Goldman Sachs Analysts Upgrade Santander-Chile, Expect Return On Equity To Rebound Over 17% In 2024 And 18.5% In 2025

Goldman Sachs analysts upgraded Banco Santander-Chile BSAC from Sell to Neutral, citing Chile as an ideal place to do business for Andean banks.

Goldman Sachs’ Tito Labarta expects “strong earnings momentum at the bank in the medium term” and expects its EPS to grow 24% on average for the period from 2023 to the end of 2026 after profits fell sharply in 2023.

“The macro scenario in Chile also screens favorably when compared to the other Andean banks in our coverage, with better industry loan growth and significantly lower delinquency ratios,” Labarta said in a note.

Goldman Sachs maintains a price target of $21 on Banco Santander-Chile and expects the bank’s return on equity to rebound to 17.2% in 2024 and 18.5% in 2025 from 11.7% in 2023. 

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Meanwhile, Goldman Sachs downgraded Bancolombia S.A. CIB from Neutral to Sell. The firm expects “the weak earnings momentum to continue in the medium term” due to easing cycle pressures on net interest margin due to Colombia’s economy.

“Loan growth in Colombia is muted, negatively pressured by a still high level of interest rates and resilient inflation,” Labarta said. 

“Moreover, the still high inflation and interest rate environment could hinder loan growth in the medium term and indicate that the credit cycle has not yet peaked.”

He also forecasted that the bank’s profitability should keep falling through 2025 and 2026 to 14.3% and 13.5%, respectively, staying in-line with Bancolombia's cost of equity of 13.8% but well below its pre-pandemic average of 19.2%.

Price Action: Banco Santander-Chile gained 1.17% to $20.75 as of Tuesday’s mid-afternoon trading, while Bancolombia fell 4.57% to $33.20.

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Image courtesy of Banco Santander-Chile