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
While some vendors scramble to create and sell you a fancy solution for monitoring your spanking new Amazon Lambdas, hear how you can do it on the cheap using just built-in Java APIs yourself. By exploiting a little-known fact that Lambdas aren’t exactly single threaded, you can effectively identify hot spots in your serverless code. In his session at 20th Cloud Expo, David Martin, Principal Product Owner at CA Technologies, will give a live demonstration and code walkthrough, showing how to ov...
Existing Big Data solutions are mainly focused on the discovery and analysis of data. The solutions are scalable and highly available but tedious when swapping in and swapping out occurs in disarray and thrashing takes place. The resolution for thrashing through machine learning algorithms and support nomenclature is through simple techniques. Organizations that have been collecting large customer data are increasingly seeing the need to use the data for swapping in and out and thrashing occurs ...
We all know that end users experience the internet primarily with mobile devices. From an app development perspective, we know that successfully responding to the needs of mobile customers depends on rapid DevOps – failing fast, in short, until the right solution evolves in your customers' relationship to your business. Whether you’re decomposing an SOA monolith, or developing a new application cloud natively, it’s not a question of using microservices - not doing so will be a path to eventual ...
One of the biggest challenges with adopting a DevOps mentality is: new applications are easily adapted to cloud-native, microservice-based, or containerized architectures - they can be built for them - but old applications need complex refactoring. On the other hand, these new technologies can require relearning or adapting new, oftentimes more complex, methodologies and tools to be ready for production. In his general session at @DevOpsSummit at 20th Cloud Expo, Chris Brown, Solutions Marketi...
Detecting internal user threats in the Big Data eco-system is challenging and cumbersome. Many organizations monitor internal usage of the Big Data eco-system using a set of alerts. This is not a scalable process given the increase in the number of alerts with the accelerating growth in data volume and user base. Organizations are increasingly leveraging machine learning to monitor only those data elements that are sensitive and critical, autonomously establish monitoring policies, and to detect...
DevOps at Cloud Expo – being held October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA – announces that its Call for Papers is open. Born out of proven success in agile development, cloud computing, and process automation, DevOps is a macro trend you cannot afford to miss. From showcase success stories from early adopters and web-scale businesses, DevOps is expanding to organizations of all sizes, including the world's largest enterprises – and delivering real r...
As enterprise cloud becomes the norm, businesses and government programs must address compounded regulatory compliance related to data privacy and information protection. The most recent, Controlled Unclassified Information and the EU’s GDPR have board level implications and companies still struggle with demonstrating due diligence. Developers and DevOps leaders, as part of the pre-planning process and the associated supply chain, could benefit from updating their code libraries and design by in...
SYS-CON Events announced today that CollabNet, a global leader in enterprise software development, release automation and DevOps solutions, will be a Bronze Sponsor of SYS-CON's 20th International Cloud Expo®, taking place from June 6-8, 2017, at the Javits Center in New York City, NY. CollabNet offers a broad range of solutions with the mission of helping modern organizations deliver quality software at speed. The company’s latest innovation, the DevOps Lifecycle Manager (DLM), supports Value S...
When NSA's digital armory was leaked, it was only a matter of time before the code was morphed into a ransom seeking worm. This talk, designed for C-level attendees, demonstrates a Live Hack of a virtual environment to show the ease in which any average user can leverage these tools and infiltrate their network environment. This session will include an overview of the Shadbrokers NSA leak situation.
SYS-CON Events announced today that A&I Solutions named "Bronze Sponsor" of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded over 15 years ago in 1999, A&I Solutions continues to provide companies with premier integrated enterprise solutions. By partnering with the trusted and proven solutions of leading technology companies, our customers are assured high performance levels across all IT environments including:...
SYS-CON Events announced today that Progress, a global leader in application development, has been named “Bronze Sponsor” of SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Enterprises today are rapidly adopting the cloud, while continuing to retain business-critical/sensitive data inside the firewall. This is creating two separate data silos – one inside the firewall and the other outside the firewall. Cloud ISVs ofte...
SYS-CON Events announced today that Loom Systems will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY. Founded in 2015, Loom Systems delivers an advanced AI solution to predict and prevent problems in the digital business. Loom stands alone in the industry as an AI analysis platform requiring no prior math knowledge from operators, leveraging the existing staff to succeed in the digital era. With offices in S...
While presenting own advanced Robo-Advisory Platform, Michał Różański, Managing Partner at EARP and CEO at Empirica, will illustrate the most important issues of building tailored FinTech software in his session at 20th Cloud Expo. He will share experiences we have gained for over 6 years of developing solutions for financial institutions and FinTech companies, including robo-advisors. We welcome all FinTech innovators interested in how properly implemented technology can move their businesses f...
Apache OpenWhisk on IBM Bluemix provides a powerful and flexible environment for deploying cloud-native applications driven by data, message, and API call events. In his session at 20th Cloud Expo, Daniel Krook, Software Architect, IBM Watson and Cloud Platform, and Distinguished IT Specialist, will discuss why serverless architectures are attractive for many emerging cloud workloads and when you should consider OpenWhisk for your next project. Then get started on Bluemix with three sample appl...
SYS-CON Events announced today that Enzu will exhibit at SYS-CON's 20th International Cloud Expo®, which will take place on June 6-8, 2017, at the Javits Center in New York City, NY, and the 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive ad...