Over the past two years all eyes have been on the moves by Spanish banks into Latin America, with Banco Bilbao Vizcaya (BBV), Banco Santander and Banco Central Hispano (BCH) all piecing together high-profile regional networks. But suddenly a more powerful entrant has arrived on the scene, with HSBC Holdings buying up banks in a rapid succession of deals.
Over the past four months HSBC has spent more than $2 billion for stakes in Bamerindus in Brazil, Banco del Sur in Peru, Grupo Financiero Serfin in Mexico and Banco Roberts in Argentina. And more deals are expected, with observers anticipating an increase in its holdings in the Banco Santiago group in Chile, plus a possible further acquisition in Argentina.
"All they need now is a strategy," was the recent comment of one Spanish-language magazine in Latin America, referring to HSBC's spending binge on a mixture of minority positions and controlling stakes across the region. And there are certainly doubters, who point to the cultural affinity the Spanish banks have with Latin America, and wonder whether HSBC management will be able to make it all work.
But while waiting to see a coherent regional strategy emerge, analysts agree HSBC has a key advantage - it is starting off by paying low asset prices. Exhibit A is the acquisition of Bamerindus in Brazil, where the close-to-billion-dollar deal under which HSBC has acquired 100% of the bank was viewed as sufficiently favourable to the point of running into some political opposition.
In Mexico, where HSBC acquired 19.9% of Serfin for $300 million, it has bought into an institution still recovering from the fallout of the 1995 peso collapse. And while the Banco Roberts acquisition in Argentina was of a different sort, in that HSBC was buying a healthy and respected institution, analysts do not feel the $650 million price tag for a 70% stake was overly expensive.
In Brazil HSBC already held a small equity stake in Bamerindus, dating back to Midland Bank's involvement in the region, and senior HSBC executives working at the bank were well positioned to weigh up an offer. The central bank was anxious to see a strong shareholder brought in to shore up Bamerindus, which was suffering from continual rumours of its impending demise.
The deal struck allows HSBC to pay R1 billion ($950 million) for Bamerindus, while having a one-year grace period during which it can flip back any bad assets to the central bank.
"It is like throwing a fish back into the pond - any assets which they don't want go back to the central bank, so I think it is a pretty fabulous deal," says Walter Stoeppelwerth, head of research at Robert Fleming in Sao Paulo.
He points out that Bamerindus has an excellent branch network, and that its chief problem is a lack of confidence on the part of depositors. This has now changed as Brazilians feel safe with the powerful new owners of the bank.
And analysts in Mexico also feel HSBC managed to achieve favourable terms while acquiring 19.9% of Serfin. "In the case of Serfin I think they were able to do a very good deal," says one Mexico City-based banking analyst. "It is a good risk-return combination that they got."
So what's next? Stoeppelwerth thinks another bank acquisition may be on the cards in Argentina, following the deal in which HSBC, with Banco Central Hispano, paid around $650 million for 70% of Banco Roberts, adding to an existing 30% stake with its origins in Midland Bank's regional operations. "Roberts is not large enough to really compete with the big boys, and my sense is that HSBC will have to make another acquisition in Argentina to shore up its critical mass," he says.
And then there is Chile, where there has been speculation for some time that HSBC will significantly increase its existing small 3.9% equity stake in Banco Santiago, now the country's largest private-sector bank after Banco de Santiago was acquired by the Banco O'Higgins group and the two institutions merged.
Here, too, a deal with the central bank may be on the cards, though the sticking point may be price since the Chilean central bank shows little willingness to offload its 38.5% stake on the cheap. That holding in the new Banco Santiago has its roots in a large subordinated debt position in the old Banco de Santiago, dating back to the early 1980s' Chilean banking crisis.
The central bank has already held a tender offer for Santiago shares, but there were few takers as the asking price was well above the price at which Banco Santiago is trading on the local bolsa. Analysts feel that the valuation is clearly unrealistic, but that up to now the central bank has resisted lowering its price for political reasons - trying to avoid precisely the sort of criticism that the Bamerindus deal has prompted in Brazil.
But Ida Longeri, chief market strategist at the Larrain Vial brokerage in Santiago, notes that with around $800 million worth of stock on its hands, the central bank might be tempted to do a deal with a buyer such as HSBC.
And Pablo Salcedo, head of research at ING Barings in Santiago, agrees HSBC would make a suitable buyer, given its cash resources, the existing stake in the bank, and management's good relationship with the Luksic family, which controls the holding company of which Banco Santiago is a part. "I think that it would make sense for HSBC, since they have had years of working together with the Luksic family," says Salcedo. Michael Marray