About Grupo Aval Acciones y Valores

Grupo Aval Acciones y Valores S.A. (Grupo Aval) provides a comprehensive range of financial services and products from traditional banking services, such as making loans and taking deposits, to pension and severance fund management. Strategy During 2022, the company shifted its strategic focus to Colombia, and by doing so, the company has increased its agility and flexibility to respond to the dynamics of the local markets, improve the company's strategic position and capture future growth. From time to time, the company explores merger and acquisition opportunities. The company has a proven track record of identifying, acquiring and integrating interests in companies the company has strategic value to the company. The company provides support to its banking subsidiaries' management teams in identifying opportunities, negotiating favorable terms and implementing acquisitions. The company independently assesses a prospective target's strategic fit with the acquiring banking subsidiary and within the company's group as a whole, and aid the company's banks in evaluating, negotiating and implementing acquisitions. The company's strategic pillars include risk management, innovation and digitalization, and social and environmental impact. The company's digital strategy considers 3 dimensions: digitalize existing products and processes; develop new digital business models; and generate or participate in 'digital ecosystems'. Operations The company manages its business through six main operating segments: Banco de Bogotá, Banco de Occidente, Banco Popular, Banco AV Villas, Porvenir and Corficolombiana, through which the company conducts three main business lines: Commercial Banking, Merchant Banking and Pension, and Severance Fund Management. Commercial Banking The company provides commercial banking services in Colombia and Panama. In Colombia, the company operates four commercial banks (Banco de Bogotá, Banco de Occidente, Banco Popular and Banco AV Villas). In Panama, the company operates through MFH and its subsidiaries. Customers of any of the company's banks in Colombia may access Grupo Aval's other bank branches to carry out basic banking transactions throughout the company's Red Aval (Grupo Aval network). The company's Red Aval (Grupo Aval network) is one of the largest networks of ATMs and branches in Colombia and has been a key element of the company's competitive positioning in the Colombian market. Under the company's multi-brand strategy, each of the company's banks focuses on particular types of customers, geographic regions and products. Through the subsidiaries of the company's banks, the company also offers bancassurance, insurance, trust, bonded warehousing and brokerage transactions, real estate escrow services, merchandise and document storage and deposit, customs agency, cargo management, surety bond and merchandise distribution services, payment and collection services, and provide deposit and lending operations in foreign currencies. Banco de Bogotá is a full-service bank with nationwide coverage and a comprehensive portfolio of services and products. While Banco de Bogotá serves all market segments, it has a leading presence in commercial loans, with a particular focus on large corporations. Banco de Bogotá's corporate strategy is centered in its customers, for which the bank strives to improve its value proposition on a regular basis, enhancing its products, strategies, initiatives, and efforts, in order to improve customer experience, as well as its role in society. Banco de Bogotá is the first carbon-neutral bank in Colombia, and adhered to the Net Zero Banking Alliance and Task Force on Climate-related Financial Disclosures, among other initiatives. Among several sustainable projects, the bank supports job creation for young populations, agribusiness startups, and women in the textile industry. In addition, it issues debit cards that support the education of Colombian children and the Amazon's reforestation, and has generated solar energy in some of its offices. Banco de Bogotá is constantly working to update its technological infrastructure. In 2022, the bank revamped ATMs installing machines. The bank also implemented a facial recognition system, which was used by 2.2 million customers to validate their identity without physical interaction with its branch network, achieving a fully digital experience. The bank implemented 20 machine-learning models this year, focused on loan placement, deposit behavior estimation and insurance. In 2022, Banco de Bogotá originated 1.3 million digital loans amounting to Ps 4.4 trillion pesos. Banco de Occidente focuses on mid-size and small and medium sized (SME) corporate customers, state-owned entities and high net-worth customers and has a diversified revenue stream. During 2022, Banco de Occidente continued implementing different strategies focused on improving commercial effectiveness, optimization of distribution channels, integration with its subsidiaries, digitalization, and launching several ESG initiatives. Banco de Occidente segments its corporate and personal banking customers in terms of service channels, commercial coverage and product offerings which increased sales force productivity. Banco de Occidente continued the commercial integration with its trust and portfolio management services offered by Fiduciaria de Occidente, off-shore products offered to Colombian and international clients through Banco de Occidente Panama and Occidental Bank Barbados, and added new shared services offerings to its subsidiaries in areas, such as technology. On the digitalization front, during 2022 Banco de Occidente increased its digital products offering, with the launch of GoU Payment Gateway, while adding new digital products, such as savings accounts in personal banking and Occicuenta for SMEs, and focusing on digital ecosystems, such as Carroya.com and metrocuadrado.com. Banco Popular operates primarily in the consumer and public sector businesses. Banco Popular is a premier provider of financial solutions to Government entities nationwide with a particular strength in public sector deposits and loans. A significant portion of its portfolio consists of payroll loans to pensioners and public sector employees. Banco Popular continues to work towards its purpose of being a sustainable company that creates experiences that positively transform people's lives. Banco Popular's strategy for the future is based on three pillars: strengthening its leadership in payroll loans supported by digitalization; diversifying product offering, such as personal loans, credit cards and mortgages; and further penetrating the medium-size business sector. In 2022, Banco Popular continued to work on its digital transformation process as part of which the bank adopted an agility-based strategy, thorough a project called 'Positive and Agile', aimed at seeking and promoting incremental value generation through the adoption of new forms of collaborative work based on agile work practices. On the product offering front, the bank assembled a task force to create a product targeted to real estate developers. This effort should increase the bank's penetration of this client segment and set the base for an expansion into new home financing, complementing the bank's traditional focus on existing home financing. Additionally, Banco Popular continued developing alliances with fintechs to expand its personal loans offering oriented to employees of private companies. Banco AV Villas focuses on services and products, such as payroll loans and credit cards, as well as its traditional line of mortgages. Banco AV Villas has a broad service network throughout Colombia, with a concentration in Colombia's central region, including Bogotá and the southwestern region. Banco AV Villas seeks to continue expanding in the small- and medium-size corporate segment. In order to increase transaction volume through electronic channels and improve efficiency, Banco AV Villas is developing projects focusing its efforts on the digitalization of the bank's services to improve customer service experience. MFH through MFG provides a wide variety of financial services in Panama, mainly commercial, investment, mortgage and consumer banking, insurance, factoring, leasing and training services, as well as real estate. The main subsidiary of MFG is Multibank Inc., which consolidates the banking, insurance and portfolio management operations of the company. Multibank Inc. is the second largest provider of automobile loans in Panama. During 2022, MFG continued to focus on its core retail and commercial banking business by strengthening the niche areas it successfully competes in, implementing different strategies focused on customer life cycle and superior customer service. Multibank continued segmenting its customer base and developing service platforms and product offerings tailored to the specific needs and characteristics of each of its client segments. The bank improved its online platform to further increase its clients' access to products and services. In terms of sustainability, Multibank implemented policies to provide preferential interest rates for financing projects related to the installation of solar panels, biodigesters, wind power, hybrid vehicles, acquisition of energy efficiency appliances through credit cards, among others, to promote sustainable financing. Corporate Customers The company's banks provide services and products to public and private sector customers. The company's banks segment their corporate customers into separate categories based principally on their annual revenues. These customer classifications, which are specific to each bank, allow the company's entities to tailor their services and products to the needs of each customer classification sector. Individual Customers The company's banks provide services and products to individuals throughout Colombia and Central America. The company's banks classify their individual banking customers into separate categories based principally on income. Lending Activities The company classifies its banks' loans into the following categories: commercial, consumer, microcredit and mortgages. Commercial loan portfolio consists of general purpose loans (loans with a maturity of over one year), working capital loans (loans with a maturity of up to one year), leases, loans funded by development banks, corporate credit cards and overdraft loans. Loans funded by development banks are loans granted to customers and focused on specific economic sectors and are funded by national or international government or government-related institutions. Interbank and overnight funds are short-term borrowings mostly entered into between banks. Consumer loan portfolio consists of payroll loans, personal loans, automobile and other vehicle loans, credit cards, overdrafts, leases, and general purpose loans. A payroll loan is a type of loan where payments are deducted directly from an employer's salary. The company provides credit card services to the company's bank customers mainly through the Visa and MasterCard networks. Mortgages Portfolio: In Colombia, Banco de Bogotá, Banco de Occidente and Banco AV Villas are the company's main originators of loans to customers for the purchase of real estate secured by mortgages, while Banco Popular is increasing its presence in this business. The company has implemented strict underwriting standards: the company does not offer mortgage loans in amounts greater than 70% of the value of the property to be purchased, upon origination and all of the company's mortgage loans (excluding housing leases) have maturities of up to fifteen years. The weighted average maturity of the Colombian mortgage loan portfolio as of December 31, 2022 was 188 months (contractual life at the time of origination). Treasury Operations The company's banks' treasury departments are responsible for managing their proprietary trading activities, liquidity and distribution of treasury services and products to customers. The company's banks' proprietary trading activities include fixed income trading, derivatives and foreign exchange operations. The company does not have any proprietary trading activities in equities and each of the company's banks have implemented trading activities policies. The company's banks also take deposits from financial institutions as part of their treasury operations. These deposits are represented by certificates of interbank deposit, or 'CDIs', and earn interest at the interbank deposit rate. Banco de Bogotá and Banco de Occidente have active treasury operations, while Banco Popular and Banco AV Villas have smaller operations. Deposits The company's banks offer traditional deposit services and products, including checking accounts, savings accounts, time deposits and other deposits. Distribution Channels The company's banks provide services and products to their customers through the company's network. Each of the company's banks manages its own distribution network. In 1998, the company created Red Aval (Grupo Aval network) in Colombia, which allows customers of any of the company's banks to make transfers, payments and undertake other basic banking functions in the networks of the company's other banks, through traditional channels and electronic networks, with results posting in real time to the accountholder's bank with no additional fees. Red Aval (Grupo Aval network) services vary for each channel. In Panama, the company serves its customers through a diversified distribution network that includes branches, ATMs, a standardized online banking platform, call centers and mobile phone banking. Full-service Branches Full-service branches act as part of the company's sales network and allow the company's bank customers to perform check cashing, deposits, savings account withdrawals, loan and credit card payments, transfers and advances. In Colombia, the company's clients can perform transactions of any of the company's banks at any of the company's branches thanks to the integration provided by Red Aval (Grupo Aval network). ATMs and Electronic Service Points Through the company's ATMs, all of the company's bank customers can, among other services, consult their balances, execute loan and credit card payments, perform transfers and advances, and pay for certain third-party services where the company has a payment collection agreement in place (such as utility service companies). Payment Collection Centers (centros de pagos) Payment collection centers allow the company's customers to pay for certain third-party services where the company has a payment collection agreement in place (such as utility service companies). Banking Correspondents (corresponsales bancarios) The company's banks enter into agreements with various third parties, including convenience store owners, to provide all of the company's bank customers with certain services, which can include checking and savings account withdrawals, account balance consultation, loan and credit card payments, transfers and advances, and payments for certain third-party services where the company has a payment collection agreement in place (such as utility service companies). Automated Telephone Banking, Mobile Banking and Online Banking Through the company's banks' websites, mobile banking services and automated telephone banking, customers may pay loan and credit card balances, make transfers between accounts and make payments for collection agreements originated in any of the company's banks. During 2022, the company continued optimizing the company's footprint by either closing, relocating or adapting branches to increase the effectiveness of the company's distribution network. Merchant Banking Corficolombiana is the largest merchant bank in Colombia based on total assets as of December 31, 2022. Corficolombiana focuses on four main lines of business: (1) equity investments in strategic sectors of the Colombian economy, including infrastructure, energy and gas, agribusiness and hospitality; (2) investment banking, including services relating to capital markets, mergers and acquisitions and project finance transactions; (3) treasury operations; and (4) financial services such as trust services, among others. Corficolombiana's business model is based on the premise of investing in businesses in strategic sectors of the Colombian economy. Corficolombiana's equity investment strategy is to target acquiring and holding majority or substantial stakes in strategic businesses. These investments enable Corficolombiana to exert influence or control over these businesses' operations and to promote revenue growth, operational efficiencies and optimization of the capital structures. Corficolombiana is regulated as a merchant bank (corporación financiera) by the Superintendency of Finance. Under Colombian law, a merchant bank is permitted to hold equity ownership positions in both financial and non-financial companies, unlike banks, which may only invest in financial companies. Corficolombiana's Asset Distribution By Sectors Corficolombiana primarily invests in five sectors of the Colombian economy: energy and gas; infrastructure; agribusiness; hotels and financial services. It generally seeks to invest in businesses with leading market positions, strong cash flows and growth potential. Corficolombiana's main investments in the energy and gas sector include a 50.9% controlling stake in Promigas S.A. E.S.P., the second largest natural gas pipeline and distribution company in Colombia, and a minority stake in Grupo Energía Bogotá S.A. E.S.P, or 'GEB', an electricity and gas group. Promigas is included in the company's consolidated financial statements as it is under the company's 'control' as defined in IFRS 10. However, pursuant to Colombian Regulation (Code of Commerce) Promigas is not a company under direct or indirect control of Grupo Aval. Corficolombiana's infrastructure investments are concentrated mainly in toll road concession projects, a sector in which it is a leading private investor in Colombia. The main investments of Corficolombiana in the infrastructure sector include Proyectos de Infraestructura S.A. (Buga-Tuluá-La Paila), Concesionaria Vial de los Andes S.A.S. (Bogotá-Villavicencio), Concesiones CCFC S.A. (Fontibón-Los Alpes), Concesionaria Panamericana S.A.S. (Los Alpes-Villeta and Chuguacal-Cambao), Concesionaria Vial del Pacífico S.A.S. (Ancón Sur-Bolombolo or 'Conexión Pacífico 1'), Concesionaria Nueva Vía al Mar S.A.S. (Mulaló-Loboguerrero), Concesionaria Vial Andina S.A.S. (Bogotá-Villavicencio) and Concesionaria Vial del Oriente S.A.S. (Villavicencio-Yopal). In the financial services & others sector, Corficolombiana offers trust and brokerage services to third-party customers through two subsidiaries: Fiduciaria Corficolombiana S.A. and Casa de Bolsa S.A. In 2022, the liquidation process of Leasing Corficolombiana S.A. was completed. Corficolombiana also has investments in the hospitality sector. These include majority stakes in Hoteles Estelar de Colombia S.A. and Promotora y Comercializadora Turística Santamar S.A. Finally, Corficolombiana's main investments in agribusiness are centered on forestry and woodworking, as well as the production of palm oil, rubber, rice and cotton mainly through Unipalma S.A., Valora S.A. and Organización Pajonales S.A. Investment Banking and Treasury Businesses Corficolombiana's investment banking team provides advice to third-party clients in the Colombian market covering a broad range of transactions, including among others, capital markets, mergers and acquisitions and project finance. Corficolombiana has led the participation of private sector companies in infrastructure projects. In 2022, Corficolombiana's investment bank helped raise financing and coordinate projects with third parties and sometimes with related parties. Corficolombiana is a relevant participant in Colombian capital markets, both in sovereign and corporate debt securities and foreign currency-denominated securities. It is also an active participant in the derivatives market, and an active market maker for Colombian sovereign debt securities. Pension and Severance Fund Management Porvenir is controlled by and consolidated under Grupo Aval. Porvenir is the leading private pension and severance fund management business in Colombia. Pension funds provide individual savings for retirement, while severance funds provide temporary income to employees who become unemployed. Through Aportes en Línea, Porvenir manages social security related information systems designed to provide employees with efficient payment solutions. Porvenir's Investments Porvenir is required to own at least 1.00% of the funds it manages that are subject to a minimum return, known as the stabilization reserve. In addition, Porvenir holds voluntary investments. Distribution Channels Porvenir attracts new individual customers mainly through its direct sales force (1,079 individuals) with direct report to five regional sales managers located in Bogotá, Antioquia, the Southern Region, the Eastern Region and the Northern Region. As of December 31, 2022, Porvenir had offices, service modules, electronic service centers and business service centers. It maintains a presence in all regions of Colombia through its service agreements with Grupo Aval's banks. Intellectual Property The company registers and monitors its brands and trademarks in Colombia and abroad according to the marketing and commercial strategy established for each country. Part of this monitoring is focused in evaluating possible registration and renovation of brands and trademarks in Colombia, the United States, Mexico and other South and Central American countries, always in connection to Grupo Aval business strategy. Competition Commercial Banking The company's main competitors in Colombia are Bancolombia, Davivienda and BBVA Colombia. Merchant Banking Bancolombia, through its subsidiary Banca de Inversión Bancolombia S.A., is Corficolombiana's largest local competitor. Pension and Severance Fund Management Porvenir's principal private competitors are other pension fund managers, including Protección, Colfondos and Skandia. History Grupo Aval Acciones y Valores S.A. was founded in 1994. The company was incorporated in 1994 under Colombian law.