Is it too risky to buy a South American bank right now? Grupo Financiero Galicia S.A. ( GGAL - Snapshot Report ) recently surprised on the Zacks Consensus for the third time in the last four quarters. This Zacks #1 Rank (strong buy) is trading at just 6.7x forward estimates.

Grupo Galicia is the holding company for Banco Galicia, one of Argentina's oldest banks, which provides financial services to corporations and individuals throughout Argentina. It also is a big supplier of credit cards.

Grupo Galicia Surprised By 19% in the Second Quarter

On Aug 9, Grupo Galicia reported its second quarter results and beat the Zacks Consensus by 8 cents. Earnings per share were 50 cents compared to the Zacks Consensus of 42 cents.

The bank's market share of loans to the private sector rose 0.3% to 9% compared with a year ago. In terms of deposits, market share of the private sector rose about 1% to 8.9% versus the second quarter of 2010.

94.8% of net income in the quarter came from Banco Galicia. Private sector credit exposure jump 48.3% in the prior 12 months and deposits were up about 50% in the same time period.

Private sector loans were up 51% year over year. The quarter was also boosted by credit-related fees which soared 69.5%. National and regional credit cards rose 47.5%.

ROE at 35%

Average Shareholders Equity (ROE) is a telling indicator for banks.

Gilicia's ROE in the second quarter was 35%, which remained steady from the first quarter which was also 35%, but jumped dramatically from 8.7% in the second quarter of 2010.

A ROE over 20 is usually considered attractive for a bank.

2011 Zacks Consensus Estimate Rises

The analysts liked what they heard in the second quarter. The 2011 Zacks Consensus Estimate rose to $1.77 from $1.74 in the last 30 days.

That is earnings growth of 110% over 2010 when the bank made just 84 cents.

Argentina's Growth in 2011

Given recent fears of a global economic slowdown, many analysts have been cutting GDP growth projections on Argentina. Recently, Morgan Stanley cut all of Latin America by 1% with the exception of Chile.

However, Argentina's growth rate is still projected to be between 5% and 7% in 2011.

Inflation has been an issue, however. It is projected to be running as high as 20%. Recently, the minimum wage was increased 25%.

Shares Have Sold Off

Emerging market stocks have been hit hard in 2011. Shares of Grupo Galicia were lower even before the recent sell off added to the decline.

Shares are down about 25% from earlier this year.

But that means that Grupo Galicia is even cheaper. In addition to a P/E under 10, it has a price-to-book ratio of 2.2.

For banks, a P/B ratio under 4.0 is usually preferred.

The bank pays a small dividend currently yielding 0.2% but you're not buying Grupo Galicia for the dividend as other South American banks pay more.

Investors are buying the bank for the growth potential and the valuation, both of which are very attractive.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.