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BANKING

Latin America: Four is company at Grupo Aval

Aval may be the leading banking group in Colombia and central America because of its sprawling structure, but could there be efficiencies available from rationalizing its operating model?

Grupo-Aval-illustration-600
Illustration: Pete Ellis

Banking consolidation is often cited as a challenge in Latin America. In the past, banking crises have led to acquisitive growth opportunities for those banks that have been relatively less stricken, while customers have sought out the strongest banks for fear of the smaller ones failing. These factors have been supplemented by others, such as costs of regulation and technology for smaller entities, to drive an increase in the market share of the leading players.

This has led to some very large banks, such as Itaú in Brazil and BCP in Peru. But the model is slightly different in Colombia. 

Consolidation of market share is evident here, too, but less conspicuously. A quick look at the market reveals banking plurality, but this is something of an illusion. Grupo Aval has majority holdings in four of Colombia’s banks. Banco de Bogotá (68.7%), Occidente (72.3%), Popular (93.7%) and AV Villas (79.9%) – quite apart from its 100% holding of BAC Credomatic, the leading central American bank. 

According to Maria Francisca Barriga, financial analyst at Davivienda Corredores, the bank is the leader in the consumer and commercial portfolios.