Shares of Argentine bank Grupo Financiero Galicia S.A. (NASDAQ: GGAL) are down 13.5% as of 1:05 p.m. EDT, and for at least a couple of good reasons.
Continue Reading Below
This morning, analysts at Citigroup announced they're downgrading the company's shares from "buy" to "neutral." Also this morning, Argentina's central bank announced it is hiking interest rates to 60% -- a one-third increase from the previous 45% rate -- in an attempt to attract more investors to its currency, and halt the devaluation of the Argentine peso.
One side effect of raising interest rates is to increase the cost of borrowing, which one would expect to hurt profit at a bank like Grupo Financiero Galicia S.A. For foreign investors in the company's stock, the continual decline in value of the Argentine peso, when translated into U.S. dollar terms to determine whether profits or growing or shrinking, may pose an additional concern.
Already, the Argentine peso has lost nearly half its value over the past year, so some might say that the damage here has already been done. The decision to downgrade Grupo Financiero Galicia stock after the interest rate hike, however, suggests that Citibank, at least, thinks there may be more bad news to come.
10 stocks we like better than Grupo Financiero GaliciaWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Grupo Financiero Galicia wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of August 6, 2018