Mexico financial sector equity looks attractive from a valuation perspective
Mexican financial sector equities that are part of the iShares MSCI Mexico Capped ETF (EWW) has returned about 33.3% YTD (as of August 10). With YTD returns equivalent to 48.4%, 47.2%, and 45.8% respectively, stocks of Grupo Fin Interacciones, Grupo Financiero Santander (BSMX), and Grupo Financiero Banorte (GBOOF) (GBOOY), are among the top performing stocks within Mexico financial sector equity. Investors in the sector enjoy a healthy dividend yield of 4.5% and a relatively lower price multiple of 2.32 P/B for the sector.
The chart above shows the forward valuations for the MSCI Mexico Financials Index as of August 10. The rising forward EPS trend line clearly indicates a higher earning potential for the sector. However, price expectations, as indicated by the forward price-to-book ratio, are also on the rise. We took a closer look at stocks within the financial sector in Mexico and identified 3 stocks in particular with US-traded ADRs, which enjoy overall favorable valuations. (Returns and performance figures relate to data as of August 10, 2017)
Grupo Financiero Santander México, S.A.B. de C.V. (BSMX)
Grupo Financiero Santander México, S.A.B. de C.V. provides a range of financial and related services to clients ranging from individuals to corporations to government institutions. The Mexican banking group is a subsidiary of Spanish bank Banco Santander.
The bank’s ADR is trading on the NYSE under the symbol BSMX. On a year-to-date basis, the ADR had returned 47.25% as of August 10. The stock trades at an attractive P/B of 2.21 as compared to the peer average of 2.32. Additionally, the stock offers an attractive dividend yield of 7.02%.
Banregio Grupo Financiero, S.A.B de C.V. (BRGGF)
Operating as BanRegio, Banregio Grupo Financiero is a regional bank offering financial and investment products and services in Mexico. The bank’s ADR trades on the NYSE’s OTC market under the symbol BRGGF. On a year-to-date basis, the ADR had returned 16.32% as of August 10. The stock trades at an attractive P/B of 2.74.
Grupo Financiero Banorte, S.A.B. de C.V. (GBOOF) (GBOOY)
Grupo Financiero Banorte or Banorte is a Mexican banking and financial services holding company. The bank’s ADR trades on the NYSE’s OTC market under the symbols GBOOF and GBOOY. On a year-to-date basis, the ADR had returned a whopping 45.87% as of August 10th. The stock trades at an attractive P/B of 2.54. The stock has 73.9% BUY recommendations from rating analysts.
