Thursday, August 19, 2010

A Peruvian Bank Offers Stable Growth

By Eric Jackson
RealMoney Contributor

8/19/2010 12:22 PM EDT
Click here for more stories by Eric Jackson

Banks have scared many investors this year. Just when we thought it was safe to wade back in the waters of U.S. banks earlier this year, we got smacked over the head with news of increased jobless claims and fears of a double-dip recession, which would cause more loan and mortgage defaults. European banks have been a horror show of volatility all year.

However, there are some good banks out there, and banks -- let's face it -- have one of the greatest business models in the world for making money.

One bank that has really performed well over the past three years is Credicorp (BAP -commentary - Trade Now), which is based in Lima, Peru.

Since the start of 2007, Credicorp is up 147% while the S&P 500 is down 22%.

It's still got a good growth story in front of it. The bank has a market capitalization of just under $8 billion, so this is nowhere near the size of the big international bank behemoths like Citigroup (C -commentary - Trade Now) or Bank of America (BAC - commentary - Trade Now).

Credicorp has been sticking to its knitting of lending in Peru and in neighboring Latin American countries. So an investment in Credicorp is a proxy investment in the continued growth of Latin America. As companies thrive and go back to Credicorp for new loans for new expansion, the bank benefits.

And while U.S. and European banks will be deleveraging for many years to come to clean up their balance sheets, Credicorp is a pleasant stroll down memory lane for many investors who remember what it was like to invest in small, aggressive U.S. banks with clean balance sheets 20 years ago.

Credicorp has $3.5 billion in cash on hand, as of the end of last quarter, and only $3.8 billion in debt. Compare that with Wells Fargo (WFC - commentary - Trade Now), which has $137 billion in cash and $230 billion in debt.


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