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
If there is anything we have learned by now, is that every business paves their own unique path for releasing software- every pipeline, implementation and practices are a bit different, and DevOps comes in all shapes and sizes. Software delivery practices are often comprised of set of several complementing (or even competing) methodologies – such as leveraging Agile, DevOps and even a mix of ITIL, to create the combination that’s most suitable for your organization and that maximize your busines...
Struggling to keep up with increasing application demand? Learn how Platform as a Service (PaaS) can streamline application development processes and make resource management easy.
In his session at @ThingsExpo, Chris Klein, CEO and Co-founder of Rachio, will discuss next generation communities that are using IoT to create more sustainable, intelligent communities. One example is Sterling Ranch, a 10,000 home development that – with the help of Siemens – will integrate IoT technology into the community to provide residents with energy and water savings as well as intelligent security. Everything from stop lights to sprinkler systems to building infrastructures will run ef...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
SYS-CON Events announced today that Peak 10, Inc., a national IT infrastructure and cloud services provider, 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. Peak 10 provides reliable, tailored data center and network services, cloud and managed services. Its solutions are designed to scale and adapt to customers’ changing business needs, enabling them to lower costs, improve performance and focus inter...
You think you know what’s in your data. But do you? Most organizations are now aware of the business intelligence represented by their data. Data science stands to take this to a level you never thought of – literally. The techniques of data science, when used with the capabilities of Big Data technologies, can make connections you had not yet imagined, helping you discover new insights and ask new questions of your data. In his session at @ThingsExpo, Sarbjit Sarkaria, data science team lead ...
In the world of DevOps there are ‘known good practices’ – aka ‘patterns’ – and ‘known bad practices’ – aka ‘anti-patterns.' Many of these patterns and anti-patterns have been developed from real world experience, especially by the early adopters of DevOps theory; but many are more feasible in theory than in practice, especially for more recent entrants to the DevOps scene. In this power panel at @DevOpsSummit at 18th Cloud Expo, moderated by DevOps Conference Chair Andi Mann, panelists will dis...
See storage differently! Storage performance problems have only gotten worse and harder to solve as applications have become largely virtualized and moved to a cloud-based infrastructure. Storage performance in a virtualized environment is not just about IOPS, it is about how well that potential performance is guaranteed to individual VMs for these apps as the number of VMs keep going up real time. In his session at 18th Cloud Expo, Dhiraj Sehgal, in product and marketing at Tintri, will discu...
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, will provide tips on how to be successful in large scale machine lear...
Machine Learning helps make complex systems more efficient. By applying advanced Machine Learning techniques such as Cognitive Fingerprinting, wind project operators can utilize these tools to learn from collected data, detect regular patterns, and optimize their own operations. In his session at 18th Cloud Expo, Stuart Gillen, Director of Business Development at SparkCognition, will discuss how research has demonstrated the value of Machine Learning in delivering next generation analytics to im...
Unless you don’t use the internet, don’t live in California, or haven’t been paying attention to the recent news… you should be aware that self-driving cars are on their way to becoming a reality. I have seen them – they are real. If you believe in the future reality of self-driving cars, then continue reading on. If you don’t believe in the future possibilities, then I am not sure what to do to convince you other than discuss the very real changes that will roll out with the consumer producti...
Up until last year, enterprises that were looking into cloud services usually undertook a long-term pilot with one of the large cloud providers, running test and dev workloads in the cloud. With cloud’s transition to mainstream adoption in 2015, and with enterprises migrating more and more workloads into the cloud and in between public and private environments, the single-provider approach must be revisited. In his session at 18th Cloud Expo, Yoav Mor, multi-cloud solution evangelist at Cloudy...
There is an ever-growing explosion of new devices that are connected to the Internet using “cloud” solutions. This rapid growth is creating a massive new demand for efficient access to data. And it’s not just about connecting to that data anymore. This new demand is bringing new issues and challenges and it is important for companies to scale for the coming growth. And with that scaling comes the need for greater security, gathering and data analysis, storage, connectivity and, of course, the...
This is not a small hotel event. It is also not a big vendor party where politicians and entertainers are more important than real content. This is Cloud Expo, the world's longest-running conference and exhibition focused on Cloud Computing and all that it entails. If you want serious presentations and valuable insight about Cloud Computing for three straight days, then register now for Cloud Expo.
IoT device adoption is growing at staggering rates, and with it comes opportunity for developers to meet consumer demand for an ever more connected world. Wireless communication is the key part of the encompassing components of any IoT device. Wireless connectivity enhances the device utility at the expense of ease of use and deployment challenges. Since connectivity is fundamental for IoT device development, engineers must understand how to overcome the hurdles inherent in incorporating multipl...