It is too risky to buy the banks right now? Banco Latinoamericano de Comercio Exterior, S.A. is a specialty bank that has been bucking the trend as it has grown its portfolio and its deposit balance. But because of global banking fears, this Zacks #1 Rank (strong buy) trades with a low forward P/E of just 7.8.
Banco Latinoamericano (aka Bladex) was created by the Central Banks of Latin America and the Caribbean as a supranational bank to support trade finance in the region.
Based in Panama, its shareholders include 23 Central Banks and state-owned entities in the region as well as Latin American and international commercial banks.
Third Quarter Net Income Rose 9%
On Oct 20, Bladex reported its third quarter results and met the Zacks Consensus of 44 cents. It has surprised 2 out of the last 4 quarters with a "meet" on the other two quarters.
Net income rose 9% to $16.3 million from the third quarter of 2010. It was boosted by the Commercial Division which rose 27% and which partially offset the Asset Management division which posted a loss in the quarter due the volatile markets.
The Commercial Portfolio rose 34% to $5.6 billion as average portfolio balances grew 11%.
As of Sep 30, Bladex's deposit balances also rose 34% to $2.5 billion, a new high and a 20% increase over the previous quarter.
The bank's Tier 1 capital ratio was 16.9% as of the end of the third quarter. That compares to 20.6% as of the end of the third quarter of 2010 and 18.1% after the second quarter of 2011. The decline is linked to the continued deployment of capital through growth.
Outlook Still Looks Solid
Bladex has ample capitalization and has been increasing its ROE levels even as the world economy slows.
For the first 9 months of 2011, the ROE averaged 10.8% compared to just 5.3% in the first 9 months of 2010. ROE is a key indicator of strength in a bank.
Zacks Consensus Estimates Rise
2011 is on its way to being a stellar year. The 2011 Zacks Consensus Estimate has risen 3 cents to $2.06 in the last 60 days.
That is earnings growth of 79% as the bank made only $1.15 a year ago.
The analysts are a bit more muted about 2012. They expect earnings to grow just 6.3% to $2.19 per share.
Bladex Is a Value Stock
Interestingly, shares haven't retreated very much in 2011. They weren't hit in the summer sell-off like most other stocks.
Yet, Bladex still has value.
In addition to a forward P/E of just 7.8, which is under its peers who average 9.8, Bladex also has a price-to-book ratio of only 0.6.
A P/B under 3.0 usually indicates value.
Shareholders are also rewarded with a pretty juicy dividend currently yielding 5%.
Bladex is in an interesting position among Latin American banks because it has positioned itself in a very specialized niche of trade finance. With Latin America and the Caribbean rich in commodities, energy and food, global trade out of the region is sure to rise.
Even with the chaos in the global financial sector, Bladex is a bank that a value or income investor might want to take a second look at.
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 on twitter at traceyryniec.