After the financial implosion of 2008, a string of government bailouts and massive losses, many investors simply lost their appetite for the volatility and uncertainty of the financial sector. But before the group fell from grace, bank stocks were some of the most popular and powerful investments on Wall Street.

From 1992 to 2007, directly before the recession of 2008, bank stocks led the market higher, pumping out huge gains as sharp economic growth and waves of industry consolidation fueled sales and earnings. Take a look at the market-beating returns below in Bank of America (NYSE : BAC), Citigroup Inc. (NYSE: C) and Wells Fargo Co. (NYS: WFC).

As you can see, bank stocks experienced huge gains and disproportionately benefitted from general economic growth. That was a big win for shareholders. But if you missed that bullish trend the first time around, then don’t worry. The cycle is about to repeat itself. That same pattern of growth and consolidation that lifted the current mega banks of North America is just getting underway in Latin America.

Latin America is just like the United States in 1992, on the front end of a long-term growth cycle that will have a huge effect on how banking stocks and the financial sector are structured. Not only will strong economic growth increase corporate demand for banking and financial services, it will also enrich the middle-class, another large group of customers to service. That long-term economic growth is the perfect foundation for consolidation in the financial services sector, a trend that would produce big gains for early investors.#-ad_banner-#

That has already given Bancolumbia S.A. (NYSE: CIB) a boost, the largest bank in Columbia, but is barely a large cap with a market cap of just $12 billion. Although the bank has some geographic diversification with operations in Brazil, Puerto Rico and Panama, it is primarily a play on Columbia, Latin America’s  fourth  largest economy. Shares currently trade with a forward price-to-earnings (P/E) ratio of 13 times, in line with the average during the past 10  years. Analysts are looking for solid 14% earnings growth in 2013, calling for full-year earnings per share of $5.05 . And as a bank stock, Bancolumbia also has a solid dividend yield of almost 3.0%.

A Latin American bank similar in size to Bancolumbia is Banco de Chile (NYSE: BCH), the second largest bank in Chile, with a market cap of $12 billion. This means the bank is big enough to fend off new threats, but small enough to take advantage of long-term growth in Latin American banking services. After years of strong financial gains, the company’s credit rating is an impressive “A,” providing an extra layer of security for traditionally more volatile emerging market investments. Banco de Chile currently trades with a forward price-to-earnings (P/E) ratio of 13 times, directly in line with its average in the past 10 years. Banco de Chile also pays a nice  3.0% dividend yield.

But if you want to go into the small caps, Oriental Financial Group (NYSE: OFG) is the way to go, with a market cap of just $437 million. That makes this small cap stock out of Puerto Rico ripe for big-time growth or a possible takeover. Shares are down about 18% in the past two years, as many investors shifted into more conservative segments of the market. But with a bullish growth projection calling for full-year earnings of $1.25 per share in 2013, shares currently trade at less than 10 times forward earnings. That’s a great deal for this small-cap bank stock in a high-growth emerging market.

Risks to Consider: Global demand for commodities is driving a lot of the spectacular growth in the emerging markets. Latin America is a commodities juggernaut, a global leader in soybeans, chicken, beef, coffee and oil. Slower economic growth and weaker demand from China would be a headwind for the region as it transforms from regional emerging market into global powerhouse.

Action to Take –> Buying Latin American bank stocks ahead of a long-term trend of growth and consolidation is a great way to produce outsized gains. They are going to be more volatile than stocks in developed economies, but could easily double or triple in size in the next 10 to 15 years.