New Management Needs To Unlock Bancolombia's Potential

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

Forget BRIC, It's Time For CIVETS

Wall Street loves sound bites and handy acronyms. Whether it is ROE, NPV or NAV, there is no shortage of handy terms. For growth-oriented investors, BRIC has been one of the most important acronyms of the past ten years. Encompassing the dynamic economies of Brazil, Russia, India and China, BRIC was a guidepost for many investors and there is no questioning the strong stock performance of this group (particularly China and Brazil). (Historically, international investing has worked out well for investors, but this may no longer be the case.

Things change, though, and it may be time for investors to pay more attention to a new name. A civet may be an odd-looking creature (imagine a cross between a raccoon and a cheetah), but the CIVETS could be the next major destination for international investing.

Meet the CIVETS
CIVETS is an acronym, reportedly coined by Michael Geoghegan at HSBC (NYSE:HBC), for Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. Investors may think of this as a second-generation of emerging economies, as these countries generally have fast-rising (and young) populations, relatively well-established financial infrastructure, internal stability and a pathway towards significant economic growth and potential co-leadership in their economic spheres.


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http://financialedge.investopedia.com/financial-edge/1010/Forget-BRIC-Its-Time-For-CIVETS.aspx

Please note - I ordinarily also would have mentioned Turkcell (NYSE: TKC) as part of this group, but I own Turkcell in my own accounts, and therefore cannot mention it within Investopedia articles.