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Banking

Argentine banks see parallels with Brazil 2003 as brighter future beckons

Low levels of credit penetration provide huge growth opportunity; other positive factors include sector consolidation and regulatory liberalization.

Despite a recent surge in the valuations of Argentine banks, analysts believe the country’s financial sector still has lots of room to grow, due to large and frontloaded credit growth.

In 2017, the Argentine financial system saw loans grow by 54%, a strong acceleration compared with the 28% growth in 2016.

Frederic-de-Mariz-headshot-160x186

Frederic de Mariz,
UBS

UBS analyst Frederic de Mariz says that his conversations with banks’ management teams have led him to believe that “the system should continue to grow loans at 15% in real terms for the next three years, or 25% in nominal terms. We estimate 36% for 2018-2019, in line with market expectations of 37%.”

Credit Suisse is another bank that expects greater upside in terms of growth and valuations – and draws comparisons with the Brazilian banking boom between the end of 2003 and 2007.

Credit Suisse banking analyst Marcelo Telles believes there are many parallels.

During that period in Brazil, annual loan growth reached as much as 26% per year in real terms. The leading banks – such as Itaú and Bradesco – consistently traded at elevated multiples: price to books of around 3.5-times

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