Welcome to Grupo Aval's second quarter 2025 consolidated results conference call. My name is Regina, and I will be your operator for today's call. Grupo Aval Acciones y Valores S.A., Grupo Aval, is an issuer of securities in Colombia and in the U.S. SEC. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation. Grupo Aval is also subject to the inspection and supervision of the Superintendencia Financiera de Colombia as holding company of the Aval Financial Conglomerate.
The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the International Accounting Standards Board. Unconsolidated financial information of our subsidiaries in the Colombian banking system are presented in accordance with Colombian IFRS, as reported to Superintendencia Financiera de Colombia. Details of the calculations of non-IFRS measures such as ROAA and ROAE, among others, are explained when required in this report.
This report includes forward-looking statements. In some cases, you can identify these forward-looking statements by words such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue, or the negative of these and other comparable words. Actual results and events may differ materially from those anticipated herein as a consequence of changes in general economic and business conditions, changes in interest and currency rates, and other risks described from time to time in our filings with the Registro Nacional de Valores y Emisores and the SEC. Recipients of this document are responsible for the assessment and use of the information provided herein.
Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material developments prior to our next earnings report. The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description. When applicable, in this document, we refer to billions as thousands of millions. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. With us today are Ms. María Lorena Gutiérrez Botero, Chief Executive Officer, Mr. Diego Solano, Chief Financial Officer, Ms. Paula Durán, Corporate VP of Sustainability and Strategic Projects, and Mr. Camilo Pérez, Banco de Bogotá's Chief Economist.
I will now turn the call over to Ms. María Lorena Gutiérrez Botero, Chief Executive Officer. Ms. María Lorena Gutiérrez Botero, you may begin.
Thank you very much. Good morning, everyone, and thank you for joining us for our second quarter 2025 conference call. I am here with Diego Solano, our Chief Financial Officer, Camilo Pérez, Chief Economist of Banco de Bogotá, and Paula Durán, Corporate VP of Sustainability and Strategic Projects. Let me start. During the first half of the year, we reached a net income of COP 856 billion, 1.7x higher than in the first half of 2024. Net income for the quarter was COP 494.9 billion, the highest quarter to year in two years, growing 37% over the quarter and 142% over the year. Results of our banking segment continue to indicate positive trends in core business metrics. Our net interest margin reached the 4% level for the first time in three years, with our consolidated NIM on loans at 4.5%.
This level of NIM on loans is close to that we had in the third quarter of 2022. At that time, the average Central Bank stood at 8.83%, relative to this quarter's average of 9.33%. The cost of risk for the quarter was 1.7%, and the year was 4.81%, the lowest ever seen the first quarter of 2023. Gross loans grew 3.2% year-over-year, while deposits grew 6.8%. Loan growth dynamics have been softer than we initially anticipated. However, activity has picked up in June and July. Our bank's deploy plan supports the flow during the second half of the year, particularly in commercial loans, working closely with Aval Banca de Inversión. During the quarter, our investments performed well, driving an expansion in NIM on investments. The performance of provenientes stabilization reserve positively contributes to this quarter's results.
Now, regarding the progress of our strategic priorities, I like to highlight a few areas. Our banks have continued working on improving their deposit mix toward retail funding. The share of peso-denominated deposits held by individuals improved during the quarter from 16.7% in the first quarter of this year to 18.2% in the second quarter of 2025. Regarding the payment business, we continue complementing our offer of products and services to individuals and companies through Gou Payments. Recently authorized by the Superintendencia Financiera de Colombia as a low-value payment management entity, both for instant payments and traditional payments. This will allow us to accelerate the design and go to market to value-add products for our current and potential customers. We are on the track to adopt the Central Bank instant payment system, when it starts operating in September.
We have already been certified to use keys in the centralized directory and in process to be certified for transaction services. On the synergies and efficiencies front, we conducted an analysis of the potential synergies between the processes of Grupo Aval entities. As a result, the first wave of implementation will continue through the second half of this year, focusing on seven key areas: procurement, talent attraction and selection, payroll management, property management, facility management, physical security, and physical challenge management. In the procurement front, we implemented the Procurement Synergy Center, which seeks efficiencies, economies of scale, and a more competitive and sustainable value chain. This center will operate on a spending base of COP 4.3 trillion, 4,200 contracts, and 16,000 payers.
We expect to capture the efficiencies that will result in initial savings more than 10% of a COP 2.1 trillion manageable spending base and a reduction in contracting times of 40%. In talent attraction and selection, we will build a talent management center for Grupo Aval, which will allow us to attract the best talent, accelerate onboarding processes, and promote internal mobility. As a significant milestone, next month, we will launch a digital employment platform that will become the largest job opportunity portal in the country. In payroll management, centralization will not only generate operational efficiencies but also allow us to deploy people analytic practices across the board. This will give us an integrated view of talent, facilitate the identification of trends at the corporate level, and improve data-driven decision making.
With this, we will be able to anticipate risks, such as talent attrition, reskilling and upskilling needs, or drops in productivity, among others. This has already been implemented by Aval Valor Compartido for Banco de Bogotá and will be rolled out during the year to our other three Colombian banks. Now, I will invite Paula to go over our ESG achievements for this quarter. Paula?
Thank you, María Lorena. This quarter, Grupo Aval made significant progress in advancing our ESG agenda. We updated our double materiality assessment with input from 280 stakeholders identifying 10 priority topics, including economic development, cybersecurity, innovation, sustainable finance, corporate governance, social impact, and climate change. Annual goals in these areas are now under review to ensure full alignment with our strategy. In terms of corporate governance, we had significant developments. For the first time, we held a joint meeting with the Board of Directors of Grupo Aval and its subsidiaries. The event brought together more than 130 directors for two days in Mexico to address global and local challenges, share perspectives, and foster collaboration.
A key milestone during the event was the launch of the Aval Board of Directors Guidelines, a guiding framework for good governance, setting principles regarding the roles of board members, effective and efficient board management, and board evaluation. We also updated our corporate policies, guidelines, and codes, aligning them with international standards and best practices in corporate governance. These updates reinforce our compliance with Colombia's regulatory framework and reaffirm our commitment to ethical, transparent, and sustainable management. They also send clear messages to our entities regarding the minimum standards expected in their ESG management. In environment, our entities advanced in implementing the TCFD framework supported by global consultancy, ERM, enabling further climate risk management and target setting. We also expanded sustainable mobility initiatives, with over 5,700 employees adopting low-emission transport, avoiding 300 tons of CO2 emissions. In terms of social impact, we foster collaborative action in the municipality of Amalfi.
Corficolombiana and Organización Pajonales joined efforts to promote sustainable tourism, education, and sports, while Banco de Bogotá, the financial education initiative, positively impacting nearly 500 community members. In addition, we continue delivering on our commitments under the Misión La Guajira initiative, with six new water purification plants, reaching a total of 81 communities now benefiting from social energy solutions. We also enabled free internet zones and announced new strategic partnerships with Claro Colombia, providing free connectivity to over 70 communities, the government of La Guajira National Civil Registry, and UNICEF, among others. This quarter, we participated in WeTrade, the largest diversity and inclusion fair in Latin America, offering more than 1,000 job opportunities and contributing to the academic agenda with the participation of Grupo Aval leaders and HR teams from our entities.
Our entities were also recognized among the top 10 of the 2025 ranking of inclusive organizations in Latin America by the Chamber of Diversity. We remain committed to ensuring that ESG is not just a component of our strategy, but a driver of long-term value creation for our stakeholders. Thanks.
Thank you, Paula. Now, on the macro side, let me share some relevant developments during this quarter. High-frequency data indicates that in the second quarter of the year, the Colombian economy continued to perform positively, driven by increased household demand. The main sectors driving growth remain public administration, entertainment, and commerce. For this year, we expect the economy to grow by 2.7%. Inflation reached 4.9% in July 2025, driven by service prices as inflation is still high in rents and other services are pressured by the elevated increase in minimum wage. We estimate that inflation will close this year around 4.9%. Despite the positive inflation outlook, the country's fiscal outlook was driven by the central bank's policy of raising rates. In July, the central bank opted to keep rates unchanged at 9.25%, maintaining a cautious stance due to both external and internal risks.
We expect the central bank's rate to end 2025 at 8.5%. However, recent information could imply an upward pressure on this figure. The biggest challenge facing the economy is fiscal sustainability. In June, the government triggered the escape clause of the fiscal rule and raised its fiscal deficit estimate to 7.1% for this year, 200 basis points above the original target that was 5.1%. Our estimates point towards a fiscal deficit closer to 8% of GDP. We anticipate further short-term rates to stem from the Ministry of Finance liability management operations and underlying pressures on long-term interest rates to unfold in the upcoming months. Despite rising political noise in the pre-election year, we remain confident in Colombia's economic resilience and encourage the business sector to stay focused on executing their strategies. Camilo, welcome. Camilo will now elaborate on our economic outlook.
Thank you, María . Good morning. In the second quarter, household consumption continued to be the main driver of growth for the Colombian economy. Despite growing domestic and external uncertainty, consumer confidence reached its highest level in three years, a situation that has supported domestic demand. This increase in household confidence has been supported by the strength of the labor market, where the unemployment rate reached its lowest level in almost 20 years. Furthermore, alternative sources of income have strengthened. Remittances, which are at a record high in the second quarter, while coffee and tourism exports continue to rise. In addition to higher incomes, household demand is now being leveraged by credit, which for the first time since 2023, grew during the second quarter. In this context, the best-performing economic sectors continue to be those most dependent on private consumption, such as commerce, entertainment, transportation, lodging, manufacturing, food services, and finance.
Meanwhile, agricultural supply continued to rise due to lower input prices and favorable weather conditions. In fact, all other sectors, with the exception of mining, construction, public services, experienced an outlook. In the case of mining and construction, further [inaudible] of public policy key to both sectors, explain in part their weak performance. While construction investment in housing and infrastructure is lagging, in the second quarter, imports of machinery and equipment, as well as corporate loans, continued to rise, suggesting that the Colombian businesses, amid high domestic demand, have modestly expanded their investment plans. Given the favorable context but recognizing global risks and the uncertainty leading up to the election next year, economic growth of 2.7% is expected for 2025. Close to potential level and higher than those recorded in 2023 and 2024.
Turning to prices, the disinflationary process resumed in the second quarter, as inflation fell from 5.1%- 4.8% between March and June, its lowest level since October 2021. In July, inflation picked up to 4.9%, and no significant gains are expected by the end of the year, which is expected to end slightly below 5%. Once again, outside the target range set by the Central Bank. Meanwhile, thanks to gains in inflation and expectations, as well as a more compliant and global environment towards emerging markets, the central bank cut its interest rates by 25 basis points to 9.75% in April. The cumulative gains in inflation and favorable global financial conditions are expected to give Colombia's central bank space to cut interest rates to around 8.50% by the end of the year.
Nevertheless, recent inflation data and higher upward pressure on and the central bank's room for rate cuts is now broader due to persistent fiscal challenges. In June, with the suspension of the fiscal rule, the government revised its assumed fiscal deficit of 2025 from 5.1%- 7.1% of GDP, and for 2026 from 4.3%- 6.2% of GDP, the latter depending on the approval of a tax reform. Given this challenging outlook, Moody's and Standard & Poor's lowered the country's credit rating. The most significant decision came from Standard & Poor's, which not only assigned the country the lowest credit rating of the three rating agencies, the BB, but also maintained its negative outlook. Despite the complex fiscal stance between March and June, the exchange rate went from COP 4,181- COP 4,102 pesos per U.S. dollar, following the global weakening of the greenback.
In any case, the Colombian peso appreciated against the U.S. dollar by only 2%, compared to an average of 6.5% for major Latin American countries. For the remainder of the year, the exchange rate will be volatile with competing forces. As the dollar remains weak globally, the country risk premium could be affected by fiscal and electoral pressures. Furthermore, with a widening external deficit, the year-end exchange rate of around COP 4,200 per U.S. dollar is expected. Specifically, the current account deficit is forecasted to fall from 1.8% of GDP in 2024 to 3.6% of GDP in 2025, due to a stronger recovery in imports and exports, both in goods and services, where the terms of trade will be affected by lower commodity prices. This wraps up the macroeconomic outlook. Thank you. Back to you, María Lorena.
Thank you, Camilo. Given that economic outlook, let me say that we are pleased to report continued signs of recovery in the Colombian banking industry. Loan demand has strengthened, with growth in real terms turning positive for the first time in nearly two years. Cost of risk continues to trend downward, supporting improved profitability across the system. Only six out of 29 banks reported net losses as of May 2025 compared to 11 banks in the same period last year, highlighting a sustained improvement in financial performance. Now, I would like to pass the call to Diego, who will give you the financial and our results. Diego.
Thank you, María Lorena. I will start on page nine and page 10 with the two charts showing growth rates and quality portfolio relative to the rest of the Colombian banking system. For comparative reasons, these are unconsolidated figures under Colombian IFRS as published by the Superintendencia Financiera de Colombia. Starting on page nine, in the four months ending on May 2025, commercial loans and mortgages for the system grew 1.3% and 4.6% in real terms, while consumer loans contracted 5.1% in real terms. Year- on- year, Aval banks have gained 112 basis points of market share in consumer loans, 206 basis points in mortgages, and lost 109 basis points in commercial loans. This yielded year on year 10 basis points lower market share in total loans. Our performance in commercial loans was driven by aggressive price competition in the market.
The past two months, loans grew 1.7% in the system. Even though dynamics continued to show signs of recovery, real growth was stagnant considering the 1.7% quarterly inflation. Mortgages grew 2.3% and commercial loans 1.6% in annual terms over the quarter, while consumer loans returned to growth with 1.3% increase for the quarter. On page 10, loan quality for both the system and the Aval banks showed an improvement during the quarter for all loan categories. Our banks continue to exhibit better or equal loan portfolio quality to the system in all main categories.
I will now move to the consolidated results of Grupo Aval under IFRS. On page 11, assets grew 6% over the year and 1.8% over the quarter to 376 trillion COP. Those loans, which account for 57% of our assets, reached 199.4 trillion COP, growing 3.2% year on year and 0.3% over the quarter. Retail loans have driven our growth.
Consumer loans grew 6% year-on-year and 1.5% in the quarter, with payroll loans previously covering increases 4.8% year-on-year and 0.6% in the quarter. Personal loans growing at 4.2% year-on-year and 1% over the quarter. Auto loans growing 3.9% year-on-year and contracting 0.9% during the quarter, and credit cards contracting 4.7% year-on-year and 0.6% during the quarter. Mortgages, the second part of our retail loans, continue to be underweighted with 20% year-on-year and 2.8% during the quarter. Finally, commercial loans expanded 23% year-on-year and contracted 0.3% over the quarter. Our dynamics during the quarter reflect aggressive price competition with some of our peers. We expect 2025 loan growth to be close to 7%.
On page 12, we present the evolution of funding and deposits. Total funding increased 6.2% year-on-year and 1.5% in the quarter. Deposits that account for three-fourths of our funding grew 6.8% year-on-year and 1.9% quarter-on-quarter. Our deposits to net loans ratio closed at 110%. This page is representing the mission of our total capitalization, our Tier 2 and the capital efficiency ratio of our banks. Our total equity increased 3.4% over the quarter and 6.2% year-on-year, while attributed equity increased 3.4% over the quarter and 6.2% year-on-year. Total solvency and Tier 1 ratio evidence a slight increase in most of our banks. On page 14, we present our yield on loans, cost of funds, spreads, and NIMs.
Total NIM increased 52 basis points to 4% quarter to 4%, 52 basis points growth over the quarter, mainly driven by an improvement in NIM investments to 2.4%. Our consolidated NIM loans expanded 20 basis points year-on-year and 10 basis points quarter-on-quarter to 4.5%. This incorporates a 10 basis points year-on-year expansion of NIM retail loans to 6% and a 34 basis points year-on-year contraction of NIM on commercial loans to 3.3%. Focusing on our banking segment. NIM loans of our banking segment grew 9 basis points in the quarter to 5%. This is operating a 10 basis points increase in NIM retail loans to 6.5% and 6 basis points increase on commercial loans to 3.9% during the quarter.
The total NIM of our banking segment expanded 38 basis points over the quarter to 4.6%, due to the same dynamics that affected our consolidated NIM. On a consolidated basis, the average yield on loans for the quarter increased 4 basis points quarter-on-quarter to 11.7%, while the average three-month IBR decreased 12 basis points to 9.92%. Consolidated cost of funds was materially stable, falling 3 basis points quarter-on-quarter to 6.8%. Finally, by the previous results, the central bank stood flat at nine and a quarter during the second quarter. With this slow rate cuts implying longer adjustment periods than previously anticipated in this scenario, our NIM will continue to expand, though at a slower pace. On page 15 to page 16, we present our loan portfolio quality ratios. Starting on page 15. Loan portfolio quality ratios further strengthened during the quarter.
PDL metrics continue to improve in all categories. 30-day PDL formation for the quarter was the lowest since second quarter 2022, while 90-day PDL formation reached the lowest level of the last two years. 30-day PDLs were 4.81%, a 37 basis points improvement over three months, and 99 basis points improvement over 12 months. 90-day PDLs were 3.51%, 23 basis points improvement on the quarter, and 73 basis points improvement over 12 months. Commercial 30-day PDLs were 4.37%, a 41 basis points improvement quarter-on-quarter, and 80 basis points improvement year-on-year. 90-day PDLs were 3.87%, a 90 basis points improvement over the quarter, and 63 basis points improvement over the year. Consumer 30-day PDLs improved 39 basis points on the quarter to 5.07%, while 90-day PDLs decreased 30 basis points to 2.84%.
Mortgage 30-day PDLs and 90-day PDLs improved 7 basis points and 10 basis points respectively over the quarter. Finally, the ratio of charge-offs to average 90-day PDLs was 0.85x . On page 16, the share of our portfolio classified as Stage 1 remains stable at 8.5% while Stage 3 fell for the third consecutive quarter to 6.1%, driven by improvements across all portfolios. As a result, average measured allowance for Stage 2 and Stage 3 as a percentage of Stage 2 and Stage 3 were 31.5% at end of quarter. On page 17, cost of risk in our recoveries continues to show the improvement in the quality of our portfolio. This decreased 31 basis points to 1.7%. We expect 2025 cost of risk to be in the 1.95% area.
Cost of risk in our core commercial loans decreased 36 basis points to 0.4% for the quarter, and cost of risk net of recovery for consumer loans decreased 37 basis points to 4.2%. The cost of risk of credit cards and auto loans improved quarter-on-quarter. On page 18, we present net fees and other income. Fee income grew 3.5% year-on-year and slightly increased 0.3% quarter-on-quarter. Net fee income increased 1% and 1.1% respectively over these periods. A recent report from the non-financial sector was around 80% of that recorded in second quarter 2024, due to lower contribution from the energy and gas to the infrastructure sectors.
Finally, at the bottom of the page, the quarter-on-quarter decrease in our operating income is mainly driven by the seasonally high income from dividends in the first quarter, lower contribution from derivatives and FX, and OCI realizations from Colombian Government Bond exchanges that position our portfolio with higher yields going forward. These were partially offset by stronger other operating. On page 19, we present our efficiency ratios. Total expense increased 2.4% quarter-on-quarter and 9.2% year-on-year. General and administrative expenses increased slightly by 0.8% quarter-on-quarter and 4.4% year-on-year, with operating taxes and deposit insurance accounting for 34% of this category. Cost to assets for the quarter were 2.8%, increasing 3 basis points quarter-on-quarter and 6 basis points year-on-year. Our quarterly cost income slightly deteriorated to 52% over the quarter.
Finally, on page 20, we present our net income and profitability ratios. Attributed net income for the quarter was COP 195 billion, or COP 20.8 per share, increasing 36.9% relative to first quarter 2025, and being the highest in the last 12 quarters. Our return on average assets and our return on average equity for the quarter was 1.1% and 11.3% respectively. I will now summarize our general guidance year and out through this part of the presentation.
We expect our 2025 return on average equity to be in the 10.5% area. [inaudible] , with commercial loans growing in the 5% area, and retail loans growing to the 9% area. Our consolidated NIM in the 4% area, with loan loans in the 4.5% area. [inaudible] in the 4.7% area, with NIM on loans in the 5.3% area. Cost of risk net recoveries at the 1.95% area. Cost to assets in the [inaudible] , the income from the non-financial sector of 90% as of 2024, and income ratio at the 21% area.
Okay, thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts on Colombia and Grupo Aval in this year 2025. Our year-to-date performance has been largely in line with our projections. Net income has been supported by a positive trend in cost of risk, a gradual improvement in our NIM, and controlled expenses. However, the speed at which our NIM on loans has recovered is still modest, driven by high real central banking [inaudible] rates, changes in regulations that forced lower interest rate caps for consumer loans, and an intense price competition from high-quality corporate clients. We are actively working to adapt to this environment to improve our margins under this higher for longer monetary policy. That said, the progress in our financial diversification efforts is yielding results.
Three of our four banks have shifted their commercial focus toward higher yielding and faster breakeven products such as personal loans and credit cards. At the same time, we continue working on shifting our NIM towards lower cost and unstable deposits. Although loan growth has been modest, we are already seeing a change in trend, which we expect to consolidate during the second half of the year, especially in commercial loans. We are encouraged by the solid results so far, which support our constructive view and trend in net income and return on equity. We remain focused on sustaining double-digit profitability throughout the remainder of the year. With this, we are now open for questions.
Thank you. We will now begin the question- and- answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, press star then one again. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Again, if you have a question, please press star then one on your touchtone phone. Our first question will come from the line of Brian Flores with Citibank. Please go ahead. That question has been withdrawn. Our next question will come from the line of Daniel Mora with Credicorp Capital. Please go ahead.
Hi. Good morning, and thank you for the presentation. I have, if I may, three questions. The first one is regarding the cost of risk. In this quarter, it was quite low, but was explained by high recovery rather than by lower provisions. Can you provide further color on this performance? Do you see this as a trend that can be repeated in the coming quarters or should be considered a one-off in this particular quarter? That will be my first question. The second one is regarding other income. It had a solid performance, but I would like to understand what was the reason behind this number. It was the other income inside the total other operating income. Thank you so much. The third one is regarding NIM.
Given the lower reduction of the monetary policy rate, how do you see the NIM evolving not only in 2025 but in 2026? Do you expect the recovery cycle of the banks of about two to three longer than initially expected? Thank you so much.
Thanks for the questions, and let me try to take them in order, starting with perhaps the most important one regarding NIM. As María Lorena mentioned in her closing remarks, we are actively focusing on extending NIM beyond what happens with the monetary cycle. That is why we are changing our mix both on the deposit side and on the loan side. However, what we have seen in Colombia as well has been some distortion that has been implied by changes in regulation. It is tough to have a precise number of what the implication of the changes in the formula for interest rate caps has been, but there could be a discussion between 300 basis points- 400 basis points compared to the previous formula for the consumer side. That has pressed numbers lower and has an implication in growth for consumer loans.
On the other hand, on the corporate side, on the commercial side, we included a new parting graph on the end here to try to show what is going on in the Colombian market. It is we are having, as expected, NIM expansion on the consumer side as CASA funds goes down. On the commercial side, the lack of growth has forced a very intense price competition for the highest quality loans. As we have emphasized through a number of our previous calls, we are very disciplined in our pricing to make sure that we have profitable growth moving forward, and that is the reason that has driven lower growth on the consumer side than we might have desired in the past. However, when you look at the numbers, the trend has changed.
Late May, June, and July, we are having a better behavior in the market that makes us positive on how things will evolve. To wrap up what is going on with NIM, what we are seeing is we expect NIM on the commercial side to start to pick up again to levels closer to where Colombia should be operating at. We expect to see the improvement on the consumer side to continue as rates go down. This is slower than what we could have anticipated or anybody in Colombia a year ago, but monetary policy has been quite slow. I hope I did not expand too much on that, but we are positive, and that is the case for our guidance moving forward. On the cost of risk, you are right, this was a positive quarter on the cost of risk side.
However, we have stuck to the guidance of 1.95% that we had given in the past, and the guidance for ROE numbers has not. This is positive. It does not change our view on what the numbers will look like. Finally, on other income, we have a number of different items going there. Some of those have to do with recoveries of some controversies we had that implied some positive income. Some of those have offsets on the higher expenses that you saw during this quarter. All in all, we are stuck to our overall guidance. Perhaps the only change is a slightly slower loan growth and a slightly more positive non-financial, but overall, this is the same guidance that we gave on the last call.
Our next question will come from the line of Brian Flores with Citi. Please go ahead.
Hi, team. Thank you for the opportunity to ask questions. I have a question on trading assets because on your balance sheet, it is clear that they are gaining relevance year-over-year, quarter-over-quarter. Just wanted to ask you can share your thoughts. Are you taking a tactical advantage here of certain market opportunities? Is this a strategy to enhance yields? Just to want to understand not only what is being achieved, because I think as you see, trading is benefiting results. But also how you're managing risk here and the volatility on the segment. A second maybe follow-up is if you could repeat the guidance. I'm a bit slow here in typing, so if you could repeat, it would be great. Thank you.
Okay. Regarding trading assets, there's two things going on. One is we are indeed taking advantage from the exchanges of bonds that the Colombian government has done during this year. What that does is we give in bonds that already had OCI that reduced the price of those bonds in our book, but that we take. Some of what you see of our strategy there, thinking of expanding NIM, is we are refreshing those portfolios. The other piece that you might see there is we've been working overtime expanding our treasury business for clients, and some of the growth that you see on the trading assets on the trading book have an offset with positions that we've taken with clients. So when you take into consideration all those positions from the risk management that I think was your second question, that is taken care in that way.
We're not actually taking more risk on our portfolio, even though you're seeing some growth because of that treasury business with our customers.
Once again, for any questions, simply press star followed by the number one on your telephone keypad.
I'm sorry. I think I didn't repeat guidance for Brian. I apologize for that. Brian, the ROAE is in the 10.5% area. It's in the middle of the range that we have given out last time, the 10%-11%. That is building on loan growth in the 7% area, with commercial loans growing in the 5% area, and consumer or retail loans in the 9% area. NIM consolidating in the 4% area, NIM on loans in the 4.5%. If you only look at the banking segment, NIM 4.7% area and NIM on loans 5.3% area. Cost of risk, as I mentioned before, 1.95% area. Cost to assets, 2.75% area. Income from the non-financial sector, 90% of that for 2024. The income ratio in the 21% area.
Super clear. Thank you.
Thank you.
Ladies and gentlemen, that will conclude our call for today. We thank you all for joining. You may now disconnect your lines.