Despite its poor second quarter 2013 result Bancolombia S.A. (ADR) (NYSE:CIB)’s fundamentals remain strong. Net loans for that period were up by 22% year-over-year and impaired loans remained at an acceptable 2.8% of total loans. Capital adequacy is also high, with the bank having a tier-one-capital ratio of just under 12% at the end of the second quarter. This indicates that Bancolombia S.A. (ADR) (NYSE:CIB) remains in a strong financial position and is well placed to continue capitalizing on the growth potential that exists in its key markets of Colombia and El Salvador.
Bancolombia S.A. (ADR) (NYSE:CIB) pays a healthy dividend yield of just under 3%, which is significantly higher than the token yields paid by Bank of America and Citibank. It is also comparable to U.S. giants, Wells Fargo and JP Morgan, which have yields of around 3%. Finally, for those investors concerned by the quality of governance in Latin American financial institutions, Bancolombia S.A. (ADR) (NYSE:CIB) has been a regular recipient of awards recognizing its strong internal governance and management practices.
Vale appears irresistibly cheap
Latin America’s commodities sector has been particularly punished by the market, primarily because of unpredictable economic data coming out of China. One company that now appears to be an irresistible value is the world’s second largest mining company, Brazil’s Vale SA (ADR) (NYSE:VALE). For the year-to-date Vale SA (ADR) (NYSE:VALE) has seen its share price plunge 24% and in July it touched a new 52 week low.
The key drivers are concerns over the direction of the price of iron-ore, from which Vale SA (ADR) (NYSE:VALE) derives over 60% of its revenue. This makes Vale SA (ADR) (NYSE:VALE) particularly vulnerable to movements in iron ore prices. For the year-to-date iron-ore has softened by 9%, but up signiciatly from last Septermber’s low of $100 per metric ton.
The gyrations in the price of iron ore have affected earnings, but with Vale SA (ADR) (NYSE:VALE) having realized $1.6 billion in cost savings during the first-half of 2013, it is now well positioned to take advantage of the bounce prices.
Finally, Vale SA (ADR) (NYSE:VALE)’s compelling dividend yield of 5% is superior to competitors BHP Billiton‘s 3.6%, Rio Tinto‘s 4% and Cliff Natural Resources 3% yield. This means it will reward patient investors as its share price grows in value on the back of cost reductions and stabilized iron ore price.
Foolish final take
The worse than expected outlook for Latin American economies, in conjunction with recent currency devaluations across the region and outflows of capital has seen investors reduce their exposure to the region.
The article 3 Enticing Value Opportunities in Latin America originally appeared on Fool.com and is written by Matt Smith.
Matt Smith has no position in any stocks mentioned. The Motley Fool owns shares of Companhia Vale Ads.
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