Grupo Aval registers preferred shares before SEC, analysts see ADRs coming soon

Monday, March 7, 2011

Colombian financial services group Grupo Aval's 20-F registration of its preferred, non-voting shares before the SEC - a key step prior to listing ADRs - confirms analysts' view that the group's announced IPO abroad will be carried out soon.

Once the 20-F statement is approved by the SEC, the group will be required to regularly send information to the US regulator and comply with the corporate standards applicable to foreign issuers, which may include reporting under the Sarbanes-Oxley regulation, the group said in a filing sent to Colombian financial regulator Superfinanciera.

"In prior months, the group had modified their statutes to create this preferred stock, which they will register before the SEC, just like Bancolombia (NYSE: CIB) did," local brokerage Interbolsa analyst Felipe Toro told BNamericas.

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In December 2010, Grupo Aval received shareholders' approval for an IPO outside the domestic market "within an appropriate timeframe," citing favorable local and international market conditions, coupled with its strong financial performance, as the main reasons for the plan.

The group will on Thursday (Mar 10) ask shareholders to issue these preferred, non-voting shares.

"This does not constitute an IPO or any kind of offer abroad. We are working on implementing our report obligations and best practices for the market and the regulators, and as usual, we keep an eye on opportunities that may arise," Javier Díaz, Grupo Aval's legal and IR VP, told BNamericas.

Among the benefits the group would receive from an overseas IPO, analysts cite more access to capital and liquidity, increased analyst coverage and the entry of foreign investors into Grupo Aval's ownership, which would improve its corporate governance practices.

The group would also improve its positioning against its main competitors in the banking system, such as Bancolombia and Davivienda. The latter launched its IPO on the domestic market in August last year and has announced it plans to issue ADRs eventually.

Grupo Aval's main asset - the country's second biggest bank, Banco de Bogotá - is in the process of buying BAC Credomatic, a Central American banking group, for US$1.9bn. The purchase represents more than 50% of Banco de Bogotá's assets.

The group's profits increased 17.9% last year to 927bn pesos (US$490mn).

Grupo Aval's four banks represent about a third of the Colombian banking system's loans. It also owns the country's largest private pension fund manager, AFP Porvenir.