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Financial services firm Celfin has initiated coverage of Bancolombia (NYSE: CIB) with a hold recommendation and end-2011 target prices of 30,280 pesos for the locally traded stock and US$65.30 for the ADRs.
Celfin's target price implies price-to-book (P/B) multiples of 2.5 for 2011 and 2.0 for 2012, in line with Bancolombia's historical trading range and below the average 12-month forward trading multiple for Celfin's Andean banking coverage universe.
Celfin expects 19% annual expansion in Bancolombia's loans this year and next, which will drive earnings up by 22.5% in 2011 and a additional 25.1% in 2012.
"On the other hand, we see some obstacles for both Bancolombia and the Colombian banking industry to maintain double-digit growth rates in the long term. Finally, we believe most of the near-term expansion for the bank seems to have already been factored into Bancolombia's share price," the report reads.
Bancolombia is Colombia's second-largest bank and also operates the largest bank in El Salvador.