Grupo Aval's shares may recover by up to 102%, according to commission agents



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Analysts expect recovery in the banking sector

Andrés Venegas Loaiza – [email protected]

At the end of the week, it was news in the financial sector that the president of Asobancaria, Santiago Castro, was summoned to stop carrying out what he called an "economic panic campaign," in which investors are invited to sell shares they have in some financial groups speculating with a predictable stock-market crash.

The official's appeal comes at a time when problems involving the companies of the Aval Group (the largest banking group in the country), with the case of Odebrecht, caused their shares to fall in the stock market.

However, LR took on the task of looking at species forecasts by species of the group and another banking sector of financial analysts, finding that in front of none of these actions has negative expectations, in addition to reputation noise and that On the contrary, as a sector banks should have a good air in 2019.

In summary, the shares of Aval Group companies appear as the species to which analysts gave the best weight in their target price; so that Corficolombiana's main share, affected by the scandals, could rise to 102% in relation to the current price, while the common share could recover 91.2%; being those of better projection.

Alexandra Cely, Stock Analyst Values ​​commented that "it is true that a topic of economic panic was generated with the expectation that the market has on the theme of the Aval Group," however, it indicated that better results are seen financial and that companies are strong thanks to their fundamentals, and both these and others in the banking sector "are seen in the medium term as a great opportunity."

When asked if this fall faced by the group's actions could generate contagion in the sector, Carlos Rodriguez, equity director of Ultraserfinco, said that "there are always rumors and gossip in the market, but the reality is that banks today they are very well positioned in the coverage of loans in arrears as well as in their levels of capitalization ".

The analyst added that, in the specific case of Grupo Aval, the fundamentals proved to be stronger than noise, noting that "the Ruta del Sol issue has been in Colombia for more than two years and what is seen in the companies' results" . The bottom line is that fundamentals prevail over media risk. "

Ómar Suárez, equity manager at Casa de Bolsa, pointed out that 2018 was a year of deceleration of the portfolio, "a situation that deteriorated the quality and increased expenses with provisions that affected the ROE and the net profit of the banks," However, the expert predicts that by 2019 it is expected to see signs of an improvement in these factors.

Precisely in the latest monthly report revealed by the Financial Superintendency, it has been shown that banks are recovering and eight of ten of these entities have increased their profits compared to 2017.

"We are recommending the banking sector for next year supported by faster portfolio growth, which may reach 8% and a decrease in the past due portfolio, because the exit of some of the large customers, such as Electricaribe, utilities improve," confirmed Rodriguez.

On the other hand, Cely says that "despite the noises, a negative recommendation is not made precisely because they are reputational and not in their foundations, which are strong."

The Aval Group is the main shareholder and holder of Banco Popular, with a participation of 93.70%; Banco Av Villas, holder of 79.90%; Banco de Occidente, with a holding of 72.30%; Banco Bogotá, where it has 68.70%; and Porvenir, where it has a 20% stake. The Corficolombiana corporation is a subsidiary of Banco de Bogotá, with a 32.93% stake in its holding.

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