Argentine Banker Brito Sees Potential Investment Grade in 2016by , , and
Banco Macro could seek acquisitions in Argentina, region
Bank could issue overseas bonds if yields fall below 8%
Argentina could gain an investment grade in 2016 if the next president tackles policy changes from lifting capital controls to publishing reliable economic statistics, said Jorge Brito, president of Banco Macro SA.
The most important sign for investors will be the next president’s inauguration speech on Dec. 10, which should clearly lay out a credible economic plan to regain confidence and attract capital, Brito said in an interview at the headquarters of the bank in downtown Buenos Aires. Opposition candidate Mauricio Macri is currently favored to prevail over the ruling party’s Daniel Scioli in a runoff vote on Nov. 22.
“It’s irrelevant if they lift currency controls on day one or in 180 days,” Brito said. “The important part is that they will be lifted. If the government does four or five things well, Argentina could get investment grade in nine months.”
After 12 years of rule by the Kirchner family, Brito said the first-round election result shows Argentines want an end to policies that have swelled the budget deficit to the most in a decade, caused foreign investment to shrivel and pushed the country into default. Macri unexpectedly ended up in a near tie with frontrunner Scioli in last month’s vote.
Moody’s Investors Service rates Argentina Ca, 10 levels below investment grade. Standard & Poor’s and Fitch Ratings assign the country a default rating. Argentina has never had an investment grade, according to data compiled by Bloomberg.
Brito, 62, said that if Argentina lets the peso float, as Macri has promised, there could be an overshooting that could spark inflation and hurt the economy. He favors lifting controls over a longer period of time.
The real value of the peso is close to the blue-chip swap rate used for financial transactions, according to Brito. That exchange rate was 14.37 per dollar on Thursday, he said. The official rate, closely controlled by the central bank, was 9.61.
Banco Macro, which beat Bloomberg analyst estimates by reporting 1.1 billion-peso ($114 million) profit in the third quarter, is interested in using its cash pile to make acquisitions if the right opportunity surfaces, Brito said. The bank will move into a new $100 million tower in downtown Buenos Aires next year, he said.
Banco Macro’s American depository receipts have surged 41 percent in 2015 to $62. The ADRs rose 0.7 percent in New York trading while local shares gained 0.6 percent to 89 pesos at 11:55 a.m. in Buenos Aires.
The bank would only issue more shares to finance an acquisition or to expand to neighboring countries like Uruguay, Paraguay or Bolivia, according to Brito. Any expansion would have to wait until Argentina gains an investment grade, he said.
The bank would be tempted to issue more debt if yields fall below 8 percent, he said. The yield on Banco Macro’s notes due in 2017 is 8.99 percent.