Latin American Awards for Excellence 2013: By country

Argentina

Best Bank: Banco Santander Río

Following Santander Mexico’s IPO in 2012, the Spanish bank’s Argentine subsidiary is the next Latin American asset in line to tap the capital markets. There might be a long wait, however, as Banco Santander Río’s operating environment is far from conducive to the sort of market valuation that Santander will want to get for its excellent bank.

Argentina’s GDP growth fell sharply in 2012, reaching an estimated 2.6%, following much stronger growth in 2011 (8.9%) and 2010 (9.2%). The government’s unorthodox economic policy and interventionist approach is having an effect on inflation, growth and the president’s popularity, but no deviation from the established economic approach appears forthcoming. Against this difficult macroeconomic backdrop, Santander Río managed to grow revenues by 20% and increased net profit by 5%. The bank is now the leader in market share in total loans (8.8%, with a non-performing loan ratio of 0.77%), total deposits (9.7%) and mutual funds (12.7%), In mortgages, credit cards and personal loans the bank is second by market share. Its return on equity was a market-leading 43.4% and its return on assets was 3.7%.

Given the low level of investment bank activity in Argentina last year, with ECM and M&A virtually nonexistent and DCM extremely depressed, there is no investment bank award.

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Bolivia

Best Bank: Mercantil Santa Cruz

The Bolivian sovereign’s high-profile re-entry into the international capital markets (the first such bond for 90 years) highlighted the improving fundamentals of the Bolivian economy. Between 2005 and 2011 GDP doubled and the government has used high commodity prices to lower total public debt, which now stands at 32% of GDP, compared with 52% in 2006 and 86% in 2003. Total external debt is now 13%, down from 28% in 2006, and international reserves have grown by 700% to more than $13 billion. International investors bought into the success story: the bookrunners on the sovereign deal, Bank of America Merrill Lynch and Goldman Sachs, managed to attract an order book of $4.75 billion for the $500 million transaction.

Mercantil Santa Cruz took advantage of the strong growth in the economy and the country’s financial system to grow revenues by 26.4% to $176.6 million and net profits by 36.9%. The bank’s operational income was 24% higher than that of the second-most profitable bank. Mercantil grew deposits by 12.2% and total loans by 11%, while lowering the non-performing loan ratio to 2.53% (from 3.42% in 2011). The bank reported a return on equity of 17.54%; the bank’s management will therefore be preparing carefully for the impact of the new Bolivian banking law that will affect next year’s results, not least an increase in net income tax from 25% to 37.5% for banks that have return on equity higher than 13%.

Best Bank: Bradesco
Best Equity House: BTG Pactual
Best M&A House: BTG Pactual
Best Debt House: HSBC

Brazilian retail banks have long enjoyed a large and profitable domestic market. But the government’s attempt to lower interest rates, first with dramatic cuts to the base rate and then by pressuring the state banks to expand credit, has changed the tone in the market. The privately owned banks’ response has been muted – they argue that high non-performing loan ratios and loan-loss provisions hamper their ability to cut the rates they charge for consumer credit. The consumers themselves have also responded to the incentive to take on even more credit, as the debt burden is already high.

The focus for the Brazilian banks has therefore become less about winning market share and more about disciplined portfolio growth, coupled with internal cost control and a focus on the efficiency ratio. Bradesco has met this challenge best. It beats its main private-sector rival on a number of key metrics: revenues have been growing. Bradesco’s total assets grew 13.3% while it maintained control of costs – the efficiency IEO ratio reduced to 41.5% in March 2013, compared with 42.7% a year earlier, largely thanks to a big, multi-year IT investment programme. This combined to increase operating income by 6.4% (Itaú Unibanco’s fell by 9.1%). Bradesco’s non-performing loan ratio was 4% (Itaú’s was 4.5%) and it had a non-performing loan coverage ratio of 179% (Itaú: 161%). Bradesco’s price-earnings ratio was 12.5 (Itaú: 11.5) and it achieved a return on equity of 19.5%. Bradesco’s market capitalization rose during the awards qualification period by 28.8%, while Itaú’s rose by 10.9% and Banco Santander Brasil’s fell by 13%.

Luiz Carlos Trabuco Cappi, Bradesco. The bank has met many challenges the best

Competition in the Brazilian equity market is fierce, with strong local banks pitted against determined foreign rivals. The relative lack of new equity issued in 2012 didn’t help the pressure on equity houses to win deals, but BTG Pactual clearly demonstrated market leadership by topping the league tables for the qualification period: the bank did $2.3 billion-worth of deals to give a market share of 24.7% (second-placed Itaú BBA was credited with $1.6 billion and 15.3%) and brought 24 deals to market (Itaú BBA worked on 13). The investment bank also managed a wide array of transaction types: IPOs, follow-ons, accelerated bookbuilds and real estate funds. BTG Pactual was global coordinator on the largest transaction in Brazil in the period – its own $1.7 billion IPO, which won plaudits (and a Euromoney Latin America deal of the year 2012) for the way it structured and executed the transaction. BTG Pactual was also the global coordinator on the largest follow-on in the period (Taesa’s $867 million deal) and was bookrunner on all four IPOs during the period (Linx, BTG Pactual, Unicasa and Locamerica). The bank also brought a new equity product to the market: its FII BTG Pactual Corporate Office Fund, the first Brazilian real estate fund marketed to international investors.

BTG Pactual also wins Euromoney’s award for M&A in Brazil. Not only did the investment bank work on more deals than any other bank – and by volume was neck and neck with Bank of America Merrill Lynch – but its reputation for shrewd advice is unrivalled. This is illustrated by the fact that Eike Batista turned to BTG Pactual for support amid a collapse in market confidence in his Brazilian EBX Group. It speaks volumes that the announcement that BTG Pactual had become involved (it announced a strategic partnership that included a $1 billion credit line) in the intricate negotiations with private-sector creditors, BNDES and the Brazilian government did much to steady market sentiment and BTG Pactual subsequently advised on the sale of 40% in two blocks of OGX’s offshore Tubarai Martelo field for $850 million. BTG Pactual was also exclusive financial adviser to MPX in the sale of a 24.5% stake to E.On for R$1.4 billion ($624.4 million).

Beyond these examples, BTG Pactual’s M&A highlights include advising Ometz Group in its sale to Abril Educação for R$877 million, Multilab in its sale to Takeda for $540 million, Cosan in its acquisition of a controlling stake of Comgás for R$3.4 billion, and Abertis in its transaction with OHL Brasil for toll-road assets with a total value of $1.8 billion.

The locals dominate the DCM league tables. However, these include local debentures and many of these transactions are not fully distributed into the market. In many cases the local banks are effectively structuring bank loans as local bonds and passing them into their asset management businesses. Although effective, this complicates the volume picture from a traditional DCM perspective.

HSBC has won the award for excellence because of its ability to do important, fully distributed deals in the local market, as well as an impressive array of deals for Brazilian issuers in the international capital markets. Not the least of these is the liability management transaction HSBC worked on for the Republic of Brazil. The deal was worth R$3.2 billion and included a tender offer and a new global-Brazilian real issue. The deal was executed quickly and created a new liquid benchmark for the sovereign. Another highlight was Minerva Foods’ liability management (one of the fixed-income themes in the past year), which included a $649 million tender and $850 million new issue of 10-year NC5 notes due in January 2023. The transaction was one of the first sub-investment-grade deals from a Brazilian corporate in 2013 and achieved the company’s lowest yield and coupon in the 10-year section of its curve. HSBC also brought first-time issuers, such as Caixa Econômica Federal’s $1.5 billion dual-tranche deal, as well as Samarco Mineração’s $1 billion of 10-year notes. HSBC was also busy in different currencies, doing deals in euros (Petrobras and Vale), sterling (Petrobras), as well as global Brazilian reais (Banco ABC). The bank brought high-yield names to the international market (QGOG, OAS and Grupo USJ) and won repeat mandates from frequent Brazilian issuers including Braskem, BRF and Banco do Nordeste. Importantly, the bank also built experience in the local markets and has (according to Brazilian capital markets association Anbima) a 7.6% market share of local distribution, with a balance sheet of less than half of that, which shows the bank is punching above its weight. The bank also brought to market Concessionária Auto Raposos Tavares’s R$750 million 12-year local bond, which was the first-ever local project bond distributed under Law 12.431. It also book-managed Elektro Eletricidade e Serviços’ R$650 million three-tranche transaction in the local market, which included the lowest-ever coupon for seven- and 10-year inflation-linked debentures issued in Brazil.

Best Bank: Banco de Chile
Best Equity House: BTG/Celfin
Best M&A House: JPMorgan
Best Debt House: Citi/Banchile

Despite falling commodity prices – for copper in particular – the Chilean economy shrugged off the economic headwinds and posted GDP growth of 5% in 2012. It looks set for a decent performance in 2013. Similarly, Banco de Chile – the strongest bank in the country – continued serenely to grow revenues, profits, assets and market share. In 2012 Standard & Poor’s upgraded the bank’s long-term international rating from A to A+, making it the highest-rated private financial institution in Latin America. The reasons for the agency’s upgrade were clear: the bank posted net income of Ps466 billion ($909 million), 9% up on the previous year, and it has a leading market share of 29% of the total system’s earnings. It also led in return on equity (26.1%) and return on assets (2.1%).

BTG Pactual’s acquisition of Chilean independent investment bank BTG Pactual/Celfin was driven by a desire to become a truly regional player. That decision has paid early dividends: the Brazilian-based bank has won the award for best equity house in Chile. The Chilean division enjoyed a strong year, which included topping the league tables and a broad range of deals. BTG Pactual was global coordinator on the largest Latin American equity deal in the period, Enersis’ complex $6 billion capital raising. It also led follow-ons for Sonda and laPolar and conducted accelerated bookbuilds for Cencosud and Latam Airlines. BTG Pactual was also the first non-US bank to sole bookmanage an American depositary receipts offering, with Corpabanca’s $158 million ADR follow-on in January 2013. The bank also led on a Chilean IPO, with Hortifruit’s $67 million transaction in July 2012.

Thanks to Celfin, BTG also performed well in Chilean M&A, but can’t match JPMorgan’s $15.3 billion of volumes – worth 55% of the market from nine deals. The US bank was involved in the most transformational M&A transactions in Chile last year, including advising Cencosud on its $2.6 billion acquisition of French supermarket chain Carrefour’s Colombian supermarkets, part of Cencosud’s aggressive expansion into neighbouring Latin American markets in its attempt to become one of the leading multilatinas. JPMorgan also advised Chilean targets of cross-border acquisitions, such as Chile’s AFP Cuprum in its $1.5 billion sale to Principal Financial Group – the largest acquisition to date for the US-based seller of life insurance and retirement products.

Citi/Banchile wins the debt award because of its market-leading ability to execute transactions in the international and domestic debt capital markets. Citi/Banchile dominates local issuance in terms of volumes and landmark deals; the bank led on Caja Los Andes’ CLP-denominated transaction in March 2013, which was the second largest corporate bond issued in pesos in Chilean history, as well as Enap’s UF6 million ($289 million) bond in January that obtained the lowest yield for a local bond. The bank can also point to large international deals, including Telefonica’s inaugural $500 million 144a/RegS, which attracted over $6 billion in orders. Citi/Banchile led three Tequila bonds (foreign issuers tapping the Mexico’s local market) for Molymet – showing capability in the growing trade in intra-Andean debt capital markets deals.

Colombia is becoming an increasingly important – and competitive – banking market in the region. New entrants and growth among the incumbents made it hard to select the best bank this year, but Banco de Bogotá edges out the competition to regain the award it lost to Bancolombia in 2012. The bank, part of Grupo Aval, has been able to use its low cost of financing to build strong financial results. Net income rose 15.7% and the bank has a 20.6% market share of the financial sector’s net income (Bancolombia has 19.6%, Davivienda 10.8% and BBVA 6.8%). The bank has focused on efficiency in the past couple of years, and these efforts are paying off: the efficiency ratio at the end of 2012 was 42.2%, well ahead of its competition (Bancolombia 56.4%, Davivienda 50.1% and BBVA 57%). It also has market-leading return on average assets (2.9%), and its return on equity was 15.4%. The bank’s solid international reputation was demonstrated in February 2013 by its $500 million international bond transaction, which was seven times oversubscribed.

Investment bankers expect big things from Colombia and the competition is hotting up between the internationals and the locals. Bancolombia had an impressive year – especially in ECM and M&A, but Bank of America Merrill Lynch wins the best investment bank award for its all-round excellence. The bank was involved in the landmark equity transaction of the year, which was Cemex Latam Holdings’ $1.15 billion IPO – the largest equity deal of the year and the largest ever IPO in Colombia.

The bank was also involved in the highest-profile and most transformative M&A transactions in the country. It advised Santander on its sale of Banco Santander Colombia to Chile’s Corpbanca and CorpGroup in a deal worth $1.2 billion. It also advised Telefónica in the merger/restructuring between Colombia Telecomunicaciones and Movistar and Parapat in a deal worth $4.7 billion – the largest merger ever for a Colombian corporation. In DCM, BAML was involved in some standout transactions, including the only sole book-run transactions in the country, for Banco GNB Sudameris; the largest bond issue for Bancolombia ($1.25 billion); the lowest coupon ever on a Latin American local-currency fixed-rate issuance (4.375% for the Republic of Colombia); and the lowest-ever rate for a non-investment-grade issuer in Latin America (Pacific Rubiales’ $1 billion 10 non-call five, which priced at par with a 5.125% coupon).

In 2012, Ecuador’s consumer banking system was subject to new regulations and taxes. The effects of these will be broadly negative for Ecuadorian banks’ profitability and the full effect will be felt in 2013 accounts. However, Banco Pichincha has already responded by curtailing its credit expansion. The bank – which has 29.1% of the assets in the financial system – reported net profit of $65.9 million and return on equity and return on assets of 9.4% (17.1% in 2011) and 0.9% (1.5% in 2011) respectively. The bank blames the government’s new banking regulations for the diminished returns, which affected all banks in the system. Banco Pichincha’s results were more resilient than most – raising revenues by 11.15%, increasing its market capitalization by 21.7% – but it will be interesting to see how the regulations and tax affect Ecuadorian banks in the coming year.

Santander México’s IPO – the largest in the history of the Mexican stock market – cemented its reputation as the leading bank in the country. Domestic and international investors created large demand and the bank was able to place 24.9% of its equity (worth $4.06 billion) with a bid-to-cover ratio of almost five times. The bank then built on this show of confidence in its solidity by placing an inaugural $1 billion 10-year bond, which was the longest-term and lowest-cost senior debt placement ever by a Mexican bank.

The high demand for Santander México’s equity and debt was driven by the continuing performance of the bank in one of the most attractive financial sectors in the emerging markets. Last year’s winner of the award for excellence repeated its market-leading performance: revenues increased 21% and net income up by 31.4% to Ps17.8 billion ($1.33 billion). Return on average equity was 19.1%. Its credit portfolio was managed prudently, with a capitalization ratio of 14.78%, a non-performing loan ratio of 1.7% and an efficiency ratio of 39.49%. Return on assets grew to 2.3%, from 1.8% in 2011.

The winner of the best investment bank award, Deutsche Bank, worked on Santander México’s debt and equity IPOs. It also worked on the other landmark deal (and winner of Euromoney’s deal of the year), the global peso transaction for América Móvil, which for the first time linked the liquidity available in the domestic and international markets in a single transaction. The transaction has already been copied – with Televisa’s Ps6.5 billion deal in May this year – and many expect it to be a template for future DCM markets across Latin America. Deutsche Bank’s award reflects the bank’s momentum in a key Latin American market. In the past couple of years it has been focusing on developing its relationships with the leading Mexican companies and issuers, and the strategy has paid off. The bank’s share of fees has leapt from 3.2% to 9.1% in the year. The bank tops the M&A league table (with a 33% share), largely thanks to its ability to generate repeat mandates. As well as working on América Móvil’s global peso deal, it led the company’s €1 billion transaction and was sole lead on the £750 million transaction (with the lowest sterling bond coupon for a Latin American issuer), as well as advising the Mexican corporate on its acquisition of 27.7% of Royal KPN for €3.1 billion.

Another example of Deutsche’s ability to build wallet share from key clients was its lead role in Sempra’s Ps5.2 million inaugural dual-tranche offering, followed the next month (March 2013) by Sempra’s Infraestructura Energetic Nova’s (IEnova) $598 million IPO. Deutsche Bank was global coordinator and the deal was the first IPO since 2007 to price at the top of its range.

Paraguay was unusual in the region in recording negative GDP growth (minus 1.2%) in 2012. Banco Regional did well despite this, especially as the agricultural sector, to which it is heavily exposed, suffered more than most. Despite this, it achieved a rating upgrade from Feller Rate (a subsidiary of Standard & Poor’s) for the third year in a row.

The bank generated the same net profit that it achieved in 2011 – when GDP growth was 4%. The bank expanded its loan portfolio by 9% and local deposits increased by 9.2%. Despite recent improvements in its efficiency ratio (the bank has improved this by over 15 percentage points in the past three years following its acquisition of ABN Amro’s operations in the country) return on equity fell slightly to 22.2%. With growth forecasts for the Paraguayan economy of 11% and 13% for 2013 – driven by an expected rebound in agriculture – Banco Regional (which has a partnership with Rabobank) is well set to be the outperformer again.

Peru’s economy has been the fastest growing in Latin America for the past couple of years and the Peruvian financial system has responded with higher demand for credit. BBVA Continental has taken most advantage of these positive credit conditions and ranks first in efficiency and profitability, with an efficiency ratio of 35.44% and a return on equity of 33.08%. The bank also has a higher-quality loan book than its rivals, resulting in a non-performing loan ratio of 1.19% and a coverage ratio of 366.81%. The bank increased total revenues by 20% and net income by 10.3%.

Citi wins the award for the best investment bank in Peru. The bank led on the only equity transaction during the qualification period, InRetail’s $400 million IPO – the biggest such deal in Peru since 2006. Citi was also involved in some of the most important M&A deals in the country’s strongest-growing sectors: power generation (Citi advised Montealto’s $250 million acquisition of two Peruvian wind farms) and construction (Citi advised Cementos Lima in its all-stock acquisition of Cemento Andino). In DCM Citi was second in the league tables behind Bank of America Merrill Lynch and worked on some impressive transactions. The bank led on BBVA’s Peruvian bank’s £400 million ($617 million) bond, which was six times oversubscribed and achieved the lowest coupon for a Peruvian financial institution. Citi was also involved in the landmark Peruvian DCM transaction: Coazucar’s inaugural, high-yield 10-year deal, which was substantially oversubscribed and priced with a coupon of 6.735% – the lowest coupon for a Latin American high-yield issuer.

Santander remains the largest bank in Uruguay, but Itaú’s subsidiary has the momentum. All the more surprising is that Itaú Uruguay has achieved its remarkable recent rate of growth organically when its leading competitors, Santander and BBVA, have followed acquisitive strategies, buying, respectively, ABN Amro’s and Crédit Agricole’s businesses in the country.

Itaú managed to add 33% more customers and grew total assets by 20% (the industry average was 12%). Loans granted to the non-financial sector grew by 21% and deposits by 18%. The bank’s net income was $42 million (223% higher than in 2011) from revenues of $163 million, compared with Santander’s net income of $39 million from revenues of $258 million. The bank has market-leading return on equity (26%) and return on assets (1.6%).

BBVA Provincial’s investment in technology as a means to drive efficiency in its retail banking operations paid off handsomely last year. The bank added mobile services and installed 36 new express zones. The bank achieved a migration of 92% to automated banking channels (equivalent to 70 million monthly transactions out of a total of 76 million). It also introduced a new pre-approved loans system and improved internal processing that enabled it to grow loans by 45.6%, while its non-performing loan ratio fell to 0.65% from 0.89%. The bank’s total assets increased by 58%. Total revenues rose 49.7% and net income rose 69.9% to $1.2 billion. The cost-income ratio fell to 28.7%. Return on equity grew 1,516 basis points to 62.95% and return on assets hit 5.91%.