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Rating Action:

Moody's affirms Grupo Aval's ratings; changes outlook to stable

Global Credit Research - 17 Jan 2014

Mexico, January 17, 2014 -- Moody's Investors Service today affirmed all of Grupo Aval Acciones y Valores S.A.'s (Grupo Aval) ratings and changed the outlook to stable, from negative. The ratings affirmed were the Baa3 long-term local and foreign currency issuer ratings and Prime-3 short-term local and foreign currency issuer ratings. Moody's also affirmed Grupo Aval's Baa3 long-term foreign currency debt rating of the senior unsecured notes issued by the Cayman Islands-based Grupo Aval Limited, a fully guaranteed subsidiary of Grupo Aval.

The following Grupo Aval ratings were affirmed with a stable outlook:

Grupo Aval Acciones y Valores S.A.

Long-term local currency issuer rating of Baa3

Short-term local currency issuer rating of Prime-3

Long-term foreign currency issuer rating of Baa3

Short-term foreign currency issuer rating of Prime-3

Grupo Aval Limited

Long-term foreign currency senior debt ratings of Baa3

RATINGS RATIONALE

Moody's affirmed all of Grupo Aval's ratings with a stable outlook following the recent capital infusion from existing shareholders, which reduced the holding company's double leverage, as well as the repayment of debt, which also enhanced its liquidity. The affirmation and return to stable outlook also reflect the holding company's improving earnings generation capacity due to both organic growth of its operating subsidiaries and bank acquisitions particularly in Central America which will support earnings growth in the coming years.

Between December 2013 and January 2014, Grupo Aval raised COP2.4 trillion in capital from existing shareholders which the holding company used to repay COP1.4 trillion in loans from companies owned by Grupo Aval's controlling shareholder and to replenish the COP 1.1 trillion of resources previously used to capitalize Banco de Bogotá S.A. (C-/baa2 stable, Baa3 stable) to support the bank's acquisition of Grupo Financiero Reformador of Guatemala and Banco Bilbao Vizcaya Argentaria Panamá, S.A. (BBVA Panamá), both completed in December 2013.

As a result, Grupo Aval's double leverage declined from 132% as of year-end 2012 to a more adequate level of around 120%, said Moody's. Grupo Aval had issued a substantial COP2.9 trillion in debt during 2012, which had led to an increase in double leverage to an estimated 140%, up from 110% as of year-end 2011, based on Moody's estimated use of proceeds, prompting the September 2012 negative outlook. Moody's calculation of double leverage includes investments in subsidiaries at book value, loans to subsidiaries and goodwill as a percentage of shareholders' equity excluding asset revaluations. Moreover, liquid assets are expected to cover 35% of total debt through year-end 2013, up from a low of 15% as of June 2013.

Increasing dividend income from Grupo Aval's operating subsidiaries also supports the return to stable outlook. In 2013, dividend income increased by 16% to COP822 billion, mainly related to a 24% increase from Banco de Bogotá, the largest operating subsidiary that contributes 50% of total dividends. Combined dividends from Grupo Aval's other equity participations increased by 8%, particularly from Banco Popular S.A. which contributed 22% of dividend income, Banco de Occidente S.A. with 19%, and Banco Comercial AV Villas S.A. with 8%. Moody's expects dividend income to maintain healthy growth in the range of 10%-15% for the next two years as the group integrates its acquisitions and income and cost synergies materialize.

Moody's also noted that Grupo Aval's recent acquisitions will help the holding company to build earnings thus further lowering double leverage. Banco de Bogotá's acquisition of Grupo Financiero Reformador of Guatemala and BBVA Panamá will strengthen the market presence of its Central American subsidiary, BAC Credomatic, in two key growth markets in the region. The acquisition of BBVA Horizonte AFP S.A. in Colombia added notable market share to the group's pension fund administrator AFP Porvenir S.A. and thus should assure the group's dominance in the administration of mandatory pension funds and severance funds in Colombia and its position as the third-largest provider of voluntary pensions.

At the same time, Moody's highlighted Grupo Aval's acquisitive regional expansion strategy and indicated that should the group announce further significant acquisitions or increase its debt levels, these factors could trigger a negative rating action.

The principal methodology used in this rating was Global Banks published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The date of the last Credit Rating Action was 18 September 2012 when Moody's changed the outlook for all of Grupo Aval and Grupo Aval Limited's ratings to negative, from stable.

Grupo Aval is the holding company for Banco de Bogotá, Banco de Occidente, Banco Popular, Banco AV Villas and AFP Porvenir and is headquartered in Bogotá, Distrito Capital, Colombia. Grupo Aval Limited is a fully guaranteed subsidiary of Grupo Aval established for the issuance of the holding company's debt and domiciled in the Cayman Islands. As of September 2013, Grupo Aval combined with Grupo Aval Limited reported unconsolidated assets of COP27.0 trillion and shareholders' equity of COP21.2 trillion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

The ratings issued by Moody's de Mexico are opinions regarding the credit quality of securities and/or their issuers and not a recommendation to invest in any such security and/or issuer.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Felipe Carvallo
Vice President - Senior Analyst
Financial Institutions Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Maria Celina Vansetti-Hutchins
MD - Banking
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 001-888-779-5833
SUBSCRIBERS:52-55-1253-5700

Moody's affirms Grupo Aval's ratings; changes outlook to stable
No Related Data.

 

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