In Monday’s trading, there were 15 ADRs (American Depositary Receipts) in Barchart’s Top 100 Stocks to Buy. Banco Macro (BMA), a leading Argentinian bank, was one of the 15, moving up 14 spots to 55th position.
In September, I covered the bank’s stock after it jumped to fifth in the Top 100 Stocks to Buy. With its price up 36% in the past month, I wondered if it could keep rising. Indeed, it has increased 39% in the four months since.
The bank’s weighted alpha yesterday was 185.32, higher than its 52-week change of 176.98%. This indicates a momentum stock that could continue to move higher.
The question is whether BMA stock is at the end of a good run or ready to make another leg higher.
I’ll consider both arguments.
It’s Got Plenty of Gas in the Tank
I like two things about Banco Macro without even looking at its financial situation.
First, it’s in Latin America, one of the best places to find value on the planet, in my opinion. Secondly, it’s family-controlled--the Brito and Carballo founding families own 40.5% of the voting shares--a characteristic I’ve always liked because it encourages long-term thinking, something many public companies can’t or won’t entertain.
When I last discussed the bank’s stock, the big question was whether the right-of-center Milei government’s economic revival plan would continue to gain traction in 2025. The country came out of its year-long recession in December. Millei’s managed to eliminate the country’s fiscal deficit for the first time in 123 years.
“‘Milei’s government has achieved what many consider a miracle in terms of cutting down inflation and stabilizing the economy and the US dollar’s price, two long-standing Argentinian traumas,’ says Juan Pablo Ferrero of the Department of Politics, Languages and International Studies at the University of Bath. ‘These are notable accomplishments upon which Milei is now basing his political success,’” Global Finance reported Ferrero’s comments in early January.
That’s the good news. The bad news is the cost-cutting hasn’t produced the growth needed to bring people out of poverty in Argentina, where 53% of its citizens live in poverty. It’s something to be aware of when investing in any Argentinian business listed on a U.S. stock exchange.
In my September article, I suggested that its stock surpasses $80 if it delivered good Q3 2024 results in November. It delivered.
The bank’s total deposits in Q3 2024 were 8.07 trillion Argentine pesos ($766.3 million), up 7% from Q2 2024 and 30% year over year. Its total loan portfolio was 4.55 trillion Argentine pesos ($431.8 million), up 17% from Q2 2024 and 28% from Q3 2023. The bank finished the second quarter with a 9.2% market share in private-sector loans.
In the third quarter, its net interest and net fee income was 686.94 billion Argentine pesos ($5.29 billion), up 114% from Q2 2024 and 50% from Q3 2023. It finished the quarter with 5.24 million retail customers, 42% of whom were digital, and 161,180 corporate customers.
Business is generally good for the bank.
The Bank Stock Is Ready for a Rest
Since hitting a five-year high of $118.42 in the first week of January, its stock has lost 19% of its value in the past month.
The two most obvious reasons are valuation concerns and the Argentine economy.
On the valuation front, let’s consider some of its financial metrics and multiples from October 2017 when it hit an all-time high of $136.10.
According to S&P Global Market Intelligence, the bank’s September 2017 price-t0-tangible-book-value ratio was 3.48x, not the highest multiple in the past decade--that was 3.65x in 2016--but it was right up there.
Another metric worth considering is its P/NTM EPS (price to estimated EPS for the next 12 months) ratio. The highest in the past decade was 19.90x in March 2024, and the second-highest was 12.97x in December 2017.
These two ratios clearly show that Banco Macro has benefited from multiple expansion on at least two occasions in the past decade.
Today, its P/TBV ratio is 2.33x, while its P/NTM EPS is 10.13x, both higher than at other times in the past decade, but compared to J.P. Morgan Chase (JPM)--2.66x and 14.45x for the two multiples--it’s at or near fair value.
Regarding the Argentine economy, the bank’s provision for loan losses in the third quarter was 22.97 billion Argentine pesos ($21.8 million), 24% higher than in Q2 2024 and 53% higher than a year ago. Its non-performing loans to total financing ratio was reasonably low in the quarter at 1.15%, down eight basis points from Q2 2024, and 24 basis points from a year ago.
The bank is on sound financial footing, which explains the higher valuation.
In late January, Bloomberg reported on Argentina’s November economic results. They were better than expected, with 0.9% GDP growth, 50 basis points higher than economists’ estimate for October.
“Wages in Argentina grew 4.6% in October from September, surpassing monthly inflation for the seventh straight month after price increases wiped out paychecks earlier in the year. With wages picking up, the government estimates that the poverty declined below 39% in the third quarter after surpassing 54% at the start of the year,” Bloomberg reported.
The country's GDP is expected to grow by 5% in 2025, so poverty concerns have been tamped down slightly.
Ultimately, the company's 19% correction from its five-year high in January was due to profit-taking rather than concerns about its business or the economy.
What to Do?
On Banco Macro’s first day of trading in 2025, its Put/Call OI ratio was 0.46, which is very bullish. Today, it’s 2.39, down from late January but still very bearish relative to the beginning of the year.
That’s a warning to tread carefully but not an outright do-not-buy signal.
If you want a better entry price than $96, I’d consider selling the March 21 $75 or $85 put.
The $75 and $85 puts generate $3.10 and $5.50 in premium, respectively, for annualized returns of 25.5% and 45.0%, respectively. As you can see, neither has excellent volume. That’s across all of the bank’s options.
If you’re confident of Banco Macro’s long-term future, I’d recommend the $85 put. The idea is to generate income while you wait for a better entry point.
If you really want to own BMA stock, buy 100 now and sell the $75 put every 30-45 days until you can buy at a lower price. Its weighted alpha suggests you might have to wait a while.
Banco Macro remains an excellent mid-cap foreign bank stock if you’re not afraid of Latin America’s tricky economic issues.
