Breaking Down Grupo Aval Acciones y Valores S.A. (AVAL) Financial Health: Key Insights for Investors

You're looking at Grupo Aval Acciones y Valores S.A. (AVAL) right now and seeing a classic mixed-signal situation, which is why the market is giving it a Neutral rating despite some truly solid numbers. Honestly, you need to look past the top-line growth and see where the risks are pooling. The good news: AVAL reported a consolidated attributable net income of Ps 521.0 billion for the third quarter of 2025, a jump of 25.3% year-over-year, and their Return on Average Equity (ROAE) hit a respectable 11.5%. That's strong income growth, plus the credit cycle is improving, evidenced by the 90-day Past Due Loan (PDL) ratio dropping to 3.4%. But still, the realist in me sees the high leverage and the ongoing revenue and cash flow challenges that analysts are flagging, which is why the stock is trading around $4.20 as of mid-November 2025. The core question isn't whether they're profitable-they are-it's whether the funding stability, driven by an 8.5% year-over-year increase in consolidated deposits to Ps 212.6 trillion, can consistently offset the debt pressure and broader economic uncertainties, especially with a $5.07 billion market cap to defend.

Revenue Analysis

You need to know where Grupo Aval Acciones y Valores S.A. (AVAL) is making its money right now, because the mix is changing. The direct takeaway is that while Net Interest Income (NII) remains the core engine, a strategic pivot toward higher-yield investments and retail lending is actively compensating for pressure on traditional commercial loan margins, leading to strong bottom-line growth.

For the trailing twelve months ending June 30, 2025, Grupo Aval's total revenue showed a solid year-over-year growth rate of 21.28% (in Colombian Pesos, COP), reflecting a rebound in a challenging operating environment. The company reported a Q3 2025 quarterly revenue of $1.15 billion (USD), slightly below analyst expectations, but the underlying profitability drivers are what matter most.

Breakdown of Primary Revenue Sources

As a diversified financial conglomerate, Grupo Aval's revenue streams are primarily divided between the income generated from lending (Net Interest Income) and the fees earned from its extensive service network (Fee Income). This is not just a bank; it's a financial ecosystem.

• Net Interest Income (NII): The largest component, derived from the difference between interest earned on loans and investments, and interest paid on deposits. For Q3 2025, NII was COP 1.87 trillion, marking a 12% increase from the same period last year.
• Fee Income: This comes from services like asset management, insurance, and the pensions business. The Fee Income Ratio, which measures fees against total operating income, stood at 20.5% in Q2 2025.
• Trading & Investment Income: This has become a critical, high-growth area. The Net Interest Margin (NIM) on investments jumped significantly in Q3 2025 to 4.13%, actively offsetting a sequential decline in core loan margins.

Segment Contribution and Strategic Shift

The conglomerate's structure-four commercial banks, the largest private pensions and severance fund manager (Porvenir), and a merchant bank-means revenue contribution is complex, but the trend is clear: retail is in, and investment income is providing a necessary buffer. The consolidated net income for Q3 2025 was Ps 521.0 billion, a 25.3% rise year-over-year, which is a strong signal.

Here's the quick math on the core lending shift:

The company is intentionally prioritizing retail loans, which have a much higher margin (5.8% NIM in 1Q25) compared to commercial loans (3.4% NIM in 1Q25). This is a defintely smart move to maximize profitability per dollar of loan growth. What this estimate hides is the exceptional, but possibly non-recurring, performance from the Porvenir pensions and severance fund business in Q3 2025, which contributed significantly to the strong net income.

The overall NIM on the core loan portfolio actually decreased sequentially to 4.42% in Q3 2025, but the total NIM rose to 4.35% because the investment portfolio stepped up. This means the firm is strategically repositioning assets toward higher-yield investments to maintain profitability, rather than relying solely on volume expansion in core lending. For a deeper dive into the balance sheet health, see Breaking Down Grupo Aval Acciones y Valores S.A. (AVAL) Financial Health: Key Insights for Investors.

Next step: Finance should model the impact of a 10% decline in non-core investment income on the full-year 2025 Return on Average Equity (ROAE) by the end of the month.

Profitability Metrics

You want to know if Grupo Aval Acciones y Valores S.A. (AVAL) is making money efficiently, and the quick answer is that their profitability is strong and improving in the third quarter of 2025. The company is successfully translating a high Net Interest Margin (NIM) into solid returns on equity and assets, a defintely positive sign for investors.

For a financial holding company like Grupo Aval Acciones y Valores S.A., we look at different metrics than a manufacturer. We focus on Net Interest Margin (NIM), which is your proxy for gross profit, and the Efficiency Ratio, which tells you about operating profit.

Net Interest Margin (NIM) and Gross Profit Proxy

The Net Interest Margin (NIM) is the core measure of a bank's primary business-lending money at a higher rate than it costs to borrow it. For Grupo Aval Acciones y Valores S.A., the NIM (including net trading income) for the third quarter of 2025 (3Q25) stood at a robust 4.3%. This is a key indicator of their ability to manage their cost of funds and loan pricing.

This gross profitability trend is very encouraging. The NIM has been on an upward trajectory, rising 35 basis points quarter-over-quarter in 3Q25. This is a result of effective funding stability, supported by an 8.5% year-over-year increase in customer deposits. Plus, Latin American banks generally display some of the highest NIMs worldwide, so AVAL is operating in a favorable environment for this metric.

Operational Efficiency and Operating Profit Margin

Operational efficiency is measured by the Efficiency Ratio (Cost-to-Income Ratio), which is operating expenses divided by total income. The lower this ratio, the better the cost management, and the higher your operating profit margin. Grupo Aval Acciones y Valores S.A. showed solid operating discipline, reporting an Efficiency Ratio of 50.7% in 3Q25.

Here's the quick math: an efficiency ratio of 50.7% means that for every dollar of total income, only about 51 cents are spent on operating expenses. This leaves 49.3% as the pre-provision, pre-tax operating profit margin. This is a clear sign of tight cost control, especially when you consider that the Colombian banking sector's cost-to-income ratio was historically higher, at 67.84% in 2021.

• 3Q25 Efficiency Ratio: 50.7%.
• Operational discipline is improving, with total other expenses down sequentially.
• The ratio improved from 52.0% in 2Q25, showing a good quarter-over-quarter gain.

Net Profitability: ROAA and Net Income

The bottom line for a financial institution is best gauged by its Return on Average Assets (ROAA) and Return on Average Equity (ROAE). These are your best proxies for net profit margin relative to the size of the business and the capital invested.

For 3Q25, the company's profitability metrics strengthened significantly:

The attributable net income of Ps 521.0 billion for 3Q25 is a substantial increase, showing that the improvements in NIM and operational efficiency are flowing directly to shareholders. The ROAA of 1.0% is a very healthy net profit margin for a bank with total assets of Ps 343,840.8 billion. This upward trend in net profitability, despite macroeconomic challenges, suggests effective risk and capital management. If you are looking for more context on who is driving these results, consider Exploring Grupo Aval Acciones y Valores S.A. (AVAL) Investor Profile: Who's Buying and Why?

Debt vs. Equity Structure

You need to understand how Grupo Aval Acciones y Valores S.A. (AVAL) funds its operations, and the short answer is: it relies heavily on debt, which is typical for a financial conglomerate, but its leverage ratio is high even for the sector. The company's consolidated debt-to-equity (D/E) ratio stood at 3.87 as of the second quarter of 2025, indicating a substantial reliance on debt financing relative to shareholder equity. This is a high-leverage model, so you need to look closely at the quality of the underlying assets.

For a financial holding company, the D/E ratio is often higher than in other industries because customer deposits and other core banking activities are recorded as liabilities, or debt. To be fair, a ratio of 1.5 or lower is desirable for most non-financial companies, but a major US bank like Bank of America had a D/E of 1.169 in the first quarter of 2025. Grupo Aval Acciones y Valores S.A.'s 3.87 is significantly higher, even compared to the average for US Regional Banks, which is around 0.5.

Here's the quick math on the key components as of June 2025:

• Total Debt (current and non-current): Approximately $16.81 billion USD.
• Total Stockholders' Equity: Approximately $4.40 billion USD.
• Debt-to-Equity Ratio: 3.87.

Financing Strategy and Near-Term Risks

Grupo Aval Acciones y Valores S.A. balances its funding between debt, primarily through its operating subsidiaries' deposits and borrowings, and equity. The holding company itself manages its financial health through dividend inflows from its core banking and non-financial subsidiaries, which is the primary source for covering its interest payments.

The holding company's structure introduces a key risk called structural subordination, meaning the holding company's liabilities are paid after the liabilities of its operating banks. This is why Moody's assigned the holding company a Ba2 issuer rating in July 2025, which is one notch below its main subsidiary, Banco de Bogotá. The management of this risk is critical, and the company's double leverage ratio-a measure of holding company debt used to finance subsidiary equity-was relatively high at 122% in March 2025.

On the debt issuance side, the company has maintained access to capital markets, which is defintely a positive sign. For instance, in November 2024, its local bonds received an AAA long-term debt rating from BRC Ratings - S&P Global S.A. for an issuance of up to COP 400,000 million. This shows strong local market confidence in its debt servicing ability. Still, the high leverage is a constant factor to monitor, especially with the challenging operating environment in Colombia noted in 2025.

A simple way to look at this is to track the double leverage ratio; if it climbs past 125%, that's a red flag for holding company creditors.

You can dive deeper into who is holding this debt and equity by Exploring Grupo Aval Acciones y Valores S.A. (AVAL) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You're looking for a clear picture of Grupo Aval Acciones y Valores S.A. (AVAL)'s ability to meet its near-term obligations, and the data from the 2025 fiscal year gives us a solid, if nuanced, view. The direct takeaway is that while the core banking operations show stability through strong deposit growth, the holding company maintains a healthy, albeit slightly fluctuating, liquid asset base to service its debt.

For a financial holding company like Grupo Aval Acciones y Valores S.A. (AVAL), the standard Current Ratio (current assets divided by current liabilities) and Quick Ratio are less informative than they are for a manufacturing firm. Banks operate on a different model, but we can still assess their liquidity position by looking at highly liquid assets against short-term funding needs.

As of June 30, 2025, the holding company (Grupo Aval Acciones y Valores S.A. and Grupo Aval Ltd. combined) reported total liquid assets of Ps 787.9 billion, which is a key indicator of its immediate capacity to cover corporate expenses and debt service at the parent level. This is up from Ps 724.8 billion at the end of 2024, showing a positive trend in the holding company's liquid reserve.

Here's the quick math on the holding company's liquidity position as of mid-2025:

• Total Liquid Assets (Holding Co.): Ps 787.9 billion
• Total Gross Indebtedness (Holding Co.): Ps 5,688.8 billion
• Net Indebtedness (Holding Co.): Ps 4,901.0 billion

The net indebtedness figure is what matters most here; it's the gross debt minus cash and fixed income investments. While the number is large, the debt is largely long-term, and the liquid assets are a strong buffer for the holding company's obligations. The underlying strength comes from the operating subsidiaries, which saw consolidated deposits reach Ps 212.6 trillion by 3Q2025, a massive funding base.

Cash Flow Statement Overview (1Q2025)

Drilling down into the cash flow statement for the holding company (Grupo Aval Acciones y Valores S.A. separate statements) for the first quarter of 2025 provides concrete evidence of where cash is being generated and used. This is a crucial look at the parent company's treasury management, separate from the consolidated banking operations.

The cash flow trends show a healthy operating cash flow, which is then directed toward financing activities, primarily dividend payments. Honestly, this is exactly what you want to see from a holding company-cash coming in from operations and investments (like dividends from its subsidiaries) and being paid out to shareholders and for corporate debt service. One clean one-liner: Cash flow from operations is the lifeblood of the holding company.

What this estimate hides is the massive scale of the banking subsidiaries' cash flows, which are mostly internal to the conglomerate. Still, the parent's cash flow is defintely a key indicator for investors.

Near-Term Liquidity Strengths and Concerns

The primary strength is the quality and stability of the underlying banking assets. The 90-day Past Due Loan (PDL) ratio for the consolidated entity declined to 3.4% in 3Q2025, a clear asset quality improvement that reduces future credit risk and preserves capital. Plus, the holding company's liquid asset position provides a comfortable cushion against its corporate debt. The holding and Grupo Aval Ltd. had Ps 638.8 billion in liquid assets as of 3Q2025.

If you want to dive deeper into the consolidated metrics, you can find a more detailed analysis in Breaking Down Grupo Aval Acciones y Valores S.A. (AVAL) Financial Health: Key Insights for Investors. Your next step should be to compare this holding company liquidity profile against its dividend payout ratio to ensure the operating cash flow is sustainable for shareholder returns.

Valuation Analysis

You are asking the right question: is Grupo Aval Acciones y Valores S.A. (AVAL) priced correctly right now, or is there a discount to grab? The quick answer is that, as of November 2025, the stock appears undervalued based on core book value metrics, but the market is pricing in a clear risk premium.

The current share price is around $4.20. To put that in perspective, the stock has had a phenomenal run over the last 52 weeks, climbing by over +111.06% from its 52-week low of $1.97 to its recent high of $4.50. That tells you the market sentiment has completely shifted from deep pessimism to cautious optimism, but the valuation multiples still suggest a significant margin of safety.

Is Grupo Aval Undervalued? A Look at Key Ratios

When analyzing a financial holding company like Grupo Aval Acciones y Valores S.A., we lean heavily on book value and earnings multiples. The numbers below, based on 2025 fiscal year data, show a clear disconnect between the stock price and the company's underlying assets and earnings power.

Here's the quick math on the key valuation ratios:

• Price-to-Earnings (P/E) Ratio: The trailing P/E is about 11.64. This is well below the S&P 500 average and even below many regional bank peers, suggesting the market is not paying a high multiple for its current earnings. The forward P/E drops to a very attractive 7.72, signaling expected earnings growth.
• Price-to-Book (P/B) Ratio: This is the most compelling figure. Grupo Aval Acciones y Valores S.A. trades at a P/B ratio of just 0.56. This means you are buying the company's net assets for 56 cents on the dollar. Honestly, that's a deep discount.
• Enterprise Value-to-EBITDA (EV/EBITDA): For financial conglomerates, this metric is often less reliable due to the nature of their balance sheets, and you'll see it reported as 'n/a' or an inconsistent number. I defintely prefer to rely on P/E and P/B for a bank holding company.

The P/B ratio is the one screaming 'undervalued' right now.

Dividend and Analyst Sentiment: A Moderate Buy

The dividend profile is solid, plus the analyst community is signaling confidence. The current annual dividend is about $0.10 per share, which translates to a dividend yield of approximately 2.44%. Given the trailing Earnings Per Share (EPS) of about $0.33, the payout ratio is roughly 30.3%, which is a healthy, sustainable level that leaves plenty of capital for growth and regulatory requirements.

What this estimate hides is the potential for currency fluctuation, as the company reports in Colombian Pesos, but the US-listed ADR is in dollars. Still, the underlying cash flow supports the payout.

The consensus among the analysts covering Grupo Aval Acciones y Valores S.A. is a Moderate Buy. This aligns with the cheap P/B multiple and the strong stock price momentum over the past year. They see the value, but they also acknowledge the geopolitical and currency risks that keep the P/B so low. For more on who is jumping into the stock, you should check out Exploring Grupo Aval Acciones y Valores S.A. (AVAL) Investor Profile: Who's Buying and Why?

Next step: Dig into the latest Q3 2025 earnings report released on November 13, 2025, to confirm the drivers of the strong forward P/E forecast.

Risk Factors

You need to see past the headline Ps 521.0 billion attributable net income Grupo Aval Acciones y Valores S.A. (AVAL) reported for 3Q2025. While those numbers look strong, a seasoned investor like you must map the near-term risks, especially those tied to the Colombian macroeconomic environment and the holding company structure. Honestly, the biggest challenge isn't their banking operations, which are performing well, but the financial architecture of the parent company.

External and Macroeconomic Headwinds

The primary external risks stem from the operating environment in Colombia, their core market. The government's fiscal situation remains a clear concern, with the projected fiscal deficit for 2025 sitting at a concerning minus 7.5% of GDP. This challenge underscores the need for fiscal balance and economic stability.

Also, inflation is a persistent threat. While it stalled at 5.1% in October 2025, the expectation is for it to close the year around 5.3%. These inflationary pressures directly impact economic growth and could strain borrowers, even though the company's asset quality has improved.

• Fiscal Deficit: -7.5% of GDP in Colombia for 2025.
• Inflation: Expected to close 2025 at 5.3%.
• Interest Rates: Higher-than-expected rates pressure earnings.

Operational and Financial Structure Risks

The most critical internal risk is the structural subordination of the holding company, Grupo Aval Acciones y Valores S.A., to its operating entities, like Banco de Bogotá S.A. This means the holding company's creditors are second in line to the creditors of its subsidiaries. Plus, the high double leverage ratio compounds this risk.

Here's the quick math: Grupo Aval Acciones y Valores S.A.'s double leverage ratio-which measures the extent to which the holding company uses debt to fund equity in its subsidiaries-was 122% as of March 2025. This ratio is relatively high, and while it has been coming down from a peak of 127% in 2022, it still poses a risk, particularly if subsidiary earnings are pressured.

Another operational point to watch is market share. While the company gained share in consumer and mortgage loans (gaining 112 basis points in consumer loans and 206 basis points in mortgages as of May 2025), they lost 109 basis points in commercial loans, signaling competitive pressure in a key segment.

Mitigation Strategies and Forward-Looking Actions

Management is defintely aware of these risks and has clear mitigation strategies in place. The focus on credit quality is visible, with the 90-day past-due loan (PDL) ratio improving to 3.4% in 3Q2025, down from 4.3% a year ago. The cost of risk (net) is also well-managed, expected to be stable in the 1.9% area for the full year 2025.

To counter funding instability, they have focused on deposit growth, which expanded 8.5% year-over-year, supporting a strong funding base. Strategically, the company is also making advancements in its asset management division, with Aval Fiduciaria on track to become Colombia's largest fiduciary. This diversification helps offset some of the core banking volatility. You can review their long-term strategic focus here: Mission Statement, Vision, & Core Values of Grupo Aval Acciones y Valores S.A. (AVAL).

Growth Opportunities

You're looking for a clear path forward on Grupo Aval Acciones y Valores S.A. (AVAL), and the takeaway is this: AVAL's near-term growth is tied to its dominant market position and a deliberate digital push, but it still faces a challenging macroeconomic environment in Colombia. We expect a solid rebound in profitability for the 2025 fiscal year, driven by lower credit costs and a more favorable interest rate environment.

Wall Street analysts project AVAL's consensus Earnings Per Share (EPS) for the 2025 fiscal year to be around $0.39. This is a significant jump, reflecting an expected earnings growth of over 85% compared to the previous year. Revenue is also forecast to reach approximately $5.04 billion in 2025, a nearly 29% year-over-year increase. This growth is defintely not just organic; it's a result of calculated strategic moves.

Key Growth Drivers and Strategic Moves

AVAL's strategy maps to three clear areas: digital innovation, non-banking consolidation, and risk management. They are using their scale to build a better digital moat, which is smart.

• Digital Product Innovation: The launch of 'Tag Aval' across all four of their banks-Banco de Bogotá, Banco de Occidente, Banco Popular, and AV Villas-is a major product innovation. Plus, their digital wallet, 'dale!', is expanding its offerings, now providing investment products (like FICs) and personal loans in partnership with subsidiaries like Fiduciaria de Occidente.
• Non-Banking Consolidation: They've been busy consolidating the non-banking financial business, acquiring and creating Aval Fiduciaria, Aval Casa de Bolsa, and Aval Banca de Inversión. This move streamlines their investment banking, brokerage, and trust services, creating a more comprehensive financial ecosystem.
• Technology and Efficiency: AVAL is increasing its capabilities through Artificial Intelligence (AI) tools for automated threat detection and response, which is a critical investment in a high-growth digital environment. This focus on cybersecurity and technological maturity helps lower operational risk.

Competitive Advantages: The Moat

The company's primary competitive advantage is its sheer scale and diversification across the Colombian financial system. This isn't a small regional player; it's a financial powerhouse.

Here's the quick math: Grupo Aval is the largest bank holding company in Colombia, controlling a consolidated market share of roughly 24.6% of the country's loans as of the second quarter of 2024. This dominance gives them pricing power and a stable funding base. They are diversified across four major banks, a merchant bank, and the largest private pension fund manager, AFP Porvenir S.A..

What this estimate hides is the value of their conservative approach. AVAL has historically maintained a conservative focus, which analysts credit with helping them avoid the more severe credit quality issues seen elsewhere in the Colombian banking system. This positioning is expected to allow them to outperform the broader financial system in 2025 as the macroeconomic environment improves.

For a deeper dive into who is currently investing in this conglomerate, you can check out Exploring Grupo Aval Acciones y Valores S.A. (AVAL) Investor Profile: Who's Buying and Why?

The key action for you is to watch the subsidiary performance closely. If onboarding to digital platforms like 'dale!' accelerates beyond expectations, it could be a catalyst for exceeding these 2025 earnings estimates.