Welcome!

News Feed Item

The Zacks Analyst Blog Highlights: Bank of New York Mellon, Citigroup, HSBC Holdings, Itau Unibanco Holding and Banco Santander

CHICAGO, Aug. 19, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the Bank of New York Mellon Corp. (NYSE:BK-Free Report), Citigroup Inc. (NYSE:C-Free Report), HSBC Holdings plc (NYSE:HSBC-Free Report), Itau Unibanco Holding SA (NYSE:ITUB-Free Report) and Banco Santander, S.A. (NYSE:SAN-Free Report).

Zacks Investment Research, Inc., www.zacks.com

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

Here are highlights from Monday's Analyst Blog:

Dollar Pegging Drags Argentina to Default: 2 Banks Look Safe

Last month, Argentina defaulted for the second time in 13 years on failure of debt payments to the "vulture fund" bondholders. This resulted due to the decade-long legal battle between Elliot Management and the Argentine government. The dollar pegging policy taken by the Argentine government in 1991, holds the key to this default.

Dollar Pegging: Root Cause of the Default

Dollar pegging is a measure of valuing country's own currency at a fixed exchange rate against dollar. The movement of pegged currency is controlled by the movement of dollar. Dollar pegging is used as an effective instrument to control some economic factors including inflation and export-import pricing, and increase foreign investments.

Argentina faced certain acute economic problems between 1975 and 1990. These include hyperinflation, discouraging GDP growth, lack of adequate capital investment and low level of confidence on the government and the central bank. The country also experienced about eight crises related to its currency. The government chose to peg Argentine Peso against the U.S. dollar to address these issues.

The Pegging Effect

Initially the pegging policy was proven to be fruitful for the economy. As a result of this policy, inflation came down to almost 3.4% in 1994 from about 3000% in 1989. The GDP grew at almost 8% per year from 1991 to 1995. Moreover, the volume of foreign investment increased during this period and the export jumped.

However, the pegging's positives didn't last long. In 1998, the sudden drop in the European and Brazilian currencies took the price of Argentine exports to a very high level. But the rigid nature of "pegged exchange rate" didn't allow the government to reduce the interest rate in order to control the situation.

The government was forced to curtail the wages in order to reduce cost. This however led to higher unemployment rate and a decline in tax receipts. As a result, the deficit increased at an alarming rate and the government opted for raising public debt by issuing bonds. Reportedly, the volume of public debt escalated from 29.5% of GDP in 1993 to almost 50.3% in 1999.

Scenario Before the First Sovereign Default

By late 2001, unemployment rate soared to almost 20%. Moreover, the peso witnessed increasing outflow on higher demand for dollar. In order to handle the situation, the government imposed limitations on withdrawals from banks to not more than 1000 pesos/dollar. This policy faced an extreme round of protests which forced the President Fernando de la Rúa to resign.

Default in 2001

Extreme pressure of public debt forced the economy to suffer default and devaluation of its currency. The third-largest Latin American economy announced sovereign default of around $100 billion, the biggest default at the time. The situation was resolved only through large-scale debt restructuring.

In an effort to restructure, the Argentine government offered the bond holders to exchange older bonds for newer issues, which were valued at a fraction of those issued earlier. About 93% of the bond holders accepted the terms. This helped the economy to recover from its crisis in the following years.

Recent Default

The remaining 'holdout' investors or 'vulture funds' – led by NML Capital, a subsidiary of Paul Singer-led Elliot Management Corp. – refused to accept the terms and took Argentina to court to obtain the full value of the securities. The U.S. Supreme Court ruled that the country cannot not make payments to its restructured bondholders unless it pays off the holdout bondholders.

As a result, Argentina faced its second default after it has been forced to terminate the interest payment of $539 million to the bondholders. In June, the country deposited the money with The Bank of New York Mellon Corp. (NYSE:BK-Free Report), Argentina's trustee bank for its disputed bonds.

Default & Foreign Banks

Meanwhile, the subsidiaries of foreign banks are looking well prepared against the volatility that may occur due to the default. A lion's share of their portfolios consists of peso dominated central bank securities that are not included in the disputed sovereign debt category.

Moreover, most of the private banks have strong equity-to-asset ratios of about 10% with impressive loan loss reserves. Due to the strong financial position, these banks may get local currency liquidity from the central bank if funding volatility elevates.   

Reportedly, these banks – including Citigroup Inc. (NYSE:C-Free Report) and HSBC Holdings plc (NYSE:HSBC-Free Report) – are trying to arrange a group of investors who can rescue the country from the default by buying disputed bonds held by Elliott Management Corp.

2 Banking Stocks Look Safe and Attractive

Here are two foreign banking stocks that should perform well despite Argentina's default concerns.

Itau Unibanco Holding SA (NYSE:ITUB-Free Report)

This Zacks Rank #1 (Strong Buy) Brazilian bank operates through Commercial Banking, Itau BBA, Consumer Credit, and Market and Corporation Activity in countries like Brazil, Argentina and the U.S.

The bank has current year EPS growth estimate of 24.2%, compared to industry growth estimate of 10.5%. It also has a strong PE ratio of 10.61. The Zacks Consensus Estimate for the current year has been revised 3.5% up over the last two months.

Banco Santander, S.A. (NYSE:SAN-Free Report)

This Zacks Rank #2 (Buy) Spanish bank that operates in Spain, the UK, Portugal, Latin America and the U.S. Its services include retail banking, wholesale banking, asset management and insurance.

The bank has current year EPS growth estimate of 14.8%, higher than the industry growth estimate. It also has an impressive PE ratio of 15.61.

Bottom Line

Argentina is not a safe investment destination at the moment give the bleak economic outlook. However, certain sectors still has the ability to withstand the ongoing crisis. This is because these are insulated against the shockwaves going through the economy. The stocks mentioned from the banking industry are thus good additions to your portfolio.

Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros.  In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.

Get the full Report on BK - FREE

Get the full Report on C - FREE

Get the full Report on HSBC - FREE

Get the full Report on ITUB - FREE

Get the full Report on SAN - FREE

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Logo - http://photos.prnewswire.com/prnh/20101027/ZIRLOGO

SOURCE Zacks Investment Research, Inc.

More Stories By PR Newswire

Copyright © 2007 PR Newswire. All rights reserved. Republication or redistribution of PRNewswire content is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
The IoT is changing the way enterprises conduct business. In his session at @ThingsExpo, Eric Hoffman, Vice President at EastBanc Technologies, discuss how businesses can gain an edge over competitors by empowering consumers to take control through IoT. We'll cite examples such as a Washington, D.C.-based sports club that leveraged IoT and the cloud to develop a comprehensive booking system. He'll also highlight how IoT can revitalize and restore outdated business models, making them profitable...
SYS-CON Events announced today that MangoApps will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. MangoApps provides modern company intranets and team collaboration software, allowing workers to stay connected and productive from anywhere in the world and from any device. For more information, please visit https://www.mangoapps.com/.
SYS-CON Events announced today the How to Create Angular 2 Clients for the Cloud Workshop, being held June 7, 2016, in conjunction with 18th Cloud Expo | @ThingsExpo, at the Javits Center in New York, NY. Angular 2 is a complete re-write of the popular framework AngularJS. Programming in Angular 2 is greatly simplified. Now it’s a component-based well-performing framework. The immersive one-day workshop led by Yakov Fain, a Java Champion and a co-founder of the IT consultancy Farata Systems and...
SYS-CON Events announced today that Super Micro Computer, Inc., a global leader in Embedded and IoT solutions, will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Supermicro (NASDAQ: SMCI), the leading innovator in high-performance, high-efficiency server technology, is a premier provider of advanced server Building Block Solutions® for Data Center, Cloud Computing, Enterprise IT, Hadoop/Big Data, HPC and ...
In his session at 18th Cloud Expo, Andrew Cole, Director of Solutions Engineering at Peak 10, will discuss how the newest technology advances are reducing the cost and complexity of traditional business continuity and disaster recovery solutions. Attendees will: Learn why having a full disaster recovery strategy is more important now than ever before Explore the key drivers of a successful disaster recovery solution Achieve measurable operational and business value from a disaster recovery ...
How will your company move to the cloud while ensuring a solid security posture? Organizations from small to large are increasingly adopting cloud solutions to deliver essential business services at a much lower cost. According to cyber security experts, the frequency and severity of cyber-attacks are on the rise, causing alarm to businesses and customers across a variety of industries. To defend against exploits like these, a company must adopt a comprehensive security defense strategy that is ...
SYS-CON Events announced today that Hanu Software will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. Leveraging best-in-class people, processes, and technologies, Hanu provides high-quality, high-value software development and business process outsourcing services to independent software vendors (ISVs) and enterprises.
What a difference a year makes. Organizations aren’t just talking about IoT possibilities, it is now baked into their core business strategy. With IoT, billions of devices generating data from different companies on different networks around the globe need to interact. From efficiency to better customer insights to completely new business models, IoT will turn traditional business models upside down. In the new customer-centric age, the key to success is delivering critical services and apps wit...
Join us at Cloud Expo | @ThingsExpo 2016 – June 7-9 at the Javits Center in New York City and November 1-3 at the Santa Clara Convention Center in Santa Clara, CA – and deliver your unique message in a way that is striking and unforgettable by taking advantage of SYS-CON's unmatched high-impact, result-driven event / media packages.
In his keynote at 18th Cloud Expo, Andrew Keys, Co-Founder of ConsenSys Enterprise, will provide an overview of the evolution of the Internet and the Database and the future of their combination – the Blockchain. Andrew Keys is Co-Founder of ConsenSys Enterprise. He comes to ConsenSys Enterprise with capital markets, technology and entrepreneurial experience. Previously, he worked for UBS investment bank in equities analysis. Later, he was responsible for the creation and distribution of life ...
The initial debate is over: Any enterprise with a serious commitment to IT is migrating to the cloud. But things are not so simple. There is a complex mix of on-premises, colocated, and public-cloud deployments. In this power panel at 18th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists will look at the present state of cloud from the C-level view, and how great companies and rock star executives can use cloud computing to meet their most ambitious and disruptive business ...
SYS-CON Events announced today that MobiDev will exhibit at SYS-CON's 18th International Cloud Expo®, which will take place on June 7-9, 2016, at the Javits Center in New York City, NY. MobiDev is a software company that develops and delivers turn-key mobile apps, websites, web services, and complex software systems for startups and enterprises. Since 2009 it has grown from a small group of passionate engineers and business managers to a full-scale mobile software company with over 200 develope...
SYS-CON Events announced today that BMC Software has been named "Siver Sponsor" of SYS-CON's 18th Cloud Expo, which will take place on June 7-9, 2015 at the Javits Center in New York, New York. BMC is a global leader in innovative software solutions that help businesses transform into digital enterprises for the ultimate competitive advantage. BMC Digital Enterprise Management is a set of innovative IT solutions designed to make digital business fast, seamless, and optimized from mainframe to mo...
As cloud and storage projections continue to rise, the number of organizations moving to the cloud is escalating and it is clear cloud storage is here to stay. However, is it secure? Data is the lifeblood for government entities, countries, cloud service providers and enterprises alike and losing or exposing that data can have disastrous results. There are new concepts for data storage on the horizon that will deliver secure solutions for storing and moving sensitive data around the world. ...
SoftLayer operates a global cloud infrastructure platform built for Internet scale. With a global footprint of data centers and network points of presence, SoftLayer provides infrastructure as a service to leading-edge customers ranging from Web startups to global enterprises. SoftLayer's modular architecture, full-featured API, and sophisticated automation provide unparalleled performance and control. Its flexible unified platform seamlessly spans physical and virtual devices linked via a world...