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Colombia has seen its economic prospects rebound from the days when it had a reputation as a haven for drug lords. Bancolombia S.A. (CIB - Snapshot Report) is expected to grow earnings by the double digits in both 2010 and 2011.

Bancolombia offers diversified banking services including asset management, insurance, pension services and brokerage services at 895 branches to both individual and corporate customers in Colombia.

Founded in 1881, the bank also does business in El Salvador under Banagricola S.A. and has offshore interests in Panama, Puerto Rico and the Cayman Islands.

Bancolombia Surprised by 19% in the Third Quarter

On Nov 3, Bancolombia announced its third quarter results and surprised on the Zacks Consensus Estimate by 17 cents. Earnings per share were $1.06 compared to the consensus of 89 cents. This was a 17% increase from the 85 cents per share reported in the third quarter of 2009.

Net loans grew 7.8% compared to the year ago period and 3.5% compared to the second quarter of 2010. Consumer loans in Colombia rose 19% compared to last year.

Loan deterioration also improved compared to the third quarter of last year, falling 62%. Charge offs also continued to move in the right direction, declining 27% compared to a year ago and falling 38% compared to the second quarter.

The capital adequacy ratio rose to 15.2% (Tier 1 of 10.6%) compared to 13.8% in the third quarter of 2009 (with Tier 1 of 10.9%).

The company also saw higher fees in the quarter from credit cards, banking services and more use of branch networks.

Zacks Consensus Estimates Moving Higher

Analysts are suddenly bullish on Bancolombia for 2010 and 2011. The 2010 Zacks Consensus Estimate has moved up by a penny to $3.67 per share as 1 estimate has been revised higher in the last week.

This is earnings growth of 17.7%.

Similarly, 1 estimate has also been revised in the last week for 2011, pushing the Zacks Consensus Estimate up by 10 cents to $4.59 per share. That is earnings growth of 24.9%.

You can see the bullish estimate projections in the 5 year price to consensus chart.

The company is scheduled to report fourth quarter results on Mar 7.

Attractive Valuations

Bancolombia has attractive valuations at these levels. The company has a forward P/E of just 12.6. With its projected growth rates, it also has a PEG ratio of 0.9.

The company's return on equity (ROE) is a solid 18.8%, far above its peers at 13.7%.

Unlike U.S. banks that slashed dividend payouts during the crisis, Bancolombia continues to reward shareholders with a dividend yielding 2.4%.

Bancolombia is a Zacks #1 Rank (strong buy) stock.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at twitter.com/traceyryniec.

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