Analyst Sees Exceptions Among Latin American Banks

Slower growth and lower commodity prices spell diminished returns for the Latin American banking sector, an analyst said Wednesday. But Credit Suisse's Marcelo Telles said certain institutions in the region "still offer attractive potential." Telles upgraded both Mexicos Grupo Financiero Inbursa SAB de CV
GPFOY
and Banco Santander-Chile
BSAC
to Out Perform from Neutral. The sector as a whole, however, will show slower-than-expected earnings growth and Telles sees consensus estimates falling along with commodities prices and a bull market for the dollar. Although investors often pursue growth premiums in developing markets, Latin American banks "aren't the high-growth places they used to be," Telles said, noting that loan growth has been slowing in the region since 2012. Preferred countries currently: Mexico, Chile and Peru. Economic ties to the U.S. cushion Mexico while Chile, although exposed to falling copper prices, is a net importer of oil and stands to gain from lower costs. Peru, meanwhile, will see fast export growth from a relatively low level. Least loved are Brazil and Columbia, where Telles sees the "worst risk-reward" ratio. The analyst also upgraded Grupo Fin Banorte SE
GBOOF
and Santander Mexico Financial Group SAB de CV , to Neutral from Under Perform. Telles downgraded Bancolombia SA
CIB
to Neutral from Outperform.

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