Emerging-Market Banks Can Reward Investors, Kooyman Saysby
Growth among developing-market banks up to 20 times faster
Peru, Romania, Indonesia among `capital friendly' markets
Investors can find better value among banks and insurers in emerging markets, which are achieving growth rates as much as 20 times faster than their peers in developed countries, according to a money manager formed by South Africa’s fourth-biggest investor.
European banks are showing 1 percent to 3 percent growth in loans and earnings, while U.S. banks are expected to grow 3 percent to 5 percent, said Kokkie Kooyman, who helps manage about 1 billion dollars at Cape Town-based Denker Capital. Contrast that with emerging markets, where financial companies are achieving expansion of 15 percent to 20 percent, he said.
Banks in Indonesia, Peru, Georgia, Romania, the Czech Republic and India are among those in markets to have followed “capital friendly, and hence job-creating, policies,” Kooyman said in an e-mailed response to questions. Kooyman is increasing holdings in Credicorp Ltd. in Peru, Yes Bank Ltd. in India and Tinkoff Credit Systems Bank CJSC. Bank of Georgia JSC and TBC Bank JSC are also among his holdings.
Evidence gathered during company visits by Denker Capital showed that in a two-to-five-year view, emerging market banks will outperform developed markets, said Kooyman, four times U.K.-based publication Investment Week’s fund manager of the year. Denker Capital was formed in August when Sanlam Ltd. units SIM Global and SIM Unconstrained Capital Partners combined to form an independent business. Sanlam, the biggest South African-based life insurer, owns 49 percent and management 42 percent.
While banks in commodity-exporting emerging markets such as Brazil, Russia, South Africa, Nigeria and other African nations are generally undervalued, the risk of negative outcomes from recession and currency weakness is high. “These countries have generally also made their own bed with poor fiscal management,” Kooyman said.
Kooyman is selling holdings in Brazilian banks after “a huge rally the past four weeks” as investors bet on a change in government. He regard banks in South Africa, where the industry index has dropped 17 percent in six months, as quite expensive, “especially taking into consideration that the possibility is high that we could have a recession with increased unemployment.”
Sanlam Investment Managers ranked fourth among South African money managers, measured by assets under management, behind Coronation Fund Managers, Old Mutual and Investec Asset Management, Alexander Forbes said March 3.