Tags: BCA | Corpbanca | BCH | Banco de Chile | SAN | Santander Chile | banking

Chile’s Corpbanca Races to Success

By    |   Thursday, 02 Jun 2011 02:36 PM

Of the three Chilean banks with ADRs traded in New York — Banco de Chile (BCH), Santander Chile (SAN), and Corpbanca (BCA) — Corpbanca is the smallest by market share, but its fast-growing loan portfolio and big plans could mean a better upside for investors. Its Chile’s oldest operating private bank and its fourth-largest in terms of the size of its loan portfolio.

In the first quarter of this year, Corpbanca raced to net profits of $61.7 million, up 12.5 percent from the same period of 2010, with a return on equity of 24.6 percent.

Total loans reached $11.6 billion as of March 31, leaving CorpBanca with a market share of just over 7 percent, which was a slight decrease compared to the fourth quarter of 2010. Operating expenses decreased by 10 percent during the first quarter of 2011 compared to the fourth quarter 2010, mainly due to lower administrative and other expenses.

“Our low operational cost is based on a cost control culture that allows the bank to compete in the Chilean market and realize high profits,” said the bank’s management in a statement.

The bank was recently voted as the “Best Bank in Chile” by British magazine World Finance, and that’s no small achievement in Chile’s highly competitive banking sector. “Corpbanca’s risk management strategy has enabled it to maintain favorable solvency ratios and risk indicators,” according to the magazine.

Corpbanca has been working towards this goal for several years, CEO Mario Chamorro told the magazine. "In 2008, we strategically changed our focus and the manner in which we conduct business in order to become the ‘Best Bank in Chile.’”

Waiting for a pullback

Local brokerage Bci Estudios gives Corpbanca stock a positive rating, mainly based on its strong growth in loans, especially mortgages, projected higher inflation in Chile, and good risk management.

However, Corpbanca, like Chile’s other banks, is trading near its 52-week high, so investors would be wise to wait for a pullback before jumping in.

Over the last 52 weeks, Corpbanca’s ADR has traded at a high of $28.35 and a low of $12.75, gaining nearly 100 percent in that period.

In January, Corpbanca’s shareholders approved a capital increase of $900 million to expand its business. Like Banco de Chile and other companies that have raised capital this year, Corpbanca aims to tap Chile’s strong economic growth driven by record high copper prices.

"We think this is a good time to issue capital because the country is seen growing in the next four years," Chamorro said at the time.

In 1995, Corpbanca was bought by a group of investors led by local businessman Álvaro Saieh, who developed a strategic plan to grow the institution into a global bank.

At that time the bank’s capital was $50 million with a Central Bank debt of $600 million. By the end of 2010 the bank had no debt and its market value was more than $4 billion.

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Of the three Chilean banks with ADRs traded in New York Banco de Chile (BCH), Santander Chile (SAN), and Corpbanca (BCA) Corpbanca is the smallest by market share, but its fast-growing loan portfolio and big plans could mean a better upside for investors. Its Chile s...
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Thursday, 02 Jun 2011 02:36 PM
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