BEST BANK
Banco Itaú
BEST BOND HOUSE
Citigroup
BEST LOAN HOUSE
ABN Amro
BEST EQUITY HOUSE
CSFB
BEST M&A HOUSE
Goldman Sachs
Brazil is easily both the toughest and the most profitable banking market in Latin America. In 2004, both Banco Itaú and Banco Bradesco made more than $1 billion in profit, and Bradesco even beat Itaú in both the fourth quarter of 2004 and the first quarter of 2005.
Bradesco is the largest privately owned bank in Brazil, with some $70 billion in assets to Itaú’s $49 billion – so the fact that it can only barely make more money than Banco Itaú is an indication of Itaú’s continued efficiency and professionalism. Indeed, Itaú had a return on assets of more than 3% in 2004, a figure no other bank even approached.
Itaú has strong competition, of course, and not only from Bradesco: Unibanco has transformed itself into a retail powerhouse, the state-owned Banco do Brasil is also very powerful, and foreign-owned Santander Banespa and ABN Amro Real are formidable competitors. But Itaú is easily the biggest and best wholesale bank in the country, thanks to its 2002 acquisition of BBA-Creditanstalt, and it is now making moves in investment banking as well. The markets are certainly impressed: its share price keeps on setting new record highs, and its market capitalization is now more than $20 billion, indicating a price-to-book ratio of more than 3.5.
If the best bank in Brazil award always goes to the same institution, the best debt house award almost never does. Brazil is a country where the biggest and best investment banks have a habit of coming unstuck, and the winner of the best debt house in Latin America almost never wins the award in Brazil. Except this year. Citigroup has had an excellent 12 months in the country, lead managing three sovereign bonds worth $3.5 billion, as well as issues for Brasil Telecom and mining company CSN. Citi also broke new ground by issuing $125 million in real-denominated notes for Unibanco to foreign investors, tapping in to increasing demand for domestically denominated debt.
Citi did reasonably well in loans, too, but did not enjoy its usual dominance of that market. Rather, ABN Amro leveraged its large local presence to easily top the loan league tables in the country. Most impressive of its transactions was the largest Brazilian loan in five years, an $814 million deal for Telemar. ABN also joined the offshore local-currency party with real-denominated notes, both for itself (ABN Amro Real) and for the Inter-American Development Bank; and it lead managed a slew of local issuance including a R1.5 billion deal for São Paulo telecommunications company Telesp. ABN Amro, then, wins the best loan house in Brazil award.
In the equities market, one bank dominated issuance over the past 12 months, and it was not any of the usual suspects. Banco Pactual, a homegrown investment bank, has been extremely aggressive over the past couple of years, and has got itself mandated on vastly more deals than any other bank. Despite being confined to Brazil, it leads the Latin American equity league tables, and its performance in equity capital markets grabbed the attention of Goldman Sachs, which is looking to create a joint venture to run its Latin American operations.
Euromoney’s awards are for quality rather than simply quantity, however, and it’s not clear that Pactual always did the best deals from its clients’ point of view. Some of its deals were good; others were bad. And whenever there was an international tranche to the deal, it was invariably the foreign bank involved – typically UBS, Merrill Lynch, or CSFB – that was given the role of sole global coordinator.
Of those three, CSFB had the most deals, and in fact it almost reaches Pactual’s first place in the league tables, despite having only four deals to Pactual’s seven. CSFB had a great run over the time period, starting with a $422 million primary follow-on offering for Braskem, the largest petrochemicals company in Latin America, in September. The deal priced at zero discount to the last sale, traded well in the immediate aftermarket and went on to rise more than 50% in the following three months. So CSFB wins the equities house of the year award in Brazil, especially since Pactual seems to have taken its eye off the ball of late while it has been holed up in negotiations over some kind of merger or joint venture with Goldman Sachs.
Honourable mention, however, must go to UBS, which started the ball rolling with a magnificent $248 million IPO for cosmetics company Natura in May 2004. The first equity deal of the Lula administration, it set the tone for all those that followed.
The Brazilian M&A house of the year is much more obvious. Goldman Sachs had by far the best and the most deals: it represented Camargo Correa in its $1 billion acquisition of Argentina’s Loma Negra, and helped foreign companies such as Telecom Italia Mobile and Energias de Portugal merge their Brazilian subsidiaries into single entities. Goldman also advised longstanding telecoms client Globo in the sale of as much of its Net Serviços subsidiary to Mexico’s Telmex as is allowed under Brazilian law; as soon as the law is changed, Telmex has an option to buy control. Brazil is the one Latin country where JPMorgan acknowledges weakness in the M&A market, and Goldman has taken full advantage of that to dominate the largest deals.
