Wednesday, September 29, 2010

Credicorp: A Bank for All Seasons

By Eric Jackson
RealMoney Contributor

9/28/2010 7:47 AM EDT
Click here for more stories by Eric Jackson

Last month, I wrote about my favorite Latin American bank at the moment, Credicorp (BAP - commentary -Trade Now).

At the time of the article, banks were swooning through a tough August. There was fear that September was going to bring more pain. Yet, as we know, September has been one of the best for equities on record. Still, market skeptics point out that financials have lagged the broader indices this month, which is a sign of more trouble ahead.

Despite this, little Peruvian bank Credicorp has defied its peers and staged an impressive ramp up in its stock price over the last month. The share is up 12.5% in the last 30 days, compared with almost a 10% gain for the S&P 500. Over that same period, Citigroup (C - commentary -Trade Now) and Wells Fargo (WFC -commentary - Trade Now) have only gone up 6%.

So, is it too late to buy in to the Credicorp story? I don't think so. There appears to be more upside ahead. Here are the top reasons for owning the stock, as I see it.

It's a much smaller bank: The bank is "only" just under $10 billion in market capitalization. This means it is large among its peers in the region and able to go after big deals that appear, yet it is not "too big to fail". It is not on the level of a large multinational bank, so should be able to retain the entrepreneurial zeal that has helped it grow to its current size for a number of years to come.

Latin America is still hot: As I argued before, an investment in Credicorp over the last 3-5 years has been an investment in the thesis that the region is going to grow significantly faster than more mature economies. This has played out, and there appears to be no immediate end to it in sight. As more multinationals continue to hunt for economic growth as the U.S. and Europe tread water, they're going as far afield as Africa. Latin America, by comparison, is more of a known quantity, with rich resources and newfound political stability. The region will continue to post above-average growth rates for the medium term, in my opinion.


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