offer statistics

7

B. 

Method and expected timetable

7

ITEM 3. KEY INFORMATION 

7

A. 

Selected financial data

7

B. 

Capitalization and indebtedness

13

C. 

Reasons for the offer and use of proceeds

13

D. 

Risk factors

13

ITEM 4. INFORMATION ON THE COMPANY 

48

A. 

History and development of the company

48

B. 

Business overview

61

C. 

Organizational structure

136

D. 

Property, plants and equipment

136

ITEM 4A. UNRESOLVED STAFF COMMENTS 

136

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 

136

A. 

Operating results

136

B. 

Liquidity and capital resources

239

C. 

Research and development, patents and licenses, etc.

243

D. 

Trend information

243

E. 

Off-balance sheet arrangements

246

F. 

Tabular disclosure of contractual obligations

247

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 

247

A. 

Directors and senior management

247

B. 

Compensation

252

C. 

Board practices

253

D. 

Employees

254

E. 

Share ownership

256

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 

256

A. 

Major shareholders

256

B. 

Related party transactions

257

C. 

Interests of experts and counsel

260

ITEM 8. FINANCIAL INFORMATION 

260

A. 

Consolidated statements and other financial information

260

B. 

Significant changes

264

ITEM 9. THE OFFER AND LISTING 

264

A. 

Offering and listing details

264

B. 

Plan of distribution

264

C. 

Markets

264

D. 

Selling shareholders

265

E. 

Dilution

265

F. 

Expenses of the issue

265

i

 

 

 

ITEM 10. ADDITIONAL INFORMATION 

265

A. 

Share capital

265

B. 

Memorandum and articles of association

265

C. 

Material contracts

273

D. 

Exchange controls

274

E. 

Taxation

274

F. 

Dividends and paying agents

283

G. 

Statement by experts

287

H. 

Documents on display

287

I. 

Subsidiary information

287

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT RISK 

287

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 

314

A. 

Debt securities

314

B. 

Warrants and rights

314

C. 

Other securities

314

D. 

American depositary shares

314

PART II 

316

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 

316

A. 

Defaults

316

B. 

Arrears and delinquencies

316

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 

316

A. 

Material modifications to instruments

316

B. 

Material modifications to rights

316

C. 

Withdrawal or substitution of assets

316

D. 

Change in trustees or paying agents

316

E. 

Use of proceeds

316

ITEM 15. CONTROLS AND PROCEDURES 

316

A. 

Disclosure controls and procedures

316

B. 

Management’s annual report on internal control over financial reporting

317

C. 

Attestation report of the registered public accounting firm

317

D. 

Changes in internal control over financial reporting

317

ITEM 16. [RESERVED] 

318

ITEM 16A. Audit committee financial expert 

318

ITEM 16B. Code of ethics 

318

ITEM 16C. Principal accountant fees and services 

318

ITEM 16D. Exemptions from the listing standards for audit committees 

318

ITEM 16E. Purchases of equity securities by the issuer and affiliated purchasers 

319

ITEM 16F. Change in registrant’s certifying accountant 

319

ITEM 16G. Corporate governance 

319

ITEM 16H. Mine safety disclosure 

320

PART III 

321

ITEM 17. Financial statements 

321

ITEM 18. Financial statements 

321

ITEM 19. Exhibits 

321

 

 

 

 

 

ii

 

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

All references herein to “peso”, “pesos”, or “Ps” refer to the lawful currency of Colombia. ‎All references to “U.S. dollars”, “dollars” or “U.S.$” are to United States dollars. This annual report translates certain Colombian peso amounts ‎into U.S. dollars at specified rates solely for the convenience of the reader. The conversion of amounts expressed in ‎pesos as of a specified date at the then prevailing exchange rate may result in the presentation of U.S. dollar amounts ‎that differ from U.S.  dollar amounts that would have been obtained by converting Colombian pesos as of another specified ‎date. Unless otherwise noted in this annual report, all such peso amounts have been translated at the ‎rate of  Ps 3,277.14 per U.S.$1.00, which was the representative market rate published on December 31, 2019. The ‎representative market rate is computed and certified by the Superintendency of Finance on a daily basis and ‎represents the weighted average of the buy/sell foreign exchange rates negotiated on the previous day by certain ‎financial institutions authorized to engage in foreign exchange transactions. Such conversion should not be ‎construed as a representation that the peso amounts correspond to, or have been or could be converted into, U.S. ‎dollars at that rate or any other rate. On April 24, 2020 the representative market rate was Ps 4,020.94 per U.S. $1.00.

Definitions

In this annual report, unless otherwise indicated or the context otherwise requires, the terms:

·

“Grupo Aval”, “we”, “us”, “our” and “our company” mean Grupo Aval Acciones y Valores S.A. and its consolidated subsidiaries;

·

“banks” and “our banking subsidiaries” mean Banco de Bogotá S.A., Banco de Occidente S.A., Banco Popular S.A. and Banco Comercial AV Villas S.A., and their respective consolidated subsidiaries;

·

“Banco de Bogotá” means Banco de Bogotá S.A. and its consolidated subsidiaries;

·

“Banco de Occidente” means Banco de Occidente S.A. and its consolidated subsidiaries;

·

“Banco Popular” means Banco Popular S.A. and its consolidated subsidiaries;

·

“Banco AV Villas” means Banco Comercial AV Villas S.A. and its consolidated subsidiary;

·

“BAC Credomatic” or “BAC” means BAC Credomatic Inc. and its consolidated subsidiaries;

·

“Corficolombiana” means Corporación Financiera Colombiana S.A. and its consolidated subsidiaries;

·

“LB Panamá” means Leasing Bogotá S.A., Panamá and its consolidated subsidiaries;

·

“Multi Financial Group” or “MFG” means Multi Financial Group Inc. and its consolidated subsidiaries.

·

“Porvenir” means Sociedad Administradora de Fondos de Pensiones y Cesantías Porvenir S.A. and its consolidated subsidiary; and

·

“Superintendency of Finance” means the Colombian Superintendency of Finance (Superintendencia Financiera de Colombia), a supervisory authority ascribed to the Colombian Ministry of Finance and Public Credit (Ministerio de Hacienda y Crédito Público), or the “Ministry of Finance”, holding the inspection, supervision and control authority over the individuals or entities involved in financial activities, securities markets, insurance and any other operations related to the management, use or investment of resources collected from the public, as well as inspection and supervision authority over the holding companies of financial conglomerates in Colombia.

1

In this annual report, references to “beneficial ownership” are calculated pursuant to the definition ascribed by the U.S. Securities and Exchange Commission, or the “SEC”, of beneficial ownership for foreign private issuers contained in Form 20‑F. Form 20‑F defines the term “beneficial owner” of securities as referring to any person who, even if not the record owner of the securities, has or shares the underlying benefits of ownership, including the power to direct the voting or the disposition of the securities or to receive the economic benefit of ownership of the securities. A person is also considered to be the “beneficial owner” of securities when such person has the right to acquire within 60 days pursuant to an option or other agreement. Beneficial owners include persons who hold their securities through one or more trustees, brokers, agents, legal representatives or other intermediaries, or through companies in which they have a “controlling interest”, which means the direct or indirect power to direct the management and policies of the entity.

Financial statements

We are a financial holding company and an issuer in Colombia of securities registered with the National Registry of Shares and Issuers (Registro Nacional de Emisores y Valores), and in this capacity, we are subject to inspection and surveillance by the Superintendency of Finance and required to comply with corporate governance and periodic reporting requirements to which all financial holdings and issuers are subject. We are not a financial institution in Colombia and we are not supervised or regulated as a financial institution. Since February 6, 2019, we are subject to the inspection and surveillance of the Superintendency of Finance as the financial holding company of the Aval Financial Conglomerate and we are required to comply with capital adequacy and additional regulations applicable to financial conglomerates. See “Item 4. Information on the Company—B. Business overview—Supervision and regulation”. All of our Colombian financial subsidiaries, including Banco de Bogotá, Banco de Occidente, Banco Popular, Banco AV Villas, Corficolombiana, Porvenir, and their respective financial subsidiaries, are entities under the direct comprehensive supervision of, and subject to inspection and surveillance as financial institutions by, the Superintendency of Finance and, in the case of BAC Credomatic, subject to inspection and surveillance as a financial institution by the relevant regulatory authorities in each country where BAC Credomatic operates.

Our consolidated financial statements at December 31, 2019 and 2018 and for the years ended December 31, 2019, 2018, and 2017 are included in this annual report and referred to as our audited consolidated financial statements. Our historical results are not necessarily indicative of results to be expected for future periods. We have prepared the audited consolidated financial statements included herein in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Grupo Aval adopted IFRS 16 using the modified retrospective approach with the cumulative effect of initial adoption being recognized on January 1, 2019. Grupo Aval has not restated comparatives for prior reporting periods, as permitted under the specific transitional provisions in the standard. The reclassifications and the adjustments arising from the new leasing rules are therefore recognized in the opening Consolidated Statement of Financial Position on January 1, 2019. For more information on the effects of the adoption on Grupo Aval, please refer to “Note 2.4 Changes in Accounting Policies—A. IFRS 16 Leases” of our audited consolidated financial statements.

For comparative purposes, following the adoption of IFRS 9 on January 1, 2018, Grupo Aval adjusted the presentation of financial instruments in the consolidated statement of financial position for prior reporting periods. In addition, following the adoption of IFRS 15 on January 1, 2018,  Grupo Aval adjusted the presentation of revenue from contracts with customers within the consolidated statements of income for prior reporting periods.

We and our Colombian subsidiaries prepare consolidated financial statements for publication in Colombia under IFRS as adopted by the Superintendency of Finance in accordance with Decree 1851 of 2013 and 3023 of 2013, as modified by Decrees 2420 and 2496 of 2015, 2131 of 2016, 2170 of 2017, 2483 of 2018 and 2270 of 2019 (which we refer to as “Colombian IFRS”). Prior to January 1, 2018, Colombian IFRS differed from IFRS as issued by the IASB in certain material respects. Starting on January 1, 2018, Grupo Aval’s consolidated financial statements for publication in Colombia do not differ from the consolidated financial statements prepared under IFRS as issued by the IASB.

Separate financial statements under Colombian IFRS are based on IFRS issued by the IASB in Spanish as of December 31, 2018, and requirements pursuant to certain Colombian regulations. As a result, rules subsequently issued by the IASB are

2

not applicable under Colombian IFRS. Our separate financial statements for local purposes, differed from IFRS as issued by the IASB in the following principal aspects:

·

Wealth tax, created by the Colombian congress in 2014 and to be paid by companies during 2015, 2016 and 2017, calculated based on the value of their shareholder’s equity can be recorded against equity reserves. However, under IFRS, according to IFRIC 21, wealth tax liabilities must be recorded in the statement of income.

·

Loss allowances are calculated based on specific rules of the Financial and Accounting Basic Circular (Circular Básica Contable y Financiera) issued by the Superintendency of Finance (which is applied in the local separate financial statements), whereas under IFRS, loss allowances were calculated according to the criteria set forth in IAS 39 and recorded in the statement of income until December 31, 2017 and under IFRS 9 beginning on January 1, 2018.

·

Financial instruments under Colombian IFRS are classified and measured under specific rules of the Financial and Accounting Basic Circular, whereas under IFRS, financial instruments were classified and measured according to the criteria set forth in IAS 39 until December 31, 2017 and under IFRS 9 beginning on January 1, 2018 (with the exception of hedge accounting which is still treated under guidelines set forth in IAS 39).

Ratios and Measures of Financial Performance

We have included in this annual report ratios and measures of financial performance such as return on average assets, or “ROAA”, and return on average equity, or “ROAE”.

These measures should not be construed as an alternative to IFRS measures and should not be compared to similarly titled measures reported by other companies, which may evaluate such measures differently from how we do. For ratios and measures of financial performance, see “Item 3. Key Information—A. Selected financial data— Ratios and Measures of Financial Performance”.

Market share and other information

We obtained the market and competitive position data, including market forecasts, used throughout this annual report from market research, publicly available information and industry publications. We have presented this data on the basis of information from third-party sources that we believe are reliable, including, among others, the International Monetary Fund, or “IMF”, the Superintendency of Finance, the Colombian Banking Association (Asociación Bancaria y de Entidades Financieras de Colombia) or “Asobancaria”, the Colombian Stock Exchange, the Colombian National Bureau of Statistics (Departamento Administrativo Nacional de Estadística), or “DANE”, the World Bank, the Superintendency of Banks in Panama (Superintendencia de Bancos de Panamá), the Superintendency of Financial Institutions in Costa Rica (Superintendencia General de Entidades Financieras), the Superintendency of Banks in Guatemala (Superintendencia de Bancos de Guatemala), the National Commission of Banks and Insurances in Honduras (Comisión Nacional de Bancos y Seguros), the Financial System Superintendency in El Salvador (Superintendencia del Sistema Financiero) and the Superintendency of Banks and Other Financial Institutions in Nicaragua (Superintendencia de Bancos y Otras Instituciones Financieras). Industry and government publications, including those referenced herein, generally state that the information presented has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. Unless otherwise indicated, gross domestic product, or “GDP”, figures with respect to Colombia in this annual report are based on the 2015 base year data series published by DANE. Although we have no reason to believe that any of this information or these reports is inaccurate in any material respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. We do not make any representation or warranty as to the accuracy of such information.

IMF’s April 2020 World Economic Outlook (WEO) database does not contain all the usual analytical groups and countries and contains only these indicators: real GDP growth, consumer price index, current account balance, unemployment, per capita GDP growth, and fiscal balance. Projections for these indicators are provided only through 2021 due to the high

3

level of uncertainty in current global economic conditions. Therefore, some information used herein refers expressly to the October 2019 WEO as the last information available.

Our consolidated statement of financial position and statement of income reflect information prepared under IFRS, while comparative disclosures of our financial and operating performance and that of our competitors are based on separate information prepared under Colombian IFRS as reported to the Superintendency of Finance. We, our banking subsidiaries, Corficolombiana and Porvenir also report separate financial data to the Superintendency of Finance under Colombian IFRS. Unless otherwise indicated or the context otherwise requires, market share and other data comparing our performance to that of our competitors reflects the separate results of our banking subsidiaries, Corficolombiana, Porvenir and BAC Credomatic. “Grupo Aval aggregate” data throughout this annual report reflects the sum of the separate financial statements of our four Colombian banking subsidiaries (Banco de Bogotá, Banco de Occidente, Banco Popular and Banco AV Villas) as reported to the Superintendency of Finance under Colombian IFRS, and it is used for purposes of comparing our performance against that of our peer banks. These separate financial statements under Colombian IFRS do not reflect the consolidation of subsidiaries such as Corficolombiana, Porvenir or LB Panamá, are not intended to reflect the consolidated financial results of Grupo Aval and are not necessarily indicative of the results for any other future period. Except where otherwise indicated, financial and market share data pertaining to BAC Credomatic and its competitors has been presented in accordance with IFRS and is based on publicly available information filed with regulators. All information regarding our market share and other comparative ratios and measures of financial performance to those of our competitors is presented on a separate basis under Colombian IFRS, in the case of our Colombian banking subsidiaries, Corficolombiana and Porvenir, and it is based on publicly available information filed with the Superintendency of Finance.

Throughout this document, unless otherwise noted, references to average consolidated statement of financial position for 2019, 2018, 2017, 2016 and 2015 have been calculated as follows: the average of balances at December 31, at September 30, at June 30, and at March 31 of the corresponding year, and the balance at December 31, of the previous year.

Banks, merchant banks (corporaciones financieras) and financing companies (compañías de financiamiento comercial) are deemed credit institutions by the Superintendency of Finance and are the principal institutions authorized to accept deposits and make loans in Colombia. Banks undertake traditional deposit-taking and lending activities. Financing companies place funds in circulation by means of active credit operations, with the purpose of fostering the sale of goods and services, including the development of leasing operations. Merchant banks invest directly in the real economy and thus are the only credit institutions that may invest in non-financial sectors. Banks are permitted to invest in merchant banks. See “Item 4. Information on the Company—B. Business overview—Supervision and regulation”. In Colombia, we operate four banks, one merchant bank and one financing company (under voluntary liquidation), and our market share is determined by comparing our banks to other banks reporting their results to the Superintendency of Finance.

We consider our principal competitors in Colombia to be Bancolombia S.A., or “Bancolombia”, Banco Davivienda S.A., or “Davivienda”, and Banco Bilbao Vizcaya Argentaria Colombia S.A., or “BBVA Colombia”, which are the three leading banking groups in Colombia after Grupo Aval.

The principal competitors of Porvenir, our pension and severance fund administrator, include Administradora de Fondos de Pensiones y Cesantías Protección S.A., or “Protección”, Colfondos S.A. Pensiones y Cesantías, or “Colfondos”, and Skandia Administradora de Fondos de Pensiones y Cesantías S.A., or “Skandia”. Corficolombiana, our merchant bank, is a merchant bank (corporación financiera), and its competitors include Banca de Inversión Bancolombia S.A., J.P. Morgan Corporación Financiera S.A., BNP Paribas Colombia Corporación Financiera S.A. and Corporación Financiera GNB Sudameris S.A.

Our principal competitors in Central America include Bancolombia, Banco General, Banco Industrial, Banco Promerica, Davivienda and Banrural.

We include certain ratios in this annual report which we believe provide investors with important information regarding our operations, such as return on average equity, or “ROAE”, return on average assets, or “ROAA”, net interest margin, or “NIM”, and operational efficiency and asset quality indicators, among others. Some of these ratios are also used in this annual report to compare us to our principal competitors.

4

Other conventions

Certain figures included in this annual report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an arithmetic summation of the figures that precede them. As such, percentage calculations presented may differ from those of rounded numbers. References to “billions” in this annual report are to 1,000,000,000s and to “trillions” are to 1,000,000,000,000s.

“Non-controlling interest” refers to the participation of minority shareholders in a subsidiary’s equity or net income, as applicable.

 

FORWARD-LOOKING STATEMENTS

Some of the matters discussed in this annual report concerning our operations and financial performance include estimates and forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 “Reform Act” including such statements contained in “Item 3. Key Information—D. Risk factors”, “Item 5. Operating and Financial Review and Prospects” and “Item 4. Information on the Company—B. Business overview”.

Our estimates and forward-looking statements are mainly based on our current expectations and estimates on projections of future events and trends, which affect or may affect our businesses and results of operations. Although we believe that these estimates and forward-looking statements are based upon reasonable assumptions, they are subject to several risks and uncertainties and are made in light of information currently available to us. Our estimates and forward-looking statements may be influenced by the following factors, among others:

·

changes in Colombian, Central American, regional and international business and economic, political or other conditions;

·

developments affecting Colombian, Central American and international capital and financial markets;

·

government regulation and tax matters and developments affecting our company and industry;

·

declines in the oil and affiliated services sector in the Colombian and global economies;

·

increases in defaults by our customers;

·

increases in goodwill impairment losses, or other impairments;

·

decreases in deposits, customer loss or revenue loss;

·

increases in allowances for contingent liabilities;

·

our ability to sustain or improve our financial performance;

·

increases in inflation rates, particularly in Colombia and in jurisdictions in which we operate in Central America;

·

the level of penetration of financial products and credit in Colombia and Central America;

·

changes in interest rates which may, among other effects, adversely affect margins and the valuation of our treasury portfolio;

·

decreases in the spread between investment yields and implied interest rates in annuities;

·

movements in exchange rates;

5

·

competition in the banking and financial services, credit card services, insurance, asset management, pension fund administration and related industries;

·

adequacy of risk management procedures and credit, market and other risks of lending and investment activities;

·

decreases in the level of capitalization of our subsidiaries;

·

changes in market values of Colombian and Central American securities, particularly Colombian government securities;

·

adverse legal or regulatory disputes or proceedings;

·

successful integration and future performance of acquired businesses or assets;

·

natural disasters, public health crises or internal security issues affecting countries where we operate;

·

loss of any key member of our senior management; and

·

other risk factors as set forth under “Item 3. Key Information—D. Risk factors” or “Item 5. Operating and Financial Review and Prospects—D. Trend information”.

The words “believe”, “may”, “will”, “estimate”, “continue”, “anticipate”, “intend”, “expect”, “should”, “could”, “would”, “plan”, “predict”, “potential” and similar words are intended to identify estimates and forward-looking statements. All statements addressing our future operating performance, and statements addressing events and developments that we expect or anticipate will occur in the future, are forward-looking statements within the meaning of the Reform Act. Estimates and forward-looking statements are intended to be valid only at the date they were made, and we undertake no obligation to update or to review any estimate and/or forward-looking statement because of new information, future events or other factors. Estimates and forward-looking statements involve risks and uncertainties and are not guarantees of future performance. Our future results may differ materially from those expressed in these estimates and forward-looking statements. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this annual report might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to the factors mentioned above, among others. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

These cautionary statements should be considered in connection with any written or oral forward-looking statements that we may issue in the future.

 

6

PART I

 

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

A.          Directors and senior management

Not applicable.

B.          Advisers

Not applicable.

C.          Auditors

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

A.          Offer statistics

Not applicable.

B.          Method and expected timetable

Not applicable.

ITEM 3. KEY INFORMATION

A.          Selected financial data

The following financial data of Grupo Aval at December 31, 2019 and 2018 and for the years ended December 31,  2019, 2018 and 2017 have been derived from our audited consolidated financial statements prepared in accordance with IFRS, included in this report. We have derived our selected statement of financial position data as of December 31, 2017, 2016, and 2015 and our consolidated statement of income data prepared in accordance with IFRS for the years ended December 31, 2016 and 2015 from our consolidated financial statements not included in this annual report. For comparative purposes, following the adoption of IFRS 9 on January 1, 2018, Grupo Aval adjusted the presentation of financial instruments in the consolidated statement of financial position for prior reporting periods. In addition, Grupo Aval adjusted the presentation of revenue from contracts with customers within the consolidated statements of income for prior reporting periods.  Our historical results are not necessarily indicative of results to be expected for future periods.

 

This financial data should be read in conjunction with our audited consolidated financial statements and the related notes, “Presentation of financial and other information” and “Item 5. Operating and Financial Review and Prospects” included in this annual report.

7

Statement of income

IFRS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grupo Aval

 

 

 

 

 

 

For the years ended December 31,

 

    

2019

    

2018

    

2017

    

2016

    

2015

 

 

(in Ps billions, except share and per share data)

Total interest income

 

19,552.7

 

18,356.6

 

18,741.8

 

17,547.0

 

14,075.6

Total interest expense

 

(8,267.2)

 

(7,484.8)

 

(8,227.7)

 

(8,392.4)

 

(5,751.5)

Net interest income

 

11,285.5

 

10,871.8

 

10,514.1

 

9,154.6

 

8,324.1

Impairment loss on loans and other accounts receivable

 

(4,194.0)

 

(4,150.0)

 

(4,119.3)

 

(3,004.2)

 

(2,127.7)

Impairment (loss) recovery on other financial assets

 

60.0

 

32.5

 

(0.1)

 

(70.4)

 

(6.2)

Recovery of charged-off financial assets

 

378.9

 

320.1

 

264.6

 

290.4

 

219.7

Net impairment loss on financial assets

 

(3,755.1)

 

(3,797.3)

 

(3,854.9)

 

(2,784.2)

 

(1,914.3)

Net income from commissions and fees

 

5,455.3

 

4,839.6

 

4,579.0

 

4,259.7

 

3,662.3

Gross profit from sales of goods and services

 

2,374.8

 

2,643.9

 

757.0

 

929.3

 

838.6

Net trading income

 

761.9

 

582.7

 

561.4

 

724.7

 

245.2

Net income from other financial instruments mandatorily at fair value through profit or loss

 

217.6

 

205.8

 

209.9

 

181.0

 

153.1

Other income

 

1,283.0

 

1,358.7

 

1,151.7

 

1,676.1

 

1,550.7

Other expenses

 

(10,171.3)

 

(9,371.0)

 

(9,003.1)

 

(8,567.3)

 

(7,635.1)

Income before income tax expense

 

7,451.7

 

7,334.1

 

4,915.2

 

5,573.8

 

5,224.7

Income tax expense

 

(2,086.3)

 

(2,149.6)

 

(1,752.8)

 

(2,056.9)

 

(1,879.0)

Net income for the year

 

5,365.5

 

5,184.6

 

3,162.4

 

3,516.9

 

3,345.7

Net income for the year attributable to:

 

 

 

 

 

 

 

 

 

 

Owners of the parent

 

3,034.4

 

2,912.7

 

1,962.4

 

2,139.9

 

2,041.4

Non-controlling interest

 

2,331.0

 

2,271.9

 

1,200.0

 

1,377.1

 

1,304.3

 

 

 

 

 

 

 

 

 

 

 

Earnings per 1,000 shares (basic and diluted earnings):

 

  

 

  

 

  

 

  

 

  

Common shares (in pesos)

 

136,188.1

 

130,725.4

 

88,075.6

 

96,039.9

 

91,619.0

Earnings per 1,000 shares (basic and diluted earnings):

 

  

 

  

 

  

 

  

 

  

Preferred shares (in pesos)

 

136,188.1

 

130,725.4

 

88,075.6

 

96,039.9

 

91,619.0

Dividends per 1,000 shares(1):

 

  

 

  

 

  

 

  

 

  

Common and preferred shares (in pesos)

 

60,000.0

 

60,000.0

 

48,000.0

 

88,200.0

 

58,800.0

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares:

 

  

 

  

 

  

 

  

 

  

Outstanding common shares in thousands

 

15,158,004.8

 

15,169,502.8

 

15,216,468.6

 

15,262,660.1

 

15,309,380.7

Outstanding preferred shares in thousands

 

7,123,012.3

 

7,111,514.4

 

7,064,548.6

 

7,018,357.0

 

6,971,636.5

Outstanding common and preferred shares in thousands

 

22,281,017.2

 

22,281,017.2

 

22,281,017.2

 

22,281,017.2

 

22,281,017.2

 


(1)

Until 2016, Grupo Aval declared dividends semi-annually in March (from the net income generated in the six-month period between July 1 and December 31 of the previous year) and in September (from the net income generated in the six-month period between January 1 and June 30 of the ongoing year) of each year. Since March 2017, the Company declares dividends on an annual basis (from the net income generated in the twelve-month period between January 1 and December 31 of the previous year). Dividends per 1,000 shares figures for 2016 include dividends declared in September 2016 from the net income generated in the six-month period ended June 30, 2016 and dividends declared in March 2017 from the net income generated in the six-month period ended December 31, 2016, which was paid in twelve equal installments between April 2017 and March 2018.

8

Statement of financial position

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grupo Aval

 

 

 

 

 

 

At December 31,

 

    

2019

    

2018

    

2017

    

2016

    

2015

 

 

(in Ps billions)

Assets:

 

  

 

  

 

  

 

  

 

  

Cash and cash equivalents

 

30,117.2

 

28,401.3

 

22,336.8

 

22,193.0

 

22,285.0

Trading assets

 

9,113.7

 

7,204.3

 

5,128.1

 

4,593.7

 

5,608.2

Investment securities

 

26,000.3

 

23,030.2

 

21,513.2

 

20,963.0

 

22,080.2

Hedging derivative assets

 

166.6

 

30.1

 

55.3

 

128.5

 

33.7

Total loans, net

 

173,942.3

 

168,685.7

 

160,754.3

 

150,898.7

 

141,827.7

Other accounts receivables, net

 

11,702.3

 

9,300.6