GRUPO AVAL ACCIONES Y VALORES S.A. (AVAL): what the price assumes

Generated: 2026-07-24 · Exported: 2026-07-25 · Source: https://boothcheck.com/report/AVAL

Headline

Field	Value
Ticker	AVAL
Company	GRUPO AVAL ACCIONES Y VALORES S.A.
Sector / Industry	Financial Services
Current price	$4.92/sh

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	financials
Return on equity needed	9.3%
Return on equity now	5.8%
ROE gap	+3.5pp
Price-to-book	1.15x

Solve inputs: computed at a 8.6% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2024); each 1pp of cost of equity moves the implied ROE ~1.2pp.

How unusual the bet is: within-range

Reference	Value
vs own history	-0.69σ
cohort percentile (of 162 peers)	27
sustained it ~10 years at this level	78%
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and relative-multiple value, while earnings-power lands below the price. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	1.04x	3	expensive
Earnings	2.24x	1	expensive
Relative	1.07x	1	expensive
Growth	1.29x	3	expensive

Families that justify the price: Asset, Relative Families that call it expensive: Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.4%); the inversion above states its own rate.

Per-Model Detail (n=8)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	—	—	no	—
Bank Fair Value (P/TBV)	—	$2.83	1.74x	yes	TBVPS $5.65 × 0.50x (ROE (TTM) 6.6% / CoE 9.3%, g=4.3% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption))
Relative Valuation	Relative	$4.60	1.07x	yes	P/E 10x (static sector reference · 2026-04), scenarios: 8.4x / 10.0x / 11.6x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDM	Growth	$9.62	0.51x	yes	DPS $0.24, g=6.6% (sustainable: ROE (TTM) × retention; not the terminal-growth assumption), ke=9.3%
Two-Stage DDM	Growth	$2.91	1.69x	yes	Stage 1: -5% for 5yr, Stage 2: 3.5% perpetual
Simple Excess Return	Asset	$4.75	1.04x	yes	BV/sh $6.65, ROE (TTM) 6.6%, ke 9.3%
Two-Stage Excess Return	Asset	$3.96	1.24x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$3.82	1.29x	yes	Rev $11.1B, growth 6% (input: historical growth; tapered), Terminal P/S: 0.4x / 0.5x / 0.6x (bear / base = today's held flat / bull, cap 8x)
Growth-Adjusted P/E	Relative	—	—	no	—
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	—	—	no	—
Graham Number	Asset	$5.52	0.89x	yes	√(22.5 × EPS $0.20 × BVPS $6.65) — Graham's conservative floor
EV/EBITDA Relative	Relative	—	—	no	—
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	$0.17	28.94x	yes	EPS $0.20 × (8.5 + 2×-5.0%) × (4.4 / 5.3%) (excluded from median)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	—	—	no	—
PEG Fair Value	Relative	—	—	no	—
Earnings Yield	Earnings	$2.20	2.24x	yes	EPS $0.20 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• A holding company stacked above four Colombian banks and a merchant bank, Grupo Aval earned Ps 336.6 billion attributable in the first quarter of 2026 after a new national equity tax took Ps 210.1 billion straight off the line.

• The distance that matters sits between two numbers: today's price asks the group to sustain a return on equity near 9.3%, while the book has recently been producing about 5.8%.

• The next visible test is the Itaú Colombia retail book, cleared by the regulator on June 16, 2026, which moves roughly 267,000 customers and about COP 6.5 trillion of consumer and mortgage loans onto Banco de Bogotá ahead of second-quarter results on August 19, 2026.

Bull Case

Itaú spent years building a consumer bank in Colombia, then decided it would rather not. What it walked away from now belongs to Aval's largest subsidiary. Colombia's financial regulator authorized the transfer of Itaú's Colombian retail assets, liabilities and contracts on June 16, 2026, moving roughly 267,000 customers, about COP 6.5 trillion of consumer and mortgage loans and about COP 4.1 trillion of deposits to Banco de Bogotá. Acquiring a seasoned retail book is a different exercise from originating one. The borrowers have payment histories, the accounts are already open, and the funding arrives attached to the assets rather than needing to be bid for in the deposit market.

That matters because the funding side is already running ahead. Customer deposits reached Ps 216.8 trillion at the end of the first quarter, up 11.7% on the year, while gross loans grew 6.0% to Ps 193.7 trillion. A bank whose deposits are outgrowing its loan book by five percentage points is a bank with room to lend, and management has told investors it expects roughly 9.5% loan growth for 2026, with the retail side expanding around 14%.

Credit is improving underneath that. Loans more than 90 days past due fell to 3.1% of the gross book from 3.3% the prior quarter, and the net cost of risk of 1.8% was 36 basis points better than a year earlier. Colombian consumer credit went through a genuinely painful cycle; this is what the far side of one looks like, with delinquency receding while the loan book grows again.

The spread story is turning at the same time. Total net interest margin rose to 3.3% in the quarter from 3.0%, and management guided consolidated net interest margin toward roughly 3.9% for the full year as liabilities reprice down faster than assets. For a bank, that is the lever with the most torque: nothing about the balance sheet has to change for the earnings to move.

Which brings the argument to the tax. Reported return on average equity for the quarter was 7.4%, and management stated it would have been 12.0% without the Colombian equity tax, which lifted operating expenses by Ps 311.7 billion in the period. The bull reading is that the franchise is already earning close to a double-digit return on its capital and is handing a slice of it to the Colombian treasury. Fiscal policy is not a competitive problem, and it is not permanent in the way a lost customer is.

The honest concession is that the macro backdrop is not helping: management's own economist put 2026 Colombian growth near 2.4% with inflation around 6.2%, in an election year. The counter is that Aval's full-year plan already carries that. Guidance calls for a return on equity of about 9.25% for 2026 including roughly 1.2 percentage points of equity-tax drag. The bank is not asking for a better country in order to hit its number. It is asking to execute an acquisition it has already been cleared to make, in a credit cycle that is already turning its way.

Bear Case

Start with what the buyer is signing up for. At today's price the market is underwriting a sustained return on equity of roughly 9.3%, and the group has recently been earning about 5.8% on its book. That is not a rounding error. It is roughly three and a half percentage points of profitability that has to appear and then stay, and the premium to book value the shares carry rests entirely on it. If the return settles back toward what has actually been demonstrated, the multiple the shares support compresses toward book rather than above it, and the arithmetic does that work quickly on a bank because the denominator is the equity itself.

The first problem with getting there is that the equity tax is not a single quarter's inconvenience. Management folded it into full-year guidance, costing roughly 1.2 percentage points of return on equity across 2026 and cutting the internal target from the prior 10.5% plan. A tax that has to be guided for is a tax that behaves like an operating cost, and Colombia's fiscal position is not obviously the sort that produces one-time levies exactly once.

The second is capital. The group closed the quarter with a tangible equity ratio of 8.6%. That is a thin cushion for a holding company about to absorb a retail loan portfolio, and it constrains the two things a bear worries about most: the ability to grow the balance sheet without raising equity, and the ability to keep paying out to the parent. Aval itself does not make loans. It collects dividends from Banco de Bogotá, Banco de Occidente, Banco Popular, Banco AV Villas and Corficolombiana, and minority holders in those subsidiaries take their share before the parent sees it. Capital that gets trapped one level down does nothing for the holder of the ADR.

Then there is the composition of the growth. The retail book is guided to expand around 14% this year in an economy management expects to grow about 2.4%, with inflation near 6.2% and a national election in between. Consumer lending that outruns nominal income growth by that margin has a way of producing its provisions on a two-year lag. The current numbers already carry a hint of it: net charge-offs ran at 2.1% of average gross loans in the quarter while the net cost of risk was 1.8%. Losses are being taken slightly faster than they are being provided for, which flatters reported earnings in the near term and leaves less reserve behind if the retail push disappoints.

The Itaú transaction cuts both ways for the same reason. It buys 267,000 customers of a bank that concluded Colombian consumer banking was not worth staying in. Integration risk on a portfolio transfer is mostly attrition risk: the customers did not choose Banco de Bogotá, and the ones with the best credit have the most options.

Finally, the valuation methods are not uniformly comfortable. The asset-value and peer-multiple lenses sit essentially at the price. But the earnings-power method leaves the price about 2.24 times its central estimate, which is the same statement made a different way: capitalize what this bank currently earns, rather than what it is guided to earn, and the shares are worth a fraction of what they cost. The whole case for the current price is that current earnings are the wrong input.

Valuation

At $4.92, the shares change hands at about 1.15 times the group's book equity, and the specific thing that premium is paying for can be stated in one line: a sustained return on equity of roughly 9.3%, against the 5.8% recently earned. Management's own full-year plan calls for about 9.25%. So the price is not asking for heroics. It is asking that this year's plan become the run rate rather than the high-water mark, and that it hold there once the Colombian equity tax rolls off and the acquired retail book is absorbed.

Historically that has been a reasonable ask rather than a stretch. Among firms earning this kind of return, close to four in five have held it for a decade, and the level sits inside what Aval's own record supports. What the price does not leave is much reward for it going right, since a bank earning its cost of capital and no more is worth roughly its book, and the shares already sit slightly above.

The methods split in a way that is characteristic of a value name rather than a growth one. The asset-value methods land almost exactly on the price, about 1.04 times it. The peer-multiple read is similar at roughly 1.07. The dividend-based methods sit further away at about 1.29 above their central estimate, and the earnings-power method is the outlier at roughly 2.24. Three of the four families defend most of the price; the one that capitalizes current profitability does not. That spread is the entire argument in miniature. Buy the book and the franchise and you are close to paid for; buy the current earnings stream and you are paying more than twice for it.

The tangible-book method is worth understanding rather than reciting, because it explains why one lens is so harsh. It compares the return the bank generates on its tangible equity against the return investors require for holding that equity. Because the first is currently below the second, the method warrants a discount to tangible book rather than a premium, and any price above book fails it by construction. That is a mechanical consequence of the profitability gap, not a separate finding.

Solvency here reads differently than for an industrial company. Deposits fund the balance sheet, so the usual net-debt and interest-coverage arithmetic has nothing to grip. What bounds the downside is regulatory capital and the ability to keep money flowing up to the parent, and on the first the tangible equity ratio stood at 8.6% at quarter end. That is adequate rather than generous, particularly against a plan that includes absorbing roughly COP 6.5 trillion of acquired consumer and mortgage loans.

One currency note the arithmetic depends on: Aval reports in Colombian pesos under IFRS, and the ADR represents twenty preferred shares. Quarterly attributable earnings of Ps 336.6 billion translate to Ps 14.2 per local share. A peso that moves against the dollar moves the ADR whether or not a single Colombian borrower changes behavior, which is a risk that sits alongside the operating one rather than inside it.

Catalysts

The calendar item is second-quarter results on August 19, 2026, and the single number to read first is the return on average equity, both as reported and as management frames it before the equity tax. The first-quarter gap between those two readings was wide, at 7.4% reported against 12.0% excluding the tax, and how that gap narrows over the year determines whether the full-year target of about 9.25% is on track.

The Itaú Colombia retail transfer is the operational event of the year. The Superintendencia Financiera authorized it on June 16, 2026, and the second-quarter and third-quarter prints will be the first to show the acquired customers, loans and deposits inside the consolidated numbers. Two things to watch as it lands: whether retail loan growth tracks toward the roughly 14% management projected, and whether the cost synergies land, which management put at $30 to $40 million a year by the end of 2026.

Rates and politics run underneath both. Management expects further central bank rate increases and warned of volatility from the repricing mismatch between assets and liabilities, against a backdrop of roughly 2.4% Colombian growth and inflation near 6.2% that is expected to converge toward the 4% target only in 2027. Colombia votes this year, and for a bank holding company whose entire earnings base sits in one country, the electoral outcome is a direct input to the cost of risk and the fiscal environment rather than background noise.

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Grupo Aval Q1 2026 earnings release · Superintendencia Financiera de Colombia authorization, June 16, 2026 · Superintendencia Financiera de Colombia authorization, June 16, 2026; Banco de Bogotá announcement, December 23, 2025 · Grupo Aval Q1 2026 earnings call · Grupo Aval Q1 2026 earnings release and Q1 2026 earnings call