Mar
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Bank robber William “Willie” Sutton is attributed as saying the reason he robbed banks was “because that’s where the money is,” a quote that anyone thinking of bottom fishing for now small cap Argentina bank ADRs like Banco Macro SA (NYSE: BMA), BBVA Banco Frances SA (NYSE: BFR) and Grupo Financiero Galicia SA (NASDAQ: GGAL) should remember. That’s because Argentine President has already grabbed pension funds, an airline and the Spanish stake in YPF SA (NYSE: YPF) and now it looks like the country could go into default again to avoid paying holdout creditors from the country’s 2001 default – news that’s sending Argentine ADRs to new lows (See my previous article: Bottom Fish for Argentina ADRs or Leave Them to the “Looters”?). Likewise, Argentina is still largely shut out of international debt markets after is last default while the grabbing of YPF SA (along with pensions and an airline) did nothing to reassure investors that the same won’t happen to them whenever the government needs more money. Nevertheless, should you bottom fish for Argentina banking ADRs or is anything involving Argentina just too risky?
Starting with Banco Macro SA, its the second largest domestically-owned private bank in Argentina and the sixth-largest by deposits and lending. Earlier in February, Banco Macro SA reported a 23% rise in net profit to 426 million pesos ($87 million) in the fourth quarter along with a 26% rise in net income to 1.49 billion pesos for the year. The increases were attributed to growth in financing the private sector, including commercial loans, credit cards and personal loans. However, it should be noted tat back in December, it was reported that Argentina’s government would demand banks to grant a new round of low-cost loans to companies totaling about $3.5 billion or the equivalent of 5% of bank deposits, in an attempt to prop up the economy. Many banks apparently complied with the requirements by renegotiating loans with their current clients at lower rates. On Thursday, Banco Macro SA sank 7.39% to $14.53 (BMA has a 52 week trading range of $10.74 to $21.93 a share) for a market cap of $863.79 million plus the stock is down 32.6% over the past year and down 36.6% over the past five years.
Meanwhile, BBVA Banco Frances SA is Argentina’s oldest bank as it was founded in 1886 and its now the third largest bank in the country. In 1996, Spain’s Banco Bilbao Vizcaya, now known as Banco Bilbao Vizcaya Argentaria SA (NYSE: BBVA), acquired the 99.9% of the common shares of a major shareholder that was a holder of over 30% of the capital of Banco Francés – hence the BBVA in its name. However, not much news appears about Banco Frances SA with the last news being from October about Standard Poor’s Ratings Services leaving the bank’s credit rating the same after downgrading the rating of BBVA. On Thursday, BBVA Banco Frances SA fell 9.82% to $4.04 (BFR has a 52 week trading range of $3.05 to $6.44 a share) for a market cap of $723 million plus the stock is down 34.1% over the past year and down 38.3% over the past five years.
Finally, Grupo Financiero Galicia SA was founded in 1905 and is the fifth largest bank in Argentina. Earlier in February, Grupo Financiero Galicia SA reported that net profit rose to 368.2 million pesos ($74.8 million) from 355.1 million pesos for the same period in 2011 while net profit for the year rose 21% to 1.34 billion pesos in 2012. Apparently, Banco Galicia, the group’s main asset, was able to expand its market share of private-sector loans along with deposits during the year. Results were apparently in line with expectations for a “high volume of intermediation, a slight compression in margins, increases in cost and a gradual asset quality deterioration and with important gains in market share.” On Thursday, Grupo Financiero Galicia SA fell 8.87% to $5.24 (GGAL has a 52 week trading range of $4.14 to $7.40 a share) for a market cap of $650.50 million plus the stock is down 26.4% over the past year and down 24.8% over the past five years.
The Bottom Line. While the financial performance of small cap Argentina banking ADRs Banco Macro SA, BBVA Banco Frances SA and Grupo Financiero Galicia SA look good, their stock prices have suffered along with the image of the country. Likewise and if banks is where the money is in Argentina, you can bet that banks or their deposits or profits will be the next thing that the politicians try to grab.
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