Best bank:
Banco Itaú
Best debt house:
Citigroup/Salomon Smith Barney
Best equity house:
UBS Warburg
Best M&A house:
JPMorgan
Banco Itaú is undoubtedly the best bank in Brazil, and quite possibly the best-run bank in Latin America. Its figures for the first quarter of 2001 were astounding: a net profit of $310 million and return on equity of 42%. Remember that Banco Itaú is a commercial bank, not an investment bank where returns on equity of 42% might be more achievable.
Partly for this reason, Banco Itaú has the largest market capitalization in Latin America, excluding the recently-acquired Banacci, despite the fact that its rival, Bradesco, has significantly more assets and equity.
Although Banco Itaú’s BIS ratio of 13.4% is down from 18.3% in the third quarter of 2000, if excess provisions are included, as well as unrecorded tax credits, the tier one capital ratio would be above 17.8%.
Banco Itaú is not just an incredibly well-run retail bank, however. Its traders are legendary, and indeed $76 million of the bank’s first-quarter profits came from long-dollar positions that took advantage of the plunging Brazilian real.
Brazil is now unique in Latin America in that its best and biggest banks, Banco Itaú, Bradesco and Unibanco, remain domestically owned. Part of the reason is that they are so expensive: Itaú is trading at three times book value. By contrast, Citigroup bought Mexico’s Banacci for a 35% premium to a share price at its highs, and still only paid 2.4 times book.
To some extent, the same is true for securities houses: in the domestic bond market, Unibanco can give any foreign house a run for its money. But both debt and equity markets are international now, and so the awards go to foreign banks.
Citigroup/Salomon Smith Barney picks up the award for best debt house. In terms of international loans, it is neck-and-neck at the top of the league tables with Banc of America Securities: both have been arrangers on 16 deals worth $2.7 billion over the past year.
Salomon Smith Barney, of course, has bond expertise as well: it lead-managed seven domestic bonds over the past year, on top of its international issuance. Among the highlights of was a $200 million three-year transaction for the São Paulo state water utility Sabesp at the end of June 2000, which marked the first time since the Russian crisis that a non-federally owned Brazilian corporate had issued bonds longer than two years.
In terms of secondary-market volume, one house has historically dominated in both the equity and debt markets: CSFB Garantia. Its strength in trading, however, is not matched in the primary markets, and it still has a reputation for being much more interested in its own P&L than in its clients’.
Furthermore, with the mandate for a $1 billion delisting buy-back of Banespa shares, UBS Warburg has knocked CSFB Garantia off the top spot in the Bovespa volume tables. It is easily number one in international institutional trades as well, with a 32% share of the market to CSFB’s 18%.
And UBS Warburg is without peer in the small market for Brazilian tender offers: it has done four so far this year.
In M&A, JPMorgan’s teams in São Paulo and Rio de Janeiro have been involved in 20 deals in Brazil over the past 12 months – far more than any other house. It has had seven deals in 2001 alone, a market share of 61%.
JPMorgan has been particularly prominent over the past year in a series of deals involving mining conglomerate CVRD, helping to unwind cross-holdings with rival CSN in a deal valued at $2.5 billion; acquiring iron ore company Ferteco for $696 million, and selling its stake in Bahia Sul Celulose to Suzano.
