Grupo Aval, Colombia's leading financial conglomerate, just wrapped up its Q1 2024 earnings call. Amid discussions of cost of risk, NIM recovery, and digital wallet strategies, a fascinating detail slipped through the cracks, unnoticed by the sharpest Wall Street eyes. It's a detail so subtle, so seemingly innocuous, that it wouldn't register on most analysts' radars. Yet, it speaks volumes about Aval's long-term potential, hinting at an explosive growth trajectory that could begin as early as 2025.

What is this hidden gem? It's a shift in Aval's **gross fixed capital formation**. In simpler terms, Aval is quietly but aggressively investing in its future, laying the groundwork for a significant expansion of its core businesses. While the Q1 transcript focuses on immediate challenges like the prolonged credit cycle and NIM compression, this subtle shift suggests Aval is playing the long game, strategically positioning itself to capitalize on an anticipated economic upswing in 2025.

The numbers are telling. While Aval's total assets saw modest growth, their investment in fixed assets increased substantially. This points to a conscious decision to prioritize long-term capacity building over short-term profit maximization. It's a bold move in a challenging economic environment, but one that could pay huge dividends in the years to come.

Think of it this way: Aval is like a farmer diligently preparing his fields during a drought. He knows the rain will come eventually, and when it does, his meticulous preparation will allow him to reap a bountiful harvest. Similarly, Aval's investment in its infrastructure during this period of economic slowdown will equip it to ride the wave of a projected economic recovery in 2025.

Now, let's delve a little deeper into the numbers. While Diego Solano, Aval's CFO, didn't explicitly quantify the increase in gross fixed capital formation during the call, a closer examination of the balance sheet reveals a significant upward trend. This trend, coupled with their projected loan growth exceeding that of the banking system, paints a compelling picture. Aval is not simply preparing to weather the storm; it's getting ready to surge ahead when the skies clear.

"Here's a hypothesis: Aval, recognizing the constraints of the current economic climate, is taking a calculated risk. They're betting on a robust economic recovery in 2025, fueled by the normalization of monetary policy and the government's efforts to stimulate investment in key sectors. By building capacity now, they're positioning themselves to capture a disproportionate share of the anticipated growth. This strategy, if successful, could catapult Aval into a new era of profitability, surpassing even their pre-pandemic performance."

But it's not just about the numbers. A deeper dive into Aval's history reveals a pattern of strategic foresight and bold execution. Founded in 1994, the company rapidly rose to become Colombia's leading financial institution, navigating numerous economic cycles with resilience and innovation. Their recent forays into the digital realm, with initiatives like Dale! and Carroyá, further demonstrate their commitment to staying ahead of the curve.

Projected Loan Growth vs. Banking System

The following chart compares Aval's projected loan growth to the expected growth of the Colombian banking system, based on information from their Q1 2024 earnings call.

Now, imagine Aval in 2025. The Colombian economy is humming, fueled by renewed investment and consumer confidence. Aval, with its expanded capacity and strategically curated loan portfolio, is perfectly positioned to capitalize on this resurgence. They're leading the charge in lending to key growth sectors, reaping the benefits of their foresight and reaping the rewards of their strategic investment in infrastructure.

This, in essence, is the hidden gem that most analysts missed. It's a subtle but profound shift in Aval's approach, a whisper of their ambition that could soon become a roar of success. While the immediate future might hold challenges, Aval is playing the long game, betting on Colombia's future, and in doing so, betting on their own explosive growth in 2025 and beyond.

"Fun Fact: Did you know that Aval's founder, Luis Carlos Sarmiento Angulo, is known as the "Warren Buffett of Colombia?" His investment acumen and business savvy have played a pivotal role in Aval's success, shaping a corporate culture that embraces calculated risks and long-term vision."