Bancolombia's (NYSE:CIB) ADRs haven't done too bad over the past year (up about 5%), but they've lost about a third of their value over the past three years, and investors have been suffering through a five-year stretch of weakening margins and returns. While some of the pressures have been external to the bank, poor management and aggressive M&A played a meaningful role. Bancolombia saw a change at the top earlier this year when Juan Carlos Mora Uribe replaced Raul Yepes, the CEO who oversaw that weak five-year period, and there is definitely a lot of work to do.
The good news is that, although Bancolombia's capital is depleted, the bank is starting from a workable footprint. A leading deposit-gatherer and lender in Colombia, Bancolombia can do a lot better than it has in its consumer/retail banking operations while operations in Central America offer some scope for improvement as well. It takes only relatively modest performance improvement to drive high-single-digit earnings growth and a fair value above $38, but Colombia is a still a commodity-driven economy with a competitive banking sector and Bancolombia's capital position doesn't allow for a lapse in discipline in underwriting.
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New Management Needs To Unlock Bancolombia's Potential