Colombia Diversified Banks: 2Q26 Playbook: Solid fundamentals, fiscal risks remain

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Colombia Diversified Banks: 2Q26 Playbook: Solid fundamentals, fiscal risks remain

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16 Jul 2026 17:00:00 ET │ 20 pages

Colombia Diversified Banks

2Q26 Playbook: Solid fundamentals, fiscal risks remain

CITI'S TAKE

Brian Flores, CFA AC

We maintain our Neutral stance on Colombian banks, as potential fiscal +55-11-4009-2842

reforms and a challenging macro environment limit visibility. The threat of a luis.brian.flores@citi.com

tax surcharge could resurface during fiscal discussions, clouding earnings

visibility and capping potential ROE improvements and cost of equity Gustavo Schroden

compressions. Softer origination trends also suggest a prudent, but less +55-11-4009-5858

profitable, approach from the banks in the near term. We reiterate our gustavo.schroden@citi.com

Neutral ratings on Aval (TP COP$900) and Grupo Cibest (TP COP$70,000).

While we raise our Davivienda TP to COP$34,000 on better execution, we Arnon Shirazi, CFA

believe the positive outlook is now largely priced into the stock. +55-11-4009-7906

arnon.shirazi@citi.com

Neutral Stance on Colombian Banks Amid Headwinds — We remain neutral on

Colombian banks due to significant headwinds. Potential fiscal reform could

reintroduce higher taxes, creating uncertainty for earnings. Softer loan origination

trends suggest a more cautious approach is prudent amid high inflation and rates.

We see limited room for strong ROE improvement, reinforcing our neutral view on

the sector.

Aval: Balanced Risk/Reward, Neutral Rating Reiterated — We reiterate our Neutral

rating and COP$900 target price for Aval. The bank's net liability exposure presents

a challenge in the current high-rate environment. However, cautious credit

management and cost discipline should support results. We find a well-balanced