Unfortunate Diminishment
It’s a tough pill to swallow for Bancolombia (NYSE:CIB) investors as the stock took a sharp 2.1% nosedive during Thursday morning trading. Bank of America Securities ruthlessly downgraded the bank, shifting its rating from Neutral to the dreaded Underperform. The reasoning behind this descent? Earnings growth is expected to hit a roadblock amidst the backdrop of declining interest rates.
Forecasted Struggles
The horizon doesn’t look promising, at least according to analyst Ernesto Gabilond, who projected a rather humble earnings resurgence in the upcoming years. Gabilond’s note to clients painted a rather bleak picture, foreseeing a maximum return on average equity (ROAE) of merely 15% by the time we hit the years 2025 and 2026.
Adversity Ahead
Central banks lowering interest rates are set to apply pressure to Bancolombia’s net interest margin, a factor that had previously been a boon when monetary policy was more restrictive in the region. Under these circumstances, Bank of America’s Underperform rating appears to be the bearer of bad news, surpassing the SA Quant rating and the typical Wall Street analyst rating, both currently sitting at Hold.