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Bear of the Day: Banco de Chile (BCH)

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When global markets get selective, foreign financials are often the first place investors start trimming exposure. You get that double-edged sword of equity risk and currency risk. Risk-off typically means dollar strength, which is no good for foreign stocks. Today’s Bear of the Day has avoided these pitfalls for now. However, the near-term setup is far less compelling than it looks on the surface.

Today’s Bear of the Day is Zacks Rank #5 (Strong Sell) Banco De Chile ((BCH - Free Report) ). Banco De Chile, as the name implies, is principally engaged in commercial banking in Chile. Banco de Chile is not a small or fringe institution. It is one of the cornerstones of the Chilean banking system, with a history stretching back to 1893. The bank operates as a full-service financial institution, offering commercial banking, retail banking, corporate lending, wealth management, and treasury services. In terms of domestic relevance, this is about as “too important to ignore” as it gets in Chile.

The core issue is earnings momentum. Analyst estimate revisions have been drifting lower, reflecting pressure from slowing loan growth, tighter financial conditions, and a less forgiving macro backdrop in Chile. The country has been grappling with uneven economic growth, sticky inflation, and policy uncertainty, all of which tend to show up quickly on bank balance sheets. Net interest margins are no longer expanding the way they did when rates were moving higher, and credit costs are starting to creep back into the conversation.

While the stock has surged higher, earnings have taken a breather. Analysts have cut their earnings estimates for both the current year and next year over the course of the last month. The bearish moves have dropped our Zacks Consensus Estimates from $2.56 to $2.54 for the current year, while next year’s number is off from $2.81 to $2.73.

The Banks – Foreign industry is in the Top 16% of our Zacks Industry Rank. As such, there are other names within the industry that are in the good graces of our Zacks Industry Rank. These include Zacks Rank #1 (Strong Buy) stocks Banco Bilbao Viscaya Argentaria ((BBVA - Free Report) ) and Itau Unibanco ((ITUB - Free Report) ).


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Banco Bilbao Viscaya Argentaria S.A. (BBVA) - free report >>

Itau Unibanco Holding S.A. (ITUB) - free report >>

Banco De Chile (BCH) - free report >>

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