Regime Change on the Horizon: Bancolombia $CIB and Grupo SURA $GIVSY

For those of you who have read my writeup on Ecopetrol (EC), the thesis just got a little bit stronger. Not only have energy prices rebounded somewhat due to the cold winter, but Colombia just became even more likely to transition from incompetent communist leadership to hopefully competent capitalist leadership in May of 2026.

I don’t know how far ahead one has to look in order to most efficiently skate to where the hockey puck is going before the crowd has already bid up the prices, but fifteen to sixteen months is probably about right. I believe Stanley Druckenmiller recommends between twelve and eighteen months, and this is exactly in that window.

In December of 2024, polls were putting Gustavo Petro, president of Colombia, at 66% disapprove, 26% approve. Not to get too far into the weeds of the details of deportation flights, but yesterday El Presidente prevented two US military aircraft with deportees from landing in Colombia, Trump threatened tariffs and sanctions, and Petro backed down. If I had to guess, this would make an already unpopular president appear stupid for picking a fight with Donald Trump, and weak for backing down so quickly. I am a bit disappointed that the entire confrontation took place while the markets were closed, as now I am not certain that I will get a delicious dip in Colombian equities, but we will have to see how the market reacts in the morning.

Me, who has been looking at Colombia as an investment opportunity when Petro challenges Trump on immigration:

Today the Colombian stock market sits a full 2.21 standard deviations below their 20 year average price to earnings multiple at 6.61x vs 13.01x. Beyond that, the current leadership of the state owned enterprises is full of inefficiencies from administrative bloat and mission statement creep. It is entirely possible that with regime change, not only would investors enjoy a rerating in multiples, but that profit margins could expand under more efficient leadership.

There aren’t many investible American Depository Receipts (ADRs) to choose from as an American, but aside from Ecopetrol there is BanColombia (CIB). BanColombia is the largest bank in Colombia with 27% market share, and it has some international diversification with 15% market share in El Salvador, 10% in Guatemala, and 6% in Panama. The ADRs that trade under the symbol CIB represent preferred shares, which make them a better income security than a growth stock, but they do have the potential for appreciation if BanColombia can increase their earnings. To buy the common shares, you would have to transact on the Colombian exchange itself, or buy the company which owns 46% of the common stock, Grupo SURA, but more about them later.

BanColombia has been spending heavily on development, including building out Nequi, the popular Colombian neobank. So if you read my Brazilian fintech writeups, hiding within the BanColombia Group is their very own version of Nu Holdings, Nequi.

BanColombia has managed to increase book value per share from 11,162 pesos to 39,601 pesos from 2011 to 2023. Adjusting for Colombian inflation, that still comes out to a 5.4% real increase in book value per share, 10.2% nominal. Over that time, dividends have grown at an 8.4% real rate, 13.6% nominal. Of course the dividend can’t outpace the business forever, so I would expect dividend growth to slow.

And one thing that I find very interesting about BanColumbia is that two days ago, they suddenly broke out of their sideways price channel with a massive price spike. Especially now that the US Dollar is starting to weaken for the first time in months, CIB is in a very interesting position.

While about 23% of BanColombia is owned by the Colombian pension system, 46% of the voting power and 24.5% of the economic value is held by Grupo SURA, a publicly traded conglomerate on the Colombian exchange which also has an American ADR, GIVSY. So if you want to own the common stock of BanColombia, you could do it by buying GIVSY, but in addition to BanColombia, you would also own 81% of Sura Seguros Insurance, 93% of Sura Asset Management, and 35% of Grupo Argos, a major infrastructure developer and cement company. Grupo SURA recently spun off Grupo Argos to trade separately, but still maintains a significant ownership stake. This makes two components of SURA that trade independently, and two that are closely held.

The Colombian business community reinvented the Japanese keiretsu strategy in order to protect the businesses from hostile takeovers or influence from the government. The major corporations own stakes in each other to keep the voting power in the hands of the private sector of Colombia. So surprisingly, while the Colombian government controls 88% of the voting shares of Ecopetrol, Grupo SURA and Grupo Argos do not have direct control by the Colombian government, and BanColombia only has 21% of the votes controlled by government with 46% of the votes in the hands of the private keiretsu.

This keiretsu may be in the process of splitting itself up in order to unlock value and to stop suffering under the conglomerate discount. Just last year Grupo SURA divested of Grupo Nutresa, a food processing company. If SURA could get out from under the conglomerate discount, the potential for a multiple rerating is enormous.

To put this conglomerate discount in perspective, SURA trades at a market capitalization of $3.06 billion. But it owns 35% of Grupo Argos which trades at $3.54 billion, and 24.5% of BanColombia which trades at $8.57 billion. This means that Grupo SURA, with 81% of Sura Seguros and 93% of Sura Asset Management trades at about $300 billion less than the value of their ownership stakes in BanColombia and Grupo Argos alone. You are getting paid about a 10% discount to buy BanColombia and Grupo Argos and you are getting the other two companies for free by buying Grupo SURA. This is the same situation El Cresud (CRESY) was in when I wrote about them at $8 a share.

But back to BanColombia, how big of a rerating could they potentially enjoy? Well, under current leadership net margins have fallen from 18% in 2012 to 5.5% today. This is similar to EcoPetrol, the leadership takes the profits and uses them to acquire other assets. Under a different regime, the earning potential of BanColombia is enormous. Rather than earning $580 million on $10.4 billion of revenue, a lean and mean BanColombia could earn $1.8 billion on those revenues. Historically, BanColombia traded at a price to earnings as high as 8.0x to 10.0x, and today it sits at 6.05x. On just a multiple rerating alone, the stock price could quickly climb to between $46 to $57. With efficient operation, a couple years after Gustavo Petro leaves office, BanColombia’s ADR CIB could be a $135 stock, responsible for around $17 of earnings per share.

Grupo Argos, currently at a price to earnings ratio of 8.80x could easily return to past multiples of 12x to 14x. Unlike BanColombia, Grupo Argos is currently experiencing increasing profitability. This could be due to the effect of Gustavo Petro’s 10% annual inflation rate on the real assets Grupo Argos’ infrastructure and cement business. With a multiple rerating for Colombia, the value of Grupo Argos could be between $4.8 billion and $5.6 billion.

And now for the real fun, Sura Seguras, the insurance arm of Grupo SURA, did $5 billion in premiums in the last 12 months. That makes them about the size of Cincinnati Financial (CINF), a $21 billion market capitalization insurer. Of course I don’t expect Colombia to trade at American multiples, but if the US trades at an average price to earnings of 26, and Colombia trades at an average price to earnings of 13, I see no reason why Sura Seguras, the fourth largest insurance group in Latin America, couldn’t be worth $5 to $10 billion.

Sura Asset Management isn’t the fourth largest pension fund in Latin America, they are the largest with $174 billion of assets under management. They generate about a third of their earnings from Mexico, a country with a large population that is rapidly growing wealthy due to industrialization from the friendshoring phenomenon and cheap piped natural gas from the US. Based on comparisons to other medium sized asset managers, the value of Sura Asset management would be between $1.5 and $3.0 billion.

This sum of the parts on Grupo SURA, based on Colombia returning to their 20 year average price to earnings ratio of 13.06x, would put a market capitalization of between $11 billion and $18 billion. Even if the conglomerate discount never goes away, the GIVSY ADR easily has room to double from here. And if Grupo SURA does do more spin offs or restructurings in order to fetch a higher multiple, all the better. And while I wait for that multiple rerating, Sura Insurance has been growing at a 16% growth rate, Sura Asset Management has been growing at an 11% growth rate, BanColombia has been growing at a 9% growth rate, and Grupo Argos has been growing at a 6% growth rate, although that last one is highly cyclical.

I think the future looks bright for Colombia, and I am hoping that there are some steep discounts for Colombian equities after the geopolitical drama, however, with the quick resolution, I may not be so lucky. Even without the dip to buy, if the goal is to skate to where the hockey puck is going, the Colombian election is about fifteen months away, and that is about the timeframe that is needed to be in front of the crowd.

BanColumbia Preferred ADR (CIB) $35.67: $46 by end of 2026 while paying a 9% yield

Grupo SURA ADR (GIVSY) $17: $35 by end of 2026 while paying a 3% yield