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Bancolombia 4Q13 Results: First quarter with Banistmo's figures surprised us positively - Credicorp Capital

Quarterly Results: Bancolombia - HOLD

First quarter with Banistmo's figures surprised us positively
Price: COP 22,220; Target Price: COP 27,180

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February 4, 2014 ( newswire) 4Q13 is the first quarter consolidating Banistmo's operations. In this context, 4Q13 net income came 25% above our forecast, but the year's figure decreased 11% YoY. The positive surprise was mostly explained by lower provision expenses, which declined 18% YoY. The better performance on provisions was due to a decrease in the organic growth of the bank (12.4% YoY, below guidance), which translated into lower counter-cyclical provisions. Also, provision expenses from Banistmo were charged against equity (reflecting on greater goodwill), allowing a softening on P&L.

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The consolidation did not reflect on a material impairment on asset quality, and the NPL ratio closed the year at 1.8%, in line with our forecast. Management guidance for 2014 includes stability in asset quality, assuming a consolidated loan growth in the 10%-15% range.

Efficiency efforts (especially in headcount) are yielding good results, although the indicator remains weak. Further, the consolidation of Banistmo will reflect on 2014 opex. The strong IT investment project (Innova) ended last year, and will take a toll on opex via amortizations until 2015.

Even though management's guidance on long-term ROAE remains at 18%, the figure for 2014 is in line with our estimation (around 14%). Our current TP is COP 27,180/share with a HOLD recommendation. Current Tier 1 looks low (below 6%), but should improve around 220 bps with the capital injection.

For charts, tables and the full report, see the attached file.

Credicorp Capital

To View Complete Report: Bancolombia 4Q13

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