Zacks Industry Outlook Highlights: Grupo Financiero Galicia S.A., Banco Latinoamericano de Comercio Exterior S.A., Credicorp, Banco Santander, S.A. and Credit Suisse Group

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Nov 02, 2011, 09:30 ET

CHICAGO, Nov. 2, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Non-U.S. Banks, including Grupo Financiero Galicia S.A. (Nasdaq: GGAL), Banco Latinoamericano de Comercio Exterior S.A. (NYSE: BLX), and Credicorp Ltd. (NYSE: BAP), Banco Santander, S.A. (NYSE: STD) and Credit Suisse Group (NYSE: CS).

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A synopsis of today's Industry Outlook is presented below. The full article can be read at

http://www.zacks.com/stock/news/63784/Non-U.S.+Banks+Stock+Update+-+November+2011

Greece adopted measures to minimize government spending, but there is no guarantee that the country is out of the woods as affluent domestic and foreign investors will not stop withdrawing their money from Greek banks anytime soon. Also, the rising inflation will force regulators to tighten their policies in the Euro-zone, making banks less flexible.

May 2011 saw the re-emergence of the Greek crisis, with refinancing of public debts. Political instability further compounded the problem. The Greek government quickly intervened; the European Union leaders lent financial assurance and the situation is now under control. In October 2011, European Union leaders agreed to prevent the collapse of member economies through a package of measures. This included a proposal to write off 50% of Greek debt and demand 9% capitalization by European banks. However, acceptance of the package became dicey following the Greek Prime Minister's announcement of a referendum for the view of the Greek people.

Overall, the European Union is trying hard not just to restore investor confidence but also the health of the continent's banking system, but the issue is far from fully addressed.

Coming to banks in emerging economies, they will obviously face asset quality issues. However, they are not plagued by other significant problems that many of the larger banks face in continental Europe and the United Kingdom, such as toxic securities and dilution from capital raising. Moreover, these emerging-market banks generally tend to be well capitalized, aren't as heavily exposed to property markets, and have significant and growing sources of non-interest income.

Overall, a key determinant for quick recovery will be the quality of risk analysis and risk-awareness in decision-making and incentive policies. So, we believe that accumulating larger capital buffers over the cycle and reducing pointless complexity in business will be crucial to banking performance.

Also, the primary attention of policymakers should be on determining how much longer the fiscal stimulus should continue, ensuring that it is not withdrawn before a clearer sign of economic recovery is visible.

OPPORTUNITIES

Among the non-U.S. banks, we recommend Grupo Financiero Galicia S.A. (Nasdaq: GGAL) with a Zacks #1 Rank (Strong Buy). Banks that we also like with a Zacks #2 Rank (Buy) include Banco Latinoamericano de Comercio Exterior S.A. (NYSE: BLX) and Credicorp Ltd. (NYSE: BAP).

WEAKNESSES

We would suggest avoiding banks in Greece at this point. Also, it is better to steer clear of banks in Great Britain and Ireland, particularly those that have participated in government recapitalization programs and are yet to reimburse the money. In return for government capital and asset quality protection, these banks are facing regulatory intervention, like enforcing limits on dividend payouts and board member nominations.

Currently, banks that we dislike with a Zacks #5 Rank (Strong Sell) include Banco Santander, S.A. (NYSE: STD) and Credit Suisse Group (NYSE: CS).

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