Peruvian Bank Is Surprise Favorite Among Lenders in Americas

  • Credicorp gets boost as JPMorgan names it top Andes pick
  • Still, country's potential frontier status is a drag on stock

Peruvian lender Credicorp Ltd. is the banking stock in the Americas that analysts expect to gain the most in 2016.

The Lima-based bank is the favorite in the Americas and the second-highest rated globally among banking stocks with a market value of more than $500 million and at least 10 analyst ratings, data compiled by Bloomberg show. Its U.S.-traded shares are forecast to gain 74 percent, based on the average of 16 analysts’ 12-month price targets.

Of course, analysts have been wrong before. At the start of 2015, they forecast the stock would rally 12 percent; instead it lost 39 percent. That’s because Peru is teetering on the edge of being downgraded to frontier status from emerging market by MSCI Inc., said Marco Contreras, an analyst at Lima-based brokerage Kallpa Securities. Credicorp gains won’t materialize until at least June, when an MSCI decision is expected, he said.

"Once there is a decision, the market should return to normal and Credicorp should trade back in line with its regional peers," Contreras said by phone from Lima.

JPMorgan Chase & Co. upgraded Credicorp to overweight Wednesday and said the lender is now its top Andean bank pick. 

"The risk-to-reward profile is now skewed to the upside given structural positives in Peru’s baking system" such as high market concentration, elevated profitability and relatively low credit penetration, analysts including Saul Martinez said in a note to clients.

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