Regional Awards for Excellence 2012: Latin America

Best Regional Bank: BBVA Best Bank in the Region: Bradesco Best Investment Bank: JPMorgan Best Debt House: HSBC Best Equity House: Bank of America Merrill Lynch Best M&A House: Credit Suisse Best Flow House: HSBC Best Project Finance House: HSBC Best Cash Management House: Citi Best Risk Adviser: Deutsche Bank  All regions and countries Latin America country awards Full results index

The top 10 investment banks in Latin America generated fees of just under $1 billion during the qualification period for this year’s Euromoney Awards for Excellence. Investment banking fees from issuers in Central America were roughly $150 million. Although still small compared with other areas of the world, the region’s economies and banking industry are still growing at rates that can’t be hoped for elsewhere, except in Asia ex-Japan.

Brazil accounts for nearly 60% of Latin American fees. It still dominates the region, but one of this year’s main trends was the continued emergence of the rest of Latin America. Equity deals stalled in Brazil, but there was more activity elsewhere – for example from Colombia, Chile and Peru. Those markets should continue to be active as these countries’ economies grow and the companies operating in them achieve the scale needed to access the international capital markets. International bonds from non-Brazilian Latin American issuers were strong this year – especially in the first quarter of 2012 – and from a demand perspective investors were keen to diversify their Latin American portfolios away from Brazilian credits.

Of course Brazil will remain of great importance. But there is a prospect of a competing bloc of countries – Chile, Peru and Colombia, and possibly with Mexico collaborating with these Andean neighbours – creating a financial market to rival, if not equal, Brazil’s in liquidity and activity. Latin American banks are rushing to create organizations that will enable them to take advantage; Banco de Crédito del Perú’s acquisitions in Colombia and Chile will not be the end of pan-Andean investment banking consolidation. In June this year Brazilian investment bank BTG Pactual added to its acquisition of Chile’s Celfin with the Colombian brokerage firm Bolsa y Renta. It’s a relatively small-scale deal in terms of capital but could be hugely important as another stepping stone to BTG’s target of creating a truly Latin American brand for its investment bank.

This year the competition from the independent local banks across the region was particularly strong. Brazil’s independents lead the charge but in Chile, Colombia and Peru there are emerging independents that will, like Brazil’s locals, challenge the local franchises of the international investment banks. It will be fascinating to see how effectively they will be able to use their local business and distribution relationships to rise in the league tables in the region’s new dynamic markets for investment banking services.

Best Regional Bank

Traditional banking services throughout the region are also growth areas and the standout performance this year as a regional bank was from BBVA, whose acquisitions of Crédit Uruguay Bank (which subsequently merged with BBVA Uruguay) and 24.5% of Forum, a Chilean vehicle financing company, combined with organic growth to increase total revenues by 31.2%. In comparison, its perennial competitor in this category, Santander, increased revenues by 12%. BBVA’s operating profit rose 23.8% (Santander’s by 1.9%) and its return on equity rose 182 basis points to 29.9% while return on assets reached 1.3%.

BBVA grew total assets during the qualification period by 23.7%. Total deposits rose by 25.9% (compared with Santander’s 8%) and total loans increased by 27.3% (Santander’s rose 17.9%). BBVA’s non-performing loan ratio also fell, by 28bp to 2.2%.

BBVA South America, which is present in eight countries and has 1,431 offices, 5,783 ATMs and more than 30,000 employees, now contributes 34% of the total benefit to the global group.

Luis Carlos Trabuco Cappi: Bradesco takes best bank in the region

Best Bank in the Region

Bradesco, as the best bank in Brazil, the region’s largest, most competitive and important market, wins the best bank in the region award. The past year has been an important one for Bradesco as it seeks to maintain its aggressive expansionary aims while remaining disciplined in cost. It showed these qualities twice in its dealings with Banco Postal – the bank had a very clear idea about the value generated from running this licence, and in the licence renewal refused to enter a bidding war. It then compensated for the lack of outlets previously provided by Banco Postal, predominantly in the north and the interior of the country, by opening 1,009 new branches (the bank now has 4,636 branches with 62,749 points of sale).

That it managed to undertake this operational challenge without damaging the bank’s efficiency ratios is a big achievement – especially when considering the tight labour market and service-industry inflation present in the Brazilian economy while the bank was hiring 8,353 new employees. The bank’s investment in technology ($8 billion since 2008 and $2.5 million in the past 12 months) is also driving operational efficiencies, while its insurance business continues to provide revenue diversification and cross-selling potential from its 65 million clients (an increase in 7% from the year before).

This expansion adds to the bank’s strong base. It had a 15% capital adequacy ratio in March 2012, 12% of which is tier 1 capital. The bank’s net interest income stood at $22.3 billion, 17.1% higher than 12 months earlier. Adjusted net income climbed 8.8%, from $5.7 billion to $6.2 billion, fuelling the increase in earnings per share from $1.49 to $1.62. Total assets came to $433.3 billion, 16.9% more than in the previous period. In March 2012, Bradesco’s market capitalization exceeded $66.8 billion, and with the launch of common share ADRs, the bank increased its market share in the US and its common and preferred shares began trading on the New York Stock Exchange.

Bradesco BBI’s domestic investment banking rivals, Itaú BBA and BTG Pactual, are growing their strength across the region – BTG has been particularly aggressive in building a pan-regional platform – but for now their Latin American league table rankings derive too much from their Brazilian market strength. In the future they will probably become legitimate contenders for the award for best Latin American bank, challenging the powerhouses of recent years – Credit Suisse and JPMorgan – as well as banks such as Citibank, which is resurgent, and Deutsche Bank, which is adding equities and M&A mandates to its recent breakthrough in DCM.

Best Investment Bank

JPMorgan takes the award for best investment bank in the region. The bank has added greater strength in equity capital markets in recent years to round out its traditionally strong market share in M&A and particularly debt capital markets.

In DCM JPMorgan is still the go-to house for dollar-denominated issuance. It has a true regional platform with a substantive presence in the Andean countries, Argentina, Brazil, Mexico, Central America and the Caribbean.

It led 13 deals for first-time issuers – a particular strength of the bank – from April 2011 to March 2012, resulting in a market share of 46%. Beyond debut deals it had impressive diversity across geographies, sectors and types, including Petrobras’s landmark four-tranche, $7 billion bond; América Móvil’s $2.75 dual-tranche transaction; OGX’s ground-breaking $2.5 billion high-yield note; Cemex’s five separate exchange offers for new 9.875% US dollar and euro notes due in 2019; and Votorantim’s $500 million reopening of its five-year global Brazilian real bond.

In ECM, JPMorgan was one of the main players in the few big deals in a volatile market. The bank was global coordinator on Arcos Dorados’s $1.4 billion IPO; lead-left joint global coordinator on Arcos Dorados’s $978 million follow-on offering; joint bookrunner on Bancolombia’s $933 million follow-on; sole bookrunner and stabilization agent on Cementos Pacasmayo’s $256 million NYSE IPO; and joint bookrunner on the $371 million IPO of CFR Pharmaceuticals.

JPMorgan also played a key role in some of the most transformational M&A deals in Latin America, acting as financial adviser on local, regional and global business. Some of its leading deals include Shell’s $12 billion joint venture with Cosnan in Brazil; Grupo Sura’s acquisition of ING’s pension assets in Latin America for $3.6 billion; Embotelladora Andino’s $1 billion merger with Embotelladoras Polar; Nippon Steel’s renegotiation of its shareholder’s agreement with the controlling group of Usiminas; GDF Suez’s sale of its 10% stake in Atlantic LNG’s Train 1 for $854 million to China Investment Corporation; Galp’s sale of a 30% stake in its Brazil subsidiary to Sinopec for $4.8 billion; Heinz’s acquisition of a controlling stake in Quero for $618 million; Protabaco’s sale to BAT in Colombia for $452 million; Zurich’s acquisition of a 51% stake in Santander’s insurance and pension operations in selected Latin American countries for $2.1 billion; and Almacenes Éxito’s acquisition of a controlling stake in Disco and Devoto for $742 million.

Last year’s winner of the best investment bank award, Credit Suisse, ran JPMorgan close but wasn’t helped by the fact that DCM was the strongest area of investment banking in the region last year and is not Credit Suisse’s traditional strength. It is also less strong in equities outside Brazil – another key theme for the year – and in Brazil the bank is being pressed by the locals.

Best M&A House

Credit Suisse is, however, still the dominant bank in M&A and wins the award for best M&A house in the region. The bank advised on deals with a combined volume of $40.5 billion, second only to BTG Pactual (whose advice for companies within its private equity division complicates a clear like-for-like comparison about independent M&A advice) in league table credit, and was the number one bank in terms of fees – with $69 million, equivalent to a 13.1% share of wallet.

The bank participated in a wide range of ground breaking M&A transactions, including the first acquisition of a Latin American financial institution by a Chinese bank: ICBC bought 80% of Standard Bank in February 2012 and the bank advised the Chinese, who expanded its overseas network by 50% in a complex cross-border transaction. Credit Suisse also advised EBX on the sale of a 5.36% stake to Mubadala Development Company, the largest investment by a Middle Eastern company in Latin America. The $2 billion deal was the seventh consecutive M&A transaction on which the bank was exclusive adviser to EBX. In another first, the bank advised Cementos Argos on its acquisition of Lafarge’s US cement and ready-mix assets in what was the largest cross-border acquisition by a Colombian industrials company. Large, outbound M&A deals from the region are becoming a key trend. Other large deals by Credit Suisse this year include: advising HRT Participações in its $686 million acquisition of UNX Energy Corp; advising Grupo ADO in its 16.3% acquisition in Grupo Aeroportuario del Sureste; and advising Mabel Alimentos on its sale to PepsiCo.

Best Equity House

Latin American equities had a difficult year. In recent years Brazil has typically accounted for 80% to 90% of Latin American issuance but in this year it accounted for less than 50%. In these volatile markets execution was also difficult and for these reasons the award for best regional equity house goes to a bank that is strong across ex-Brazil and that demonstrated an ability to lead on large, complex international offerings that performed well. For these reasons Bank of America Merrill Lynch wins the award. Of the $4.5 billion in total proceeds from IPOs in Latin America during the qualification period BAML raised $2.1 billion – more than any other global bank. The bank was also the lead-left bookrunner on two of the largest IPOs during the period – Arcos Dorados and Qualicorp – and in Brazilian deals it led seven of the 13 transactions, including the follow-on for Banco Santander Chile. The bank was also joint bookrunner on Bancolombia’s follow-on and was mandated by the Chilean government as joint adviser to sell its minority-stake holdings in four different water and sewerage companies in Chile.

BAML’s file-to-offer performance exceeded the average by 200bp and ranges from 450bp to 850bp better than the average for after-market performance, depending on the period of time chosen after pricing.

Best Debt House

HSBC wins the award for best debt house in the region after demonstrating unmatched breadth of structures and currencies. With global markets volatility adversely affecting Latin American issuers’ ability to tap the international markets at times, it has become increasingly important for banks to offer issuers flexibility. The ability to raise finance within the region’s local markets, or tap new pockets of investor liquidity through new structures and global currency transactions, has been important to companies in the past year and will in all likelihood continue to be a theme in Latin American DCM in the next few years.

In the qualification period HSBC executed international deals in euros and sterling (an example of both was Petrobras’s €1.85 billion six-year and 10-year notes and the Brazilian quasi-sovereign’s £700 million [$1.1 billion] 15-year bond – the first sterling transaction by a Brazilian issuer); offshore renminbi (América Móvil’s Rmb1 billion [$157 million] 3.5% notes due in 2015); global Mexican peso (Pemex Ps10 billion [$728 million] 7.65% 10-year GDNs – the first GDN by a corporate and the first from a Mexican issuer); global Uruguayan peso (the sovereign’s Ps23.4 billion [$1.1 billion] 4.375% UI 2028 notes); Hong Kong dollar (CAF’s HK$400 million [$51.5 million] 4.03% 10-year notes), global Brazilian real (Brasil Telecom’s R$1.1 billion [$536 million] 9.750 notes due 2016 – the largest non-sovereign global Brazilian real transaction); and global Chilean peso (for the sovereign – in total HSBC brought four Latin American sovereign deals to market during the qualification period). The bank’s run in currencies has continued, with HSBC opening the Australian dollar market for Latin American issuers with Pemex’s deal in April.

The bank also demonstrated a range of structures, from inflation-linked notes, a corporate GDN, project finance structures and liability management exercises. The bank brought an innovative Basle III-compliant structure for Banco do Brasil and brought first-time issuers to market, including trades for Banco de Bogotá, Hypermarcas and OGX.

As well as breadth, HSBC has depth in local capital markets throughout the region – for example it is ranked number one in Mexican local bonds – and the DCM team works closely with its syndicated loans team. HSBC’s claim to be product-, market- and currency-agnostic when advising clients is currently stronger than that of any other bank.

Best Project Finance House

HSBC’s project bond structures, with QGIG Atlantic/Alaskan Rigs (for Queiroz Galvão) and the ENA Sur Trust (which was secured with toll-road collections from Corredor Sur) also helped HSBC win the award for best project finance house in Latin America. During the qualification period the bank also demonstrated its ability in a range of services on complex, large-scale projects, including acting as financial adviser, lead arranging with commercial debt, arranging multilateral and export financing solutions, treasury products and equity products.

HSBC financed projects throughout the region, including oil and gas projects in Brazil, a copper mine in Chile, a refinery project in Colombia, a wind farm in Mexico, a gas-powered energy plant in Peru and a hydroelectric facility in Panama.

Best Flow House

It was HSBC’s large Latin American presence that also enabled it to win the award for best Latin American flow house. The bank has more than 20 dealing rooms that provide liquidity and service client flow throughout the Americas. The bank is a big dealer in all flow products and is growing its revenues across the board. For example, in FX it increased transactions in the region by 24%. It has also been increasingly successful in linking in with its global and emerging market flow businesses to provide clients in Latin America with their growing needs for international products. HSBC has a wide range of derivatives products from forwards to highly customized exotic options in all asset classes: FX, local and G10 rates, commodities and credit.

Best Risk Adviser

The breadth and depth of products offered by HSBC gave the bank a strong claim in the risk adviser category but last year’s winner, Deutsche Bank, retains the award for having demonstrated its market-leading ability to innovate and execute tailored and effective risk solutions for clients. An example of this is when a corporate client wished to hedge the US dollar principal of a new 10-year issuance into local currency but couldn’t afford to trap cash as collateral resulting from mark-to-market movements of a long-dated hedge. The client was also concerned about receiving the best possible price, while at the same time distributing the transaction among its relationship banks.

Deutsche proposed to carry out the market risk and credit risk syndication of a 10-year option structure with a deferred premium profile, which allowed the client to pay the premium over time. Through this transaction the bank was able to execute market hedges for the full notional of the transaction in an illiquid market and then helped the client syndicate the transaction among its top relationship banks. Deutsche provided the market hedges for these relationship banks so that the client could further reduce the bid-offer paid for market risk hedges. And, at the same time, Deutsche kept a portion of the transaction on its books with a clean credit line for the client.

Best Cash Management House

Citi is another bank that has sufficient scale in the region to offer banks flow and risk management services but it is unrivalled when it comes to cash management. The bank again wins this award for its integrated cash and treasury management solutions to more than 13,000 public-sector and private-sector clients, utilizing a regional network that encompasses 2,600 branches and has 2,152 employees in Latin America that work for the global transaction services, the area of the bank that incorporates cash management.

The cash management business processes more than 110 million transactions annually. In the qualification period the bank further expanded its deposit base, with balances up 20% over the year before, including double-digit growth in Argentina, Brazil, Chile, Costa Rica, the Dominican Republic, Ecuador and Guatemala. International payment and dollar clearing transactions grew by 12.4%, with 25% growth in Chile, the Dominican Republic, Ecuador, Jamaica, Mexico, Peru, Puerto Rico and Venezuela.