Brazil banks could outperform-Deutsche Bank

Brazilian banks could outperform once inflation fears
recede despite a possible decline in asset quality, wrote
Deutsche Bank analysts Mario Pierry and Tito Labarta.

“Consumer delinquency is strongly correlated to
unemployment rates, which remain at historical low levels,”
they noted, adding that “bank stock price performance has shown
little correlation to trends in asset quality.”

The sector’s “steep discount valuation to its Latam peers
is unjustified… outperformance is likely to occur once
inflation expectations start to improve.”