Grupo Aval Q2 2026 Earnings Call Summary

1Key Financial Results and Metrics

Net Income: COP 577 billion, up 17% year-over-year, marking the highest quarterly result since March 2022.

Return on Assets (ROA): 1.1%

Return on Average Equity (ROAE): 12.7%

Loan Growth: 2.1% quarter-over-quarter, with total loans at COP 198 trillion.

Deposits: Increased by 2.1% to COP 222 trillion, outpacing loan growth.

Net Interest Margin (NIM): Improved to 5.5%, driven by strong investment portfolio performance.

Cost of Risk: Stable at 1.49%, indicating controlled credit quality.

2Strategic Updates and Business Highlights

Retail Banking Expansion: Completed the transfer of retail banking assets from Banco Itaú, adding over 250,000 customers and enhancing Banco de Bogota's retail presence.

Technology Initiatives: Focus on digital transformation through four pillars: customer knowledge (Aval 360), digital product acceleration, data-driven decision-making (Delos), and cloud infrastructure (Aurora).

Partnerships: Collaboration with Visa during the FIFA World Cup 2026, engaging over 750,000 participants.

Corficolombiana Performance: Strong contributions from fixed income and equity markets, with energy and infrastructure revenues also up.

3Forward Guidance and Outlook

Loan Growth Expectations: Anticipated growth of 10.5% in commercial loans, 8% in retail loans, and 14% in personal loans, including contributions from the Itaú transaction.

NIM Projections: Expected to stabilize around 4.2%, with banking segment NIM at 4.9%.

Cost of Risk Guidance: Projected at 1.9% for the year.

ROAE Target: Aiming for 9.25% for 2026, reflecting a cautious outlook for the second half of the year.

4Challenges and Points of Concern

Economic Environment: Colombia faces elevated inflation (6.0% as of July) and potential fiscal challenges, with a projected fiscal deficit of 6.7% of GDP.

Interest Rate Pressures: The Central Bank's policy rate remains high at 12%, with potential increases expected, which could pressure margins.

Local Tax Concerns: Proposed local tax increases in Bogotá could add operational burdens, with estimates suggesting an additional COP 500 billion in taxes for the financial sector.

Asset Quality Risks: While current metrics are stable, potential spikes in delinquency rates are anticipated due to economic pressures from the earthquake and El Niño phenomenon.

5Notable Q&A Insights

Tax Rate Expectations: Management expressed hope for no new taxes but acknowledged concerns over local tax increases in Bogotá.

Asset Quality Outlook: Management remains optimistic about stability in asset quality, despite acknowledging potential short-term spikes due to external factors.

NIM Concerns: The management is cautious about margin pressures in the context of rising interest rates but remains positive about long-term growth prospects.

Consumer Loan Growth: The shift in strategy to reduce reliance on payroll lending is aimed at improving average interest rates and gaining market share in higher-growth segments like personal loans and credit cards. Overall, Grupo Aval's Q2 2026 results reflect a solid performance amidst a challenging economic backdrop, with strategic initiatives aimed at enhancing growth and profitability while navigating potential risks.