CIB - Bancolombia ADRs fall after BofA cuts on 'fragile' political economic outlook

2023-04-27 10:47:12 ET

• Bancolombia S.A. ( NYSE: CIB ) American Depository Receipts tanked 5.8% in Thursday morning trading after Bank of America downgraded the Colombian lender to Neutral from Buy as the country's "political and economic outlook remains fragile."
• Calling it a "cabinet crisis," analyst Ernesto Gabilondo pointed out that President Gustavo Petro sacked Minister of Finance  Jose Antonio Ocampo, "whose influence has been critical to moderate reform plans (seen as making them friendlier to the economy and markets)."
• On top of that, CIB's "earnings are poised to perform modest earnings growth in the next years as the bank’s NIM will be under pressure under a lower interest rate environment," the note said, while noting the bank's cost of equity is surpassing its profitability.
• Nonetheless, Gabilondo added, CIB's balance sheet is stronger vs. pre-pandemic levels thanks to higher capital ratios.
• The Neutral rate disagrees with the Quant system rating and the average Wall Street analyst rating, both at Buy.
• SA's Quant favors CIB notably more than fellow Colombian bank Grupo Aval Acciones y Valores S.A.

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