Awards for Excellence 2018
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The period under review for Euromoney’s Awards for excellence neatly captured a peak of strong performance by banks and investment banks in Latin America. Between April 1, 2017 and the end of March this year, there was a return to positive growth and, probably more importantly, genuine optimism about the fortunes of two of the largest economies in the south of the region, Argentina and Brazil.
In Argentina, bankers continued to gather in Buenos Aires as the country’s companies lined up to get IPOs and follow-ons off the ground. The heavy debt burden of the sovereign eased somewhat and provinces, quasi-sovereigns and corporates came to market – some funding in dollars and others finding attractive pricing terms for international deals in the local peso.
Financial institutions made a strong subset of both the equity and debt deals as banks looked to boost capital to fund growing demand for loans and to finance possible consolidation in the sector. The future looked strong and stable as the government lined up the first wave of public-private partnerships.
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Candido Bracher |
But the slow build up in confidence and momentum of the year was blown apart by a currency crisis in May 2018, which would lead to president Mauricio Macri to seek a deal with the IMF. The roots of the crisis were already there, but nobody expected such as severe shock so soon. Now uncertainty is back in terms of who is going to fund the country, who is going to invest, and whether or not the required fiscal adjustment will jeopardize the administration’s re-election chances.
Brazil had a more predictable cause for volatility – the presidential election this November. However, the previous market consensus that a centre-ground, reform-minded candidate would emerge to calm markets has been thrown aside. There is very little to be certain of yet, but the unpopularity of candidates who would please the market is one of them. In fact, investors appear to be convincing themselves that success for right-wing candidate Jair Bolsonaro could be good news despite his erratic views.
Bankers always knew that political volatility would impact market activity in 2018, but their view that it could make deals difficult in the couple of months preceding the vote has extended to include the months after it as well.
The only other regular source of market activity is Mexico, and there too political risk is radically reducing investor optimism. It looks like only a disaster or a miracle could keep Andrés Manuel López Obrador from winning the election – and the market would classify his failure as a miracle. Throw in the failure to renegotiate Nafta with president Donald Trump’s increasingly unilateral and destructive views on global trade, and Mexico’s outlook is uncertain.
Latin America is still in good fundamental shape, but depowering the engines of Argentina, Brazil and Mexico would put too much of a burden on the other smaller countries to keep the region’s total activity at last year’s levels.
But let’s leave next year to next year and enjoy the review of an undeniably positive 12 months for Latin America.
There were many very strong banking performances in Latin America, but none better than that posted by Brazil’s largest private-sector bank, Itaú Unibanco. Under the leadership of its new chief executive, Candido Bracher, not only did it continue to post strong results in a country that is just emerging from a very sharp downturn but it is also increasingly setting its sights elsewhere in the region. With first-quarter 2018 net income at R$6.4 billion ($1.7 billion) and a return on equity of 20.9%, it is fair to summarize the bank as very profitable.
Itaú has long been the only local Latin American bank with a truly pan-regional presence; with large operations in Argentina, Uruguay, Chile and Paraguay. The bank has been in Argentina since 1979, began retail operations in 1995 and is now one of the leading consumer banks. This year Itaú also wins Euromoney’s award as Paraguay’s best bank and its Uruguay bank has been consistently strong.
It has also supplemented this presence with investment bankers in Argentina, Chile, Peru, Colombia, Uruguay, Paraguay and Panama. The bank’s ambitions have waned in Mexico, but otherwise the intent remains the same: to achieve the same profitability in the rest of the region that it enjoys in Brazil.
In April this year, the bank announced the creation of a strategic council headed by Ricardo Villela Marino, designed to “achieve in this region the management excellence and the level of performance it has today in Brazil, exporting the best practices and establishing the necessary conditions to assume even more leadership in those countries”.
Such an aim is challenging; by its own management’s admission its progress to date in Chile, where it merged with CorpBanca, has been disappointing. But there is no other regional bank with such strength in its home market or with such potential in multiple Latin American markets. Analysts believe that if any bank is going to become a truly regional player then Itaú is by far the most likely.
