AVAL

Corporate & Strategic Transactions

• Completed the divestiture of 99.57% of Multi Financial Group (MFG) in March 2026 after receiving regulatory approval, with MFG operations classified as discontinued operations for comparability.
• Completed the transfer of Banco Itaú Colombia's retail banking assets, liabilities and customer contracts on July 31, 2026, adding over 250,000 retail customers and strengthening Banco de Bogota's retail franchise, particularly in the affluent segment.
• Consolidated all Grupo Aval entities' indirect stakes in Corficolombiana into a single jointly controlled special purpose vehicle to simplify Corficolombiana's ownership structure, with no change to each entity's ultimate indirect ownership.

Technology Transformation Execution

• Grupo Aval is executing a four-pillar group-wide shared technology strategy to drive growth, structural efficiency, and operational resilience, with a self-funding virtuous cycle from efficiency savings reinvested into further transformation:
  • Aval 360: Builds an integrated cross-group view of customers to enable personalized service, improve cross-selling, boost conversion and retention. 67% of customers already transact via digital channels, and AI is being scaled to handle 30% of Nexa BPO customer interactions, improving scalability without sacrificing service quality.
  • Digital Core Reengineering: Develops shared, reusable digital capabilities to accelerate product time-to-market and lower structural costs. A new digital personal loan product is on track to launch in Q4 2026, with work ongoing for credit card, customer loan, and retail transactional services capabilities.
  • Delos Data Platform: Creates a common management intelligence digital twin of banking operations, integrating 9 business dimensions to support real-time, forward-looking decision making for customer management, risk, capital allocation, and efficiency.
  • Aurora Cloud Infrastructure: Combines public cloud (AWS, Microsoft Azure) and private cloud (via IBM/Kyndryl partnerships) to replace obsolete infrastructure, improve resilience, scalability, and security, and shift from capital-intensive infrastructure procurement to a flexible operating model.

Macroeconomic Context

• Colombia's Q2 2026 GDP growth hit 2.3%, driven by temporary factors (FIFA World Cup 2026 consumption, higher public administration spending ahead of local elections, higher utility demand from extreme heat), with a K-shaped recovery: agriculture, mining, manufacturing, and construction remain weak. Full-year 2026 GDP growth is expected to hit 2.4%.
• Annual inflation rose to 6.0% in July 2026, above the central bank's target, driven by wage indexation, higher fuel prices, El Niño-related energy costs, and food price pressures. Full-year 2026 inflation is expected to end at 6.8%.
• The Central Bank of Colombia raised the policy rate to 12% in June 2026 and held it steady in July, with markets expecting a further 50 bps hike to a peak of 12.50% to cool inflation. The Colombian peso has appreciated to COP 3,100 per USD, its lowest level since 2019, with the country risk premium falling to 140 bps on investor expectations of pro-growth policy from the new administration.

Post-Earthquake Response

• After the recent Colombia earthquake, Grupo Aval prioritized employee, customer, and community safety, enabled its 2,700+ ATM network and digital channels to facilitate donations to relief efforts, set up in-stadium supply collection centers, and progressively restored service after temporary interruptions in affected areas.

• Full-year 2026 guidance is maintained from prior estimates, with the following targets:
  • Total loan growth of ~10.5%, with commercial loans growing ~8% and retail loans growing ~14% (including the contribution from the Itaú retail transaction).
  • Consolidated NIM of ~4.2%, with consolidated NIM on loans of ~4.4%; banking segment NIM of ~4.9%, with banking segment NIM on loans of ~5.2%.
  • Net cost of risk of ~1.9%, cost to assets of ~2.9%.
  • Non-financial sector income 1.3x the 2025 level, with an income ratio of ~22%.
  • Full-year return on average equity of 9.25%, with management confirming it remains on track to meet this target despite a challenging operating environment.
• Guidance is intentionally conservative, reflecting management's cautious approach to short-term headwinds, and actual results could exceed targets if policy progress and market conditions improve faster than expected.

Consolidated Grupo Aval results: Total assets grew 3.9% quarter-on-quarter (QoQ) and 4.5% year-on-year (YoY) to COP 351 trillion. Gross loans grew 2.1% QoQ and 7.6% YoY to COP 198 trillion; total deposits grew 2.1% QoQ and 11.5% YoY to COP 221 trillion, with a healthy deposits-to-net-loans ratio of 117%.

By loan segment:

• Commercial loans: 2.4% QoQ growth, 7.7% YoY growth. Peso-denominated commercial loans grew 3% QoQ and 10.9% YoY; dollar-denominated commercial loans grew 5.2% QoQ (in dollar terms) and 7.7% YoY, accounting for 7.9% of the total loan portfolio post-MFG divestiture. Grupo Aval's market share of commercial loans increased 32 basis points (bps) YoY and 18 bps QoQ.
• Consumer loans: 1.1% QoQ growth, 4.7% YoY growth, accounting for ~30% of total loans. Payroll loans (53% of consumer loans) contracted 1.2% QoQ and YoY; personal loans (28% of consumer loans) grew 4.5% QoQ and 18.2% YoY; credit cards (12% of consumer loans) grew 4.5% QoQ and 6.5% YoY; automobile loans (7% of consumer loans) grew 0.8% QoQ and 3% YoY. Grupo Aval's market share of personal loans increased 189 bps YoY and 68 bps QoQ to 22.6%.
• Mortgages: 2.9% QoQ growth, 15.7% YoY growth, with market share up 14 bps QoQ and 69 bps YoY to 17.6%.

Income & profitability: Net interest income reached COP 3.6 trillion in Q2 2026, up 68.4% QoQ and 43.1% YoY. Consolidated total net interest margin (NIM) increased 217 bps QoQ to 5.51%, while consolidated NIM on loans remained stable at 4.41% QoQ. Banking segment total NIM expanded 192 bps QoQ to 6.07%, with NIM on loans up 21 bps QoQ to 5.19%. Cost of risk net of recoveries was 1.9% QoQ, 8 bps higher QoQ and 5 bps higher YoY. 90-day past-due loans (PDLs) held stable at 3.13%, with 137% coverage. Attributed net income reached COP 577 billion, up 17% YoY, the highest quarterly result since Q1 2022, with return on average equity (ROAE) of 12.7% for the quarter. Non-banking subsidiary Corficolombiana delivered a strong quarter, benefiting from strong fixed income and equity markets, with energy and infrastructure 12-month trailing revenues rising.

• Global and macroeconomic risks: Persistently high inflation, ongoing geopolitical tensions in the Middle East that keep energy prices elevated, and uncertainty around Colombia's fiscal policy path, with the 2026 fiscal deficit projected to reach 6.7% of GDP, above the government's 5.3% target.
• Energy sector risks: Delays in critical energy generation and transmission projects, combined with declining domestic natural gas production and the El Niño weather phenomenon, create significant energy security risks that could push inflation higher and hurt broader economic growth.
• Regulatory and tax risks: A proposed 30% increase in Bogota's municipal ICA income tax on the financial sector would increase industry-wide tax burdens by an estimated COP 500 billion annually, with Grupo Aval facing material additional tax costs if the proposal passes. There is also ongoing uncertainty around the details of national-level pension and tax reform.
• Interest rate and margin risks: Further central bank policy rate increases could push funding costs higher, creating short-term margin pressure, while high interest rates continue to weigh on construction and other rate-sensitive sectors.
• Asset quality risks: While asset quality remains stable overall, the recent earthquake may create temporary pressure on loan performance in affected regions in the near term, and currency appreciation has hurt the competitiveness of the manufacturing and export sectors, creating mild downside risk for commercial loan quality.

Q: What is the base case 2027 tax outlook for Grupo Aval, and is there upside to future profits from Corficolombiana and Porvenir? / A: Management hopes for no new national tax increases, with the president indicating the equity tax may be eliminated. The main near-term tax concern is a proposed 30% local ICA tax increase in Bogota, which would add an estimated COP 500 billion in annual taxes for the local financial sector if approved. Management is positive on Corficolombiana's upside, as it will benefit from renewed infrastructure investment under the new administration, and Porvenir will see upside once pension reform details are clarified and market conditions remain strong. (437 characters)

Q: Why is the full-year 9.25% ROE guidance lower than the first half's ~10% ROE, despite the first half including a one-off wealth tax? / A: Guidance is conservative for multiple reasons: Q2 2026 saw extraordinary strong fixed income trading gains that are not expected to repeat in the second half, with guidance building in a much lower 2% NIM on investments for the second half. Management also accounts for the cumulative impact of central bank rate hikes and potential near-term impacts of the recent earthquake on credit performance, and prefers to wait for clarity on the new administration's policy implementation before upgrading guidance. (461 characters)

Q: Is management concerned about asset quality after the recent rise in new 30-day past-due loans, especially amid the earthquake and El Niño? / A: Management is not concerned about broad asset quality deterioration; the recent uptick in new past-due formation is normal spiky volatility in line with historical trends, and Stage 2 and 3 loan metrics remain stable. While there may be temporary small spikes from earthquake impacts and exchange rate pressure on some trade-exposed sectors, overall asset quality is expected to remain stable in line with broader economic performance. (347 characters)

Q: With strong Q2 trading NIM unlikely to be sustained and interest rates rising, should we expect medium-term margin pressure at the consolidated level? / A: Management is cautious on short-term (second half 2026) margin pressure from potential further rate hikes, but is positive on the medium-term outlook. Q2 NIM was partially offset by derivative hedging for investment positions, and the bank's strategy of proactive loan repricing and lower deposit pass-through of rate hikes is already working. Management expects we are close to the end of the current rate hike cycle, which will reduce future pressure. (402 characters)

Q: Why has consumer loan growth for Grupo Aval lagged the industry, and will the bank resume growth and market share gains in this segment? / A: The lag is intentional, part of a strategic portfolio restructuring: Grupo Aval was historically overweight lower-yield, rate-sensitive payroll lending, and underweight faster-growing higher-yield personal loans and credit cards. The bank is deliberately reducing payroll lending share to lower interest rate sensitivity and improve average portfolio yields, while already gaining market share in personal loans. The Itaú retail acquisition will accelerate growth in the target segments, cutting around two years off the expansion timeline. (418 characters)