Latin America: CorpBanca bids to become regional force

By:
Jason Mitchell
Published on:

Domestic Chilean market seen as saturated; Colombia the prime initial focus.

Chilean bank CorpBanca’s recent $620 million capital raising will help fund its expansion into Colombia as it becomes the latest financial institution to attempt to become a pan-regional bank.

CorpBanca, Chile’s fourth-biggest bank, wants to diversify into other Latin American countries because its home market is saturated. In February the bank issued 47 billion new common shares, all of which were subject to a pre-emptive rights offering under Chilean law.

About 26% of the capital increase was successfully placed in the international market, which meant the group gained new shareholders from the US, the UK and Brazil.

The transaction was undertaken to finance the purchase for $1.278 billion of a 100% equity stake in Helm Bank, Colombia’s seventh-biggest bank, with assets under management of $6.64 billion. CorpBanca is acquiring the interests of Timon, Inversiones Carroon, and Comercial Camacho Gomez, as well as subsidiaries of Helm Corporation.

The acquired bank will be merged with Banco CorpBanca Colombia.

During the past two years, CorpBanca has expanded aggressively into the Colombian market, but now wants to concentrate on consolidating its business there.

Fernando Massú, the chief executive, says the bank is still absorbing the recent acquisitions and is unlikely to make another acquisition in 2013. CorpBanca’s management expects the acquisition to close during the first or second quarters of this year, following regulatory approval in Colombia and Chile.

Jeanne del Casino, vice-president and senior credit officer in the financial institutions group at Moody’s
Jeanne del Casino, vice-president and senior credit officer in the financial institutions group at Moody’s
“The second acquisition in Colombia in the space of a year was certainly a bold move,” says Jeanne del Casino, vice-president and senior credit officer in the financial institutions group at Moody’s. “This is reflected in our ratings. The bank had to do a lot of things – including the capital raisings – at the same time and our concern is that maybe it has been growing a bit too fast.”

Moody’s rates CorpBanca Baaa3; it rates Chile’s three biggest banks – Santander, Banco de Chile and Estado de Chile – at the higher Aa3. The agency put CorpBanca on negative outlook after it announced the Helm Bank purchase.

The capital increase also enabled strategic and long-term shareholders to join CorpBanca’s ownership structure. During the pre-emptive rights period, the International Finance Corporation, the private-sector development arm of the World Bank – subscribed for just under 17 million common shares and invested around $225 million.

Santo Domingo Group, a Colombian family-owned conglomerate, increased its stake in CorpBanca’s equity to 2.9%. The capital increase means CorpBanca will maintain a solid equity base to finance its growth plan for this year.

“The massive subscription of pre-emptive rights is a testament to the confidence our shareholders have in the bank’s achievements during the last few years and its growth plans,” says Massú. “This is further evidenced by high demand by local and foreign investors with an interest in becoming a part of our expansion project.”

Furthermore, CorpBanca said it planned to acquire an 80% equity interest in Helm Corredor de Seguros, an insurance broker, for $17.1 million.

In May 2012, CorpBanca completed the $1.2 billion purchase of Santander’s operations in Colombia, which it rebranded CorpBanca in August 2012. Eventually, Helm Bank will also assume this branding; the combined group will be the fifth-biggest bank in the country.

Brainstorm

“In 2010, CorpBanca’s board held a brainstorming session about the group’s three-year strategy for 2012 to 2015,” says Claudia Labbé, an investor relations manager at CorpBanca. “It decided that the Chilean market was highly consolidated and that if the bank wanted to grow at the same fast pace it had become accustomed to, it would have to expand overseas.

“We wanted to invest only in investment-grade countries in Latin America and we felt that Mexico and Brazil were just too big. However, right on our doorstep were two other countries – Colombia and Peru – which had well-run economies but low banking penetration.

“In particular, Colombia is very much like Chile 15 or 20 years ago. It has had solid economic fundamentals for a long time, but had the guerrilla-related issue. Now that the latest issue has largely disappeared, the strong economy stands out.”

In February, CorpBanca announced plans to distribute a dividend for the 2012 fiscal year valued at Ps0.1764023878 ($0.00037) a share.

Meanwhile, Massú has confirmed that it plans to launch an IPO of the Colombian operations on the stock exchange in Bogotá. The parent company, which trades in New York and Santiago, plans to list its Colombian subsidiary as part of its expansion strategy, but has ruled out a listing in 2013.