Slim’s bank to extend market-beating rally

Bloomberg

Mexico’s best performing stock this year, Grupo Financiero Inbursa SAB, is set to go even higher as the bank prepares to spin off its private equity business and could even make a bid for Citigroup Inc’s local assets, according to a Barclays analyst.
Gilberto Garcia raised his price target for Inbursa, which belongs to Mexican billionaire Carlos Slim, to a Street-high 41 pesos per share, and is the only one of eight analysts covering the stock tracked by Bloomberg with a buy recommendation. The stock is currently at 36.17 pesos, having rallied 48% this year.
The recommendation is based partly on the bank’s program to repurchase shares, Garcia said in an interview. The spinoff of its private equity business this year will also add greater clarity to the bank’s
results, following a period of strong earnings growth and
disciplined cost control, he said.
And while the possible bid for Citigroup’s local consumer bank, Banco Nacional de Mexico SA, is not factored into the price target, it could act as a major catalyst.
“This would be transformational for Inbursa,” Garcia said. “It would give the consumer segment a much greater scale, at a time when the bank has been more vocal about returning to growth in the higher yielding consumer sector.”
Inbursa said in January it may participate in the sale, if conditions are favourable.
Still, many analysts are less optimistic than Garcia. Bank of America delivered a double-downgrade to Inbursa from overweight to underweight last month, saying the stock was unlikely to rally much further, while Credit Suisse cut the bank to underperform from a neutral rating.
Yet Inbursa shares jumped 8.3% to their highest since 2015, before slipping about 2.6%. Inbursa’s share buyback program represented 20% of volume, according to data compiled by Bloomberg.
“That shows Inbursa thinks the stock is still cheap,” Garcia said. “Sometimes companies say they will buy-back shares but then don’t actually deliver.”
Inbursa has bought back nearly 2 billion pesos ($96 million) in shares this year, and has 2.55 billion more to spend with its buyback fund, according to filings with the Mexican stock exchange.
“The company will be growing in high yielding assets and buying back shares, that’s a powerful combination, and that is why we remain optimistic,” Garcia said.