Sunday, January 27, 2008

Brazil Financial Stocks

Brazil is considered one of the leading economies outside of Europe and the U.S. There are dozens of Brazilian stocks that trade on the New York Stock Exchange. Previously I had written about Brazil Chemical, Energy and Mining Stocks . One of the best ways to play this market is through the Brazilian financial stocks.

A diversified way to invest in Brazilian stocks, including the financials, is through the Brazil exchange traded fund, iShares MSCI Brazil Index (EWZ), which invests 95% of its assets in stocks traded primarily on the Bolsa de Valores de So Paulo. The fund pays a yield of 1.5% and was up approximately 75% last year.

Banco Bradesco (BBD), which provides banking and financial services and products to individuals, companies and international corporations around the world, is the largest insurance and pension provider in all of Brazil, based on insurance premiums, pensions plan contributions and income from saving plans. With a head office in Osasco, Banco Bradesco has been in existence for over 60 years and is considered the leader in Brazilian lending. Their private sector branch and service network is the largest in Brazil. The company as nearly 3,000 branches across the country and offers services which include Internet banking, insurance, pension plans, annuities, credit card services and free Internet access for customers. In addition to its branches in Brazil, the company has branches in New York, Grand Cayman and Nassau, Luxembourg, Buenos Aires, and Tokyo.
On January 26, 2008, Bradesco was in talks to acquire a majority stake in Agora, which is the largest brokerage firm in Brazil.
Due to the Brazilian economy, Bradesco was featured on Cramer’s Mad Money financial show on October 30, 2007, with the stock being referenced as the best way to play the booming Brazilian economy. Reasons included few bad loans, a market leader in insurance and pension plans, and 20% of the ATMs in a wealthy country.
The stock has a P/E of 17, a PEG of 1.0, and pays a small yield of 0.3%.

Banco Itau Holding Financeria (ITU) is a bank headquartered out of Sao Paulo, which accounts for 11% of all retail banking services in Brazil, making it the second largest bank in Brazil. The company also owns Investimentos Itau. Currently, the company has 50,000 employees. Banco Itau provides a wide variety services including small business banking, credit cards, retail banking, asset management, and brokerage products. They have about 13 million customers.
On January 22, the company was reported to have had its M&A business grow by $7.5 billion, or 12.6% from 2006. This made it among the top ten financial advisers in Latin America, sitting at eighth, above even Merrill Lynch.
In early 2008, Banco announced it would be selling a 15% stake in the Brazilian credit card company Redecard through a share offering. In total, the purchase of the 15 percent would amount to nearly $1.4 billion.
The stock has a P/E of 13, a PEG of 0.85, and a yield of 1.5%.

Uniao de Bancos Brasileiros S.A. (UBB), also known as Unibanco, is a Sao Paulo based bank holding company with four divisions: retail banking, wholesale banking, insurance and pension plans, and wealth management.
The stock has a P/E of 204, a PEG of 0.74, and a yield of 2.1%.

Gafisa S.A. (GFA) is one way to participate in the Brazilian real estate market. It is one of the largest builders in Brazil, and does about 90 % of its business in Sao Paulo and Rio de Janeiro. On December 11, the company hit a new high for its stock price after spiking throughout the day, rising by $3.15 to $42.56.
The stock has a P/E of 107 and a PEG of 0.42.

Author does not own any of the above.

By Fred Fuld at Stockerblog.com

3 comments:

vaerge said...

Some hands-on info:
Especially Bradesco and Itau are good for 'sure bets' (doesn't exist, I know). They are huge banks sitting firmly on the market, with Ita├║ being South America's largest bank, and Bradesco Brazil's largest.
I have first-hand experience with both banks (I do private banking in Bradesco and corporate banking in Itau). On their lending policies, they carry extreme caution plus sky-high interest rates - based on tough experience from the past, and then they also do it simply because they can! The competition for banks is not tough at all in Brazil, because it is so hard for new banks to get in because of red-tape, - so the existing ones enjoy very high returns.
Right now, the Brazilian central bank's overnight rate (called CELIC) is 11,25% per year. High? Yes, - but for example does Bradesco charge 7,39% on a simple overdraft account... - per month, that is! That's a freakin' 135% per year interest! It doesn't take much of a math genious to figure out that they make good money on that, even with all their bureacracy!

I keep my hands in the dirt to follow investment in Brazil - it's really interesting from an insider's view as well!

/Anders

Cathy Mena said...

I have first-hand experience with both banks (I do private banking in Bradesco and corporate banking in Itau). On their lending policies, they carry extreme caution plus sky-high interest rates - based on tough experience from the past, and then they also do it simply because they can!
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