Grupo Aval Model Update

Research evidence excerpt

Grupo Aval Model Update

Yuri R Fernandes AC Latin America Equity Research

(1-212) 622-3400 20 May 2026 J P M O R G A N

yuri.r.fernandes@jpmorgan.com

Investment Thesis, Valuation and Risks

Grupo Aval (Underweight; Price Target: Col$700.00)

Investment Thesis

We like Aval’s leadership position in Colombia and diversified business model focused on

selected products, segments, and geographic areas. On the negative side, macro and political

challenges remain high in Colombia, while asset quality has been deteriorating. Aval has an

overall relatively safer loan book given higher exposure to payroll loans but also lower

coverage ratio. Additionally, low ROE generation may imply softer growth going forward,

and we remain cautious on its digital strategy (e.g., operating with different brands and some

of them ranking not as good as peers). All in all, though current valuations are discounted,

we don’t see catalysts for a potential re-rating, and we believe Colombian banks will

underperform the region, hence our Underweight rating.

Valuation

Our December 2026 price target is COP 700 per share, which represents 0.9x 2026E book

value and 6.3x 2027E earnings.

Our Dec 2026 price target is based on a two-stage residual income model, which values a

company’s excess returns (expected ROE minus cost of equity multiplied by average

shareholders’ equity) over a 10-year period (2027-2036) and a terminal period (beyond

2036). These excess results are discounted back to year-end 2026 at the company’s

estimated cost of equity in order to determine the 2026 year-end fair value.

For Aval, key assumptions used in our residual income model include a long-term ROE of

15.0%, a cost of equity of 16.5%, and a perpetual growth rate of 6.0%.

Risks to Rating and Price Target