Back to top

Value

The U.S. and European banks may still be dealing with debt but the South American banks are hot as their economies expand. Banco Macro S.A. (BMA - Snapshot Report) in Argentina, recently surprised on the Zacks Consensus for the 6th straight quarter. This Zacks #1 Rank (strong buy) is expected to grow earnings 20.4% in 2010.

Banco Macro is one of Argentina's largest private banks. It has several hundred branches nationwide and has expanded into the country through acquisitions. The bank has a presence in both the agriculture community as well as the urban areas of Buenos Aires.

Banco Macro Surprised By 21% in the Third Quarter

On Nov 4, Banco Macro announced its third quarter results and surprised on the Zacks Consensus by 20 cents. Earnings per share were $1.14 compared to the consensus at 94 cents.

Banco Macro has a good track record of surprising on the estimate.

Net income grew 40% to Ps.267.9 million from Ps.190.9 million in the year ago quarter.

Deposits rose 6% over the second quarter with private sector deposits increasing 5%.

Credit also expanded in the third quarter, as financing to the private sector jumped 10% from the second quarter. This growth was boosted by credit card and consumer loans which increased 30% and 10%, respectively.

The all-important average return on equity was 27.5% through the first 9-months of the year and is much higher than the 2009 ROE of 24.6% and the highest since 2004.

Zacks Consensus Estimates Rise

There are 3 estimates for both 2010 and 2011 which is a lot for a foreign bank. 2 out of the 3 have risen for 2010 since the third quarter report came out which has pushed the Zacks Consensus up to $3.94 from $3.60.

While the Zacks Consensus is also rising for 2011, to $4.05 from $3.85 per share, analysts expect less earnings growth of just 3%.

BMA Has Value

Banco Macro trades with a forward P/E of 12.8, which is under its peers at 16x. But the P/E isn't as useful when evaluating the bank stocks.

So I look at the price-to-book ratio. Banco Macro has a P/B of just about 3.0 which is the cut-off for where you want a bank to be (which is under 3.0.)

Its return on equity numbers, as recounted above, are outstanding however. The bank also pays out earnings to its shareholders, with a current yield of 1.8%.

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.

Please login to Zacks.com or register to post a comment.