Colombia's Grupo Aval says cost of risk likely peaked in third quarter

The head of Colombia's Grupo Aval said on Thursday that cost of risk likely peaked in the third quarter, a day after the financial conglomerate reported a "lackluster" quarterly performance which saw its net profit slump 84%. However, executives warned that cost of risk should remain high in the coming quarters.

The head of Colombia's Grupo Aval said on Thursday that cost of risk likely peaked in the third quarter, a day after the financial conglomerate reported a "lackluster" quarterly performance which saw its net profit slump 84%.

However, executives warned that cost of risk should remain high in the coming quarters. This comes in line with previous forecasts, when Grupo Aval had said costs should ease as interest rates decline and the government executes its budgets. However, the company changed its net interest margin (NIM) guidance to around 3.3% this year due to poor performance of investments and increased cost of risk over July to September.

Cost of risk in 2023, net of recoveries, should land at around 2.1%, the company said, and around 2% in 2024 when the company forecast some 10.5% loan growth led by retail loans. Cost of risk is a measure of provisions banks make for managing potential losses such as poor loans. "Hopefully we'll have good news as 2024 begins," said Chief Executive Luis Carlos Sarmiento in a conference call, saying next year should mark a "transition" as the firm looks to return to its profitability targets sometime in 2025.

"Hopefully we will be able to ride on the coattails of the economic recovery," Sarmiento said.