Bancolombia: Concerning Guidance Obscures The Bank's Strengths

seekingalpha11-23

Bancolombia is by far the best-in-class bank in Colombia, with a strong funding mix. Furthermore, the creation of a new holding group could allow them to unlock more shareholder value. The ...

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Furthermore, the creation of a new holding group could allow them to unlock more shareholder value.\n        The ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739820-bancolombia-concerning-guidance-obscures-the-banks-strengths\">Source Link</a>\n\n</div>\n","source":"seekingalpha","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>Bancolombia: Concerning Guidance Obscures The Bank's Strengths</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nBancolombia: Concerning Guidance Obscures The Bank's Strengths\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-23 21:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739820-bancolombia-concerning-guidance-obscures-the-banks-strengths><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Bancolombia is by far the best-in-class bank in Colombia, with a strong funding mix. Furthermore, the creation of a new holding group could allow them to unlock more shareholder value.\n        The ...</p>\n\n<a href=\"https://seekingalpha.com/article/4739820-bancolombia-concerning-guidance-obscures-the-banks-strengths\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"CIB","symbol_name":"哥伦比亚银行","start_time":0,"source_url":"https://seekingalpha.com/article/4739820-bancolombia-concerning-guidance-obscures-the-banks-strengths","article_id":"2485205761","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485205761","pubTimestamp":1732366800,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Bancolombia is by far the best-in-class bank in Colombia, with a strong funding mix. Furthermore, the creation of a new holding group could allow them to unlock more shareholder value.The stock is undervalued and offers an attractive dividend yield. However, their FY 25 guidance on the NIM side wasn't too optimistic.Based on the pressures that the bank would face considering a dovish local monetary policy, I rate the stock of Bancolombia as a \"sell.\"","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"CIB":"哥伦比亚银行","BK4207":"综合性银行"},"translate_title":"哥伦比亚银行：有关指导掩盖了银行的优势","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"CIB":0.9},"content_text":"Bancolombia is by far the best-in-class bank in Colombia, with a strong funding mix. Furthermore, the creation of a new holding group could allow them to unlock more shareholder value.\n        The stock is undervalued and offers an attractive dividend yield. However, their FY 25 guidance on the NIM side wasn't too optimistic.\n        Based on the pressures that the bank would face considering a dovish local monetary policy, I rate the stock of Bancolombia as a \"sell.\"\n           David Bautista/iStock Editorial via Getty Images  Perhaps many Seeking Alpha readers are interested in Bancolombia (NYSE:CIB) due to its elevated dividend yield of 10.37% and market capitalization of $8.20 billion. Unfortunately, the stock coverage is quite limited, but after analyzing their backdrop after Q3 earnings, I will rate the stock as a \"sell\" due to its reduced NIM guidance for FY 25.  Colombian Banking Industry Overview The performance of Colombian banks over the past years has been pretty mediocre, with Banco Davivienda (BVC:PFDAVVNDA) and Grupo Aval (AVAL) decreasing by approximately -30.5% and -7.8% over the past two years, respectively. Attributes such as higher interest rates, low GDP growth, and falling private investments explain the banks' poor performances.  The backdrop has generated elevated delinquencies, especially from the consumer segments, making banks more cautious about their credit requirements. For context, Bancolombia's consumer portfolio is even lower than two years ago, as granting consumer loans became too risky. Although the context has been challenging for all banks, Bancolombia's stock performance has been superior, gaining a price return of 29.80% over two years. This is in part explained by Bancolombia's enviable funding mix, which allows it to have a meager cost of funding compared to the other banks. Funding Mix of Bancolombia   CIB Q3As of Q3, 50% of Bancolombia's funding mix was constituted by savings and checking accounts with cheap funding rates. Simultaneously, time deposits were also 229 bps below the reference rate, although this spread has been diminishing due to ongoing rate cuts. Finally, 67% of the term deposits are less than one year old, indicating that the funding rate of average time deposits is likely to drop as old deposits are reinvested at lower rates.  For comparison, Davivienda's funding mix lacks the soundness of Bancolombia's, with low-cost demand deposits constituting just 23.8% vs. 50% of Bancolombia. Backdrop of Bancolombia Certainly, a dovish monetary policy is not necessarily favorable for an asset-sensitive bank. Here, the national forecast is for inflation to continue decreasing and for the central bank to lower rates.  Based on these macro expectations, Bancolombia has given guidance for a substantial NIM decrease from 6.8% to an actual 6%, on average, in 2025. Of course, these projections are based on the expected pace and level of the monetary policy movements. Yet, a drop to 6% is quite substantial, considering where the actual NIM is sitting now, and that is my main point for considering a \"sell\" rating. On the other hand, this expected macro environment of lower inflation supports a higher credit improvement and encourages domestic spending. Yet, the Colombian Central Bank has already cut interest rates for over a year now, and loan demand for commercial loans (the largest component of CIB's loan book) remains relatively weak, with a modest 0.5% rise over the quarter, as corporations expect even lower rates going forward. Simultaneously, consumer loan growth remains subdued due to ongoing strict credit standards in loan originations. On the other side of the spectrum, mortgage loans are impulsing loan growth, with a rise of 2.1% for the quarter and 9.3% over the year. This is partly thanks to a war in mortgage rates that Bancolombia started in July, and other banks followed. Although there was decent growth in this category, the mortgage segment remains the most minor loan type in Bancolombia's portfolio. Potentially New Structure La RepúblicaRecently, Bancolombia announced the creation of a new holding group named Grupo Cibest, subject to shareholders and regulatory approval. This group would be the parent company of Bancolombia and all the other entities, such as Nequi. Based on the earnings call, the primary rationale for this new corporate structure is that CIB currently functions as both a bank and a holding company, which brings much complexity to corporate development due to banks' rigorous regulatory framework.  With this, the holding would be able to conduct more freely corporate actions such as share repurchases, which, based on its cash flow statement, have been minimal over the past ten years. Although the market didn't react with large volatility amid the news, I believe this news would help Bancolombia extrapolate more value to shareholders. Perhaps not many things would change, but management mentioned this new structure with optimism during the earnings call. CIB: Undervalued Stock Data by YChartsBased on its historical valuation, Bancolombia's stock looks undervalued. Yet this is a common aspect among Colombian stocks, as they haven't recovered since the presidential elections of 2022.  Now, as the leading bank with a strong funding mix and decent liquidity in the local stock exchange, Bancolombia trades at a book value premium compared to its peers.This scenario is likely to persist for many years as CIB is perhaps two steps ahead of the competition, and local liquidity means a lot in an illiquid market. Risks to a Bearish Thesis Although the guidance suggests a substantial NIM detriment, other line items, such as loan growth and Cost of Risk ((CoR)), were guided positively. Ultimately, cheaper borrowing costs allow clients to enhance debt coverage rations and boost both spending and investments. Therefore, higher loan originations partly counter a reduction in the NIM. Conclusion Stockanalysis The fact that the stock is undervalued doesn't make it necessarily a \"buy,\" especially when the company expects an 800 bps NIM deterioration that will affect its top line in 2025. Certainly, Bancolombia is the best-in-class bank in Colombia, but next year, it is likely to reduce its bottom line based on the guidance provided, and, therefore, a \"sell\" rating makes more sense. Simultaneously, analysts from Goldman Sachs, JP Morgan, and Bank of America agree that the stock's outlook is negative.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"-1","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2485205761"}