< The 2015 Latin America Research Team
Total Appearances: 24
Team Debut: 1993For a third year running, Saul Martinez captains his J.P. Morgan crew to first place. The 41-year-old leader and one colleague are stationed New York, and two teammates work out of São Paulo. Together, the analysts monitor 19 Latin American banks, impressing investors with their accessibility, timely reporting on earnings releases and readily understandable models. “Most important,” observes one money manager, “they are very good forecasters and have very insightful comments on the industry.” The squad is selective on regional banks, whose shares dipped 1.2 percent year to date through mid-July, lagging Latin America’s broad market by 3.5 percentage points. “Though conditions vary by country, credit growth and, ultimately, earnings momentum are likely to be adversely impacted by challenging economic circumstances in many countries,” he explains. “This is particularly true in Peru and Colombia, where high current-account deficits and worsening terms of trades will likely slow economic growth more than the Street expects, in our view. This could negatively impact bank operating fundamentals.” In Brazil, the researchers advise, macro headwinds and an uncertain political backdrop could drive worsening credit quality and lead to higher tax rates. At the same time, however, changes in the competitive environment — characterized by the pulling back of government-controlled banks, which account for roughly 55 percent of the lending market — are leading to hardening of prices and better financial margins. “Our stock preferences are concentrated in Mexico, where economic conditions are relatively favorable, higher interest rates are likely to benefit financial margins,” Martinez notes. “Ultimately, we see limited downside risk to our low- to high-teen annual [earnings-per-share] growth estimates in the coming years.” A favorite name in this regard is Grupo Financiero Banorte, one of the nation’s largest financial services institutions. Among Mexico’s midsize banks, BanRegio Grupo Financiero is preferred. “Saul’s industry knowledge is among the best,” declares another backer. “He has managed to train equally well a team of young, talented analysts. I also value his responsiveness and understanding of clients’ strategies and priorities.”