Bank on Brazil
12/02/2005 12:00 am EST
Louis Navellierhas been one of the industry’s most successful stock pickers for over two decades. Now, he is looking towards the international arena, with his recently launched Global Growth. Here, he is "banking" on Brazil, for two of his favorites.
"Brazil has profited from getting its economic house in order. Its economy has been boosted by a boom in natural resources and now an upgrade from Moody's, the bond rating services. The inflation forecast for 2005 is 5.2%, the lowest rate since 1998, and economists say the inflation rate is going down to 4.6% in 2006. The Brazilian economy grew by 4.9% in 2004, the fastest growth rate in a decade.
"The long-term growth prospects for Brazil remain excellent due to the fact that its middle class is continuing to expand rapidly and helping to spread prosperity throughout the country. Thanks to the policies of Finance Minister Palocci, President Lula and most members of Congress want to take credit for Brazil's booming economy, so they are debating how to continue to spread the economic prosperity, rather than focusing on political scandals. Due to this more positive debate, the future truly looks bright for Brazil.
"Brazil's Banco Bradesco S.A. ( BBD NYSE) is now the #1 buy on my list. The bank recently reported that its third-quarter earnings rose more than 90% compared with the same quarter one year ago. Net income rose 102% for the first nine months of 2005. Bradesco is Brazil's largest private bank in terms of market share. Banco Bradesco expects its overall loan portfolio to grow 20% to 25% in 2006.
"The bank's loan portfolio totaled 84 billion reals ($38 billion) at the end of September, up 25.4% from the same time in 2004. The bank expects new loans to individuals to rise 35% next year, and those loans have a wider profit margin than business loans. Corporate lending is expected to grow by 15%. The bank also just purchased 320 new ATMs, which permit clients to make cash withdrawals, pay bills and make account transfers.
"Uniao de Bancos Brasileiros S.A. ( UBB NYSE), also known as ‘Unibanco,’ is our second Brazilian bank. Based in Sao Paulo, the bank recently reported that earnings per share rose 45%. The bank's loan portfolio grew 24% from a year ago, and the company said it expected their loan portfolio would likely grow by 25% next year.
"Declining interest rates are boosting borrowing activity in Brazil. Profit margins are also increasing due to larger loan spreads to consumers and Unibanco's cost control measures begun in 2004. Return on equity (ROE), an important measure of profitability, grew to 23.3% in the third quarter, up slightly from 23.0% in the second quarter. Brazil is a strong and growing economy, and we will take part in that growth with our two Brazilian banks. Unibanco operates more than 1,000 branches throughout Brazil. Its retail unit offers home and Internet banking, while its wholesale division offers cash management and investment services."
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