trending Market Intelligence /marketintelligence/en/news-insights/trending/5_yr3kQz-74lnq5JH8Eicw2 content esgSubNav
In This List

Grupo Aval CEO: Ruta del Sol exposure to impact 2019 results

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Grupo Aval CEO: Ruta del Sol exposure to impact 2019 results

Grupo Aval Acciones y Valores SA is preparing to provision 380 billion pesos due to ongoing litigations on the Ruta del Sol II highway project, CEO Luis Carlos Sarmiento Gutiérrez said on a conference call discussing the group's second-quarter results.

The Colombian holding company expects its exposure to the scandal-laden Ruta del Sol project to be "quite impactful" on its figures for the remainder of the year, CFO Diego Fernando Solano Saravia explained during the call.

The allocation will also impact the company's cost of risk, which is projected to hit 2.3% in 2019. The figure ticked up from the 2.2% guidance Grupo Aval provided at the start of the year.

Grupo Aval is connected to the Ruta del Sol scandal through subsidiary Corporación Financiera Colombiana SA, or Corficolombiana, and its affiliate Episol. The project was canceled in 2017 after an investigation revealed that Odebrecht, the main contractor, had paid bribes worth millions of U.S. dollars to secure the contract.

The company also owns four of the banks that financed Ruta del Sol through a 10-year loan.

Earlier this month, a Colombian court annulled the contract for the project and ordered the government to pay 211 billion pesos for completed works. However, Gutiérrez said they expect the settlement to be contingent on further discussions, hence the provisioning of 100% of the loans.

The company expects its consumer loan portfolio to maintain positive performance, partly due to a modest improvement in consumer confidence, but also due to its digital efforts that have helped in onboarding customers. The strong consumer segment will help offset softer growth in the corporate loan book, which only hit 0.8% in the second quarter, Gutiérrez said.

However, the executive expects the corporate portfolio to start picking up in the next two quarters, which will support its aggregate loan growth forecast of 8% for the year.

As of Aug. 20, US$1 was equivalent to 3,417.00 Colombian pesos.