Dividend Disaster Ahead for Bancolombia? Why CIB Investors Should Be Alarmed

Market Movers Alert: Bancolombia (NYSE:CIB) has been a dividend stalwart in the Colombian banking sector, rewarding shareholders with steady payouts for years. But beneath the surface, storm clouds are gathering. Here’s why this stock could be on the brink of a dividend disaster—and why investors should brace for impact.

The Dividend Red Flags Are Blaring

Let’s start with the numbers. Bancolombia’s proposed 2024 dividend of COP3.8 trillion marked a 10.3% increase over 2023, fueled by a 60% payout ratio tied to its robust 2024 net income of COP6.3 trillion. But here’s the catch: Q1 2025’s earnings are projected to drop 7.7% year-over-year, with consensus EPS forecasts plummeting to COP1.6 trillion from COP1.778 trillion in Q1 2024. That’s a COP178 billion hit in just one quarter.

A shrinking profit engine is a death knell for dividend sustainability. If earnings keep sliding, that 60% payout ratio—which management insists it will “maintain”—could become a suicide pact. Let’s do the math: If Q1’s EPS drop is a sign of things to come, 2025’s full-year net income could easily fall below 2024’s COP6.3 trillion. A 60% payout ratio on lower profits means smaller dividends—or a payout ratio so high it risks capital adequacy. Either way, investors get burned.

The Triple Threat Killing Bancolombia’s Profit Machine

Three trends are conspiring to squeeze profitability:

1. Net Interest Margin Meltdown: Bancolombia’s NIM—the lifeblood of banking profits—dropped to 6.2% in 2025 from 6.8% in 2024. Why? Colombia’s central bank is cutting rates, squeezing the spread between what the bank earns on loans and pays on deposits.

1. Loan Growth Slump: After a 10% surge in 2024, loan growth is projected to slow to a meager 5.6% in 2025. With Colombia’s GDP expected to grow just 2.6%, there’s less demand for borrowing. That’s a recipe for stagnant revenue in a sector where growth is everything.

1. Trouble in Panama: Its key subsidiary, Banistmo, saw net income plunge 56% in 2024 due to higher loan loss provisions and weaker net interest income. If Panama’s struggles persist, they’ll drag down the whole ship.

The Capital Buffet Isn’t Enough

Bancolombia’s equity grew 14.3% in 2024, giving it a war chest to weather short-term storms. But here’s the rub: The company is restructuring into a new holding company (Grupo Cibest) to boost capital efficiency. While this could free up funds for buybacks or dividends down the road, it’s a long-term play. In the near term, the costs of restructuring and stagnant earnings could force a dividend haircut.

The GuruFocus Warning Sign

GuruFocus flagged two red flags for Bancolombia, though details are vague. But let’s fill in the blanks: A shrinking profit margin, slowing growth, and a payout ratio tied to volatile earnings are classic warning signs. If management can’t reverse these trends, the dividend is a ticking time bomb.

Conclusion: Don’t Bet on Dividends Here

The writing is on the wall for CIB shareholders. A 7.7% Q1 EPS drop, NIM contraction, and slowing loan growth mean profits are under siege. Add in the Panama mess and the pressure to preserve capital through restructuring, and there’s little room for error.

While the 60% payout ratio is “fixed” for now, math doesn’t lie: Lower profits = smaller dividends—or a payout ratio so high it risks the bank’s health.

Action Alert: If you own CIB for dividends, this is a sell signal. If you’re on the sidelines, wait for clarity on Q1 earnings (due May 7) and the NIM trajectory. Bancolombia’s dividend could soon be a thing of the past—and investors ignoring these red flags are playing with fire.