Chillin' in Chile


Carla Pasternak Image Carla Pasternak Editor, The Income Investor

Corpbanca’s share price is as healthy as the Santiago-based bank’s dividend and bottom line, writes Carla Pasternak in High-Yield International.

Santiago-based Corpbanca SA (NYSE: BCA, Santiago: CORPBANCA) is one of Chile's largest banks, offering commercial and retail banking through 111 branch offices. The bank also offers mutual-fund management, insurance, and securities brokerages through a network of subsidiaries. Shares trade as GDRs (Global Depository Receipts) on the New York Stock Exchange, but the primary listing is on the Santiago Stock Exchange.

The performance of this stock has been outstanding. BCA returned 120% in 2009 and posted a remarkable average annual three-year total return of 26%, compared with -9% for the Standard & Poor’s 500 [index]. The stock has also returned 37% so far this year and is trading near its 52-week high. What's going on?

Corpbanca is a solid bank in a growing emerging market economy. Chile exports copper and other products to other growing economies, such as China and Brazil, and its economy had been growing at about 5% to 7% annually in the years before the financial crisis. Increasing wealth and a rising middle class has created a steadily improving demand for banking and financial services.

The economy has rebounded strongly from last year's recession. In fact, the Economist forecasts that Chile's economy will grow at 4.7% this year and 6% next year. Meanwhile, inflation is forecast to be just 2.1% in 2010.