Best bank
Banco Itaú
Best local partner
Banco Bradesco
Best equity house
UBS
Best debt house
UBS
Best M&A house
Goldman Sachs
As ever in Latin America, the awards in Brazil are typically the most interesting and the hardest to decide. Last year big banks JPMorgan and Citigroup won no awards in the country, and the same is true this year. But the one award that is normally a no-brainer is Banco Itaú winning best bank in Brazil – as indeed it does this year.
What is new is the degree of competition that Itaú faced. Both Bradesco and Santander-owned Banespa had very strong claims to the title.
Bradesco is the largest bank in Brazil, and wins our award for best local partner. For such a big bank (it also owns Brazil’s largest insurance company) it’s now very well run, and has the benefit of diversification into pension funds and insurance as well as just banking. It had a fantastic 2002, growing its deposits by more than 35% and making more money, in total, than Itaú. It also bought Spanish-owned BBVA Brasil for just over $800 million as part of its race with Itaú to be the biggest bank in the country.
Itaú, for its part, announced that it would keep up with Bradesco by buying Sudameris from Italy’s IntesaBCI, but then pulled out of that deal when the Brazilian economy turned sour and the purchase price looked too high.
ABN Amro ended up with Sudameris, paying just over $750 million, making it the fifth-largest bank in Brazil, and the largest foreign-owned bank in the country, bigger even than Banespa.
But the deal that Itaú negotiated to replace Sudameris was a masterstroke. It bought BBA Creditanstalt and so filled the one area in which it was weak – wholesale banking.
Between them, Itaú and the new Itaú BBA are almost exactly the same size as Bradesco, and are bigger than state-owned giant Banco do Brasil.
In recognition of that deal, Banco Itaú wins our best bank award, despite a stellar performance by Banespa. The São Paulo-based bank, which only a couple of years ago was a lumbering state-owned dinosaur, is now a lean and efficient machine that posted a 47.9% return on equity last year, the highest in Latin America. Its profits were similar to Itaú’s and Bradesco’s and that is despite the fact that Banespa is much smaller than either of them. It also managed to bring its efficiency ratio down to 42.5% from 67.1% in one year; Itaú is at 53.1%, while Bradesco posts 57.8%.
On the investment banking side, UBS manages to win not only the best equity house award – really, it was the only possible house that could win that – but the best debt house award as well.
UBS was the bookrunner on a $142 million share exchange offer from Suzano, a $190 million primary equity offering from Net, and a $207 million secondary offering from Sabesp. It also advised Crédit Agricole on the disposal of its stake in Bradesco.
But in a much more important deal, UBS lead managed, along with Merrill Lynch, Brazil’s crucial return to the capital markets in April. The $1 billion bond, maturing in January 2007, received more than $7 billion in orders in the first 90 minutes, at which point the books were closed.
A total of 427 investors wanted part of the bond, and 338 got an allocation. As soon as the bond hit the market, the entire Brazilian yield curve tightened in dramatically – a pleasant change from previous Brazilian sovereign issues, which have a nasty reputation of doing quite badly in the aftermarket. It was probably the single most important deal of the year, and UBS and Merrill executed it flawlessly.
UBS wins the debt house award not just for that one bond, however. Even before the sovereign came to market, UBS had quietly been issuing short-dated 12-month and 18-month paper for Brazilian banks, a niche in which it has proved itself very adept, making full use of its access to Brazilian private-banking clients.
On the M&A side, Brazil is full of deals, which in aggregate have dozens of advisers. None dominates, not even JPMorgan, which recently sent its head of Latin American M&A, Nicolas Aguzin, to live in São Paulo for a few months in an attempt to drum up more business in the region’s most important country.
The best M&A house award this year goes to Goldman Sachs, which had a prominent role in the largest deals to come out of Brazil over the past year. It advised Brazilian oil company Petrobrás on the acquisition of Argentine rival Pérez Companc.
In the other major deal between the two countries Goldman Sachs was also on the Brazilian side of the Ambev-Quilmes breweries transaction. It was also involved in the highly complex Telecom Americas transaction, where Mexico’s America Móvil ended up controlling a large chunk of Brazil’s wireless telephony market.
