Posts Tagged Brazilian Banks

That’s meaningful because what we are looking for is a definitive move into a new trading range. The dip last summer was steep and it’s been slow and awkard since then. September however has seen a significant rise in client portfolios. Again, it is the solid economic data that is driving this recent push. The United States is more stable than feared and China seems to be on a soft landing as they try to cool down breakneck growth. Meanwhile, the global Financial sector is digesting the new “Basel Rules” or capital requirement adjustments to make banks safer. They’ll require a 4.5 per cent tier one capital ratio, with a 2.5 per cent extra buffer. I noticed that in Brazil all banks must hold 11 per cent of combined tier one and tier two capital, a level above that required by Basel III. One more reason to keep building those position in the relatively safe industry of Brazil banks.

www.crinvestmentadvisors.com

Lending in Brazil grew last month, according to credit figures released today by the central bank (see link).   The growth rate is twice as fast for domestic banks such as Itau and Bradesco than their foreign.  Anyone, who lives in Brazil or observes the branch system could figure that out.  Brazilian domestic commercial banks are one of the savviest investments on earth right now.

http://www.bcb.gov.br/?ECOIMPOM

I walked into the old Paulista Headquarters to chat with a director of mortgage banking, "boots on the ground"

There is tremendous opportunity for investors in Brazil’s private national banks. Remember, common sense is our key. The consumer market in Brazil is expanding, interest rates are dropping, the macroeconomic profile of Brazilian is unprecedentedly stable. This is a big country that is about to create a big middle class and well positioned banks like Bradesco and Itau are going to grow with it. CR Capital Advisors strongly recommends that our clients begin building significant long term positions in both of these national, private commercial banks.

Looser monetary and fiscal policy is speeding recovery. The financial system is sound, and domestic demand has remained robust. Brazil’s changing trade patterns towards China have helped. There is an outbreak of long-termism.  Bradesco, perhaps the commercial bank that has the best consumer brand, has started to offer 30-year mortgages, something that would have been unthinkable a few years ago.   Again, commone sense, lower interest rates will bring a rapid expansion of mortgage finance, which at present amounts to just one percent of GDP.  Think about that, 1 percent of GDP?  Expand to 2 pecent and that is a 1oo percent return.  We see even more.  Brazil is now starting to grow again, and will return to annual growth of 3.5% to 4% next year.  The longer term prospect look even brighter.
  These institutions are the kind of stakeholders in faster growing economies that we advocate our clients build positions in and they are still conservative investments with growth potential.  www.crinvestmentadvisors.com

Itau on NYSE is at 9.75

http://www.bloomberg.com/apps/quote?ticker=ITSA3%3ABZ

Bradesco on NYSE is 16

http://www.bloomberg.com/apps/quote?ticker=BBD%3AUS

Begin building long term positions.  Between these two banks, it should also comprise 3-5 percent of your total equity portfolio within 5 years.