In This Article:
We came across a bullish thesis on Bancolombia S.A. (CIB) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on CIB. Bancolombia S.A. (CIB)'s share was trading at $36.88 as of Jan 27th. CIB’s trailing and forward P/E were 6.05 and 6.35 respectively according to Yahoo Finance.
An executive in a suit walking across the lobby of a modern commercial bank.
BanColombia (CIB), the largest bank in Colombia, presents a compelling investment opportunity amidst the country’s current political and economic landscape. With a dominant 27% market share in Colombia and international diversification in El Salvador, Guatemala, and Panama, BanColombia’s ADRs offer investors exposure to a leading financial institution that combines income stability with growth potential. Over the past decade, the bank has steadily increased its book value per share from 11,162 pesos to 39,601 pesos, reflecting a real annual growth rate of 5.4% (10.2% nominal), alongside impressive dividend growth at 8.4% real (13.6% nominal). While dividend growth may moderate, BanColombia’s focus on development, including the buildout of Nequi, its digital neobank, positions it for continued success in the fintech space. Nequi’s resemblance to Brazil’s Nu Holdings adds an exciting dimension to the bank’s growth story.
BanColombia’s recent price breakout, combined with the weakening U.S. dollar, puts the ADRs in an attractive position. The stock currently trades at a significant discount, with a price-to-earnings ratio of 6.05x compared to historical highs of 8.0x to 10.0x. Despite its strong fundamentals, net margins have declined from 18% in 2012 to 5.5% today, largely due to the current leadership’s focus on acquisitions over operational efficiency. Under a more profit-focused regime, BanColombia could potentially triple its net income from $580 million to $1.8 billion, unlocking significant value for shareholders. A multiple rerating alone could propel the stock price from its current level to between $46 and $57, representing substantial upside.
For investors seeking exposure to BanColombia’s common shares, Grupo SURA offers an intriguing alternative. Grupo SURA owns 46% of BanColombia’s common stock and trades at a steep discount to the sum of its parts, effectively giving investors exposure to BanColombia and Grupo Argos at a 10% discount while acquiring Sura Seguros and Sura Asset Management for free. Grupo SURA’s efforts to divest non-core assets and unlock value further enhance its appeal as a proxy for BanColombia’s growth.