COUNTRY INDEX
LATIN AMERICA
CENTRAL AMERICA AND CARIBBEAN
LATIN AMERICA
|
ARGENTINA |
|
Best Bank: Santander Argentina |
|
|
Best Investment Bank: Goldman Sachs |
|
Argentine banks are used to facing difficult macroeconomic situations. But today’s conditions are similar to those that created the toxic brew of financial collapse in 2001: untenable foreign exchange controls, spiralling inflation, capital flight and negative real credit and GDP growth.
Whether or not the country can stave off disaster before this October’s presidential elections is unclear, but what is certain is that the banks are having to choose between loading up on rapidly deteriorating sovereign credit risk or being exposed to inflation that has now risen into triple digits.
No banks win in this kind of scenario, but relative strength comes from scale. Santander Argentina’s diversification into multiple corporate and retail segments offers some kind of protection even when the economic erosion is so widespread.
The private-sector banks have all been forced into exposure to central bank and treasury securities – and even they still don’t offer positive real rates – but Santander’s broader funding mix gives it a slight advantage.
Santander’s chief executive since April 2021, Alejandro Butti, has been revamping its customer focus and culture since he took the reins of the already-dominant institution. The added emphasis on digital banking – both enhancing Argentine use of the bank’s global platform and actively seeking local bolt-on opportunities – has been pursued with the focus of improving the client experience.
Santander introduced CX Clinic, a specialist team that works to boost client experience and loyalty, as well as improving the training of its on-site teams at branches. The cultural transformation of its staff through a training programme and a revamp of its academy was also designed to boost the client experience.
The strategy is working, and this focus is flowing through into the bank’s financial results, which were strong amid the country’s growing chaos. Some numbers need to be treated carefully in the inflationary environment and with a manipulated exchange rate, but revenues and net income grew positively in dollar terms in 2022 – by 18% and 256% respectively.
The key ratios all improved too: return on equity leapt to 19.5% from 6.3% the year before, and return on assets came in at 2.8% from 0.8%. So, while a bigger test may be coming in the year ahead, Santander is well positioned to weather the coming storm.
Given Argentina’s tough economic situation, it was another subdued year of capital markets activity. But even depressed situations can prompt deals – note the unconfirmed market rumours that Itaú is ready to give up waiting for the country’s undoubted potential to be unleashed and sell its bank in the country.
Goldman Sachs has had another strong year and captured the lion’s share of the investment banking business that did emerge. For that reason, it wins this year’s award for Argentina’s best investment bank. The US bank is throwing off its reputation for scaling back its commitment to Latin American markets that go into downturn – its continued presence in Argentina is certainly testament to this.
Presumably its success helps Goldman stay onshore, while its leadership in M&A speaks volumes, especially with international equity and debt capital markets effectively shut to Argentine issuers.
In May 2022, the bank was the exclusive financial adviser to Nike when the sports company sold its Argentine and Uruguayan operations to Regency Group. In August, Goldman also acted as exclusive financial adviser to Insud Pharma when the pharmaceutical company sold a 55% stake in its subsidiary mAbxience to Fresenius Kabi for $548 million. The lofty sales price was achieved by adding guarantees for the acquirer of milestone payments linked to commercial and developmental achievements – an effective strategy to build confidence for acquirers in volatile emerging markets.
Goldman also led the market in financing transactions. It proved its long-standing relationship with leading retailer Mercado Libre, when in July the bank upsized the company’s pre-existing warehouse facilities in Brazil and Mexico (to $260 million and $225 million respectively). Goldman was the sole structuring agent and lender on the transaction.
And in February this year, the bank also extended its financing commitment to AES Argentina, the country’s third-largest power generation company.
It wasn’t a very active investment banking year for any bank in the country, but Goldman’s ability to eke out revenue opportunities when they emerged stands it in good stead for a hoped-for burst of deal activity in 2024, following a likely change in government at the end of this year.
|
BOLIVIA |
[index] |
|
Best Bank: Banco Mercantil Santa Cruz |
||
Dollar scarcity has put the Bolivian banking sector under severe strain as the population has sought to take dollar-denominated deposits out of a system that is being drained of US currency.
The slump in central bank reserves hasn’t helped with systemic confidence as total reserves have dwindled to less than $4 billion now from a peak of around $15 billion in 2015. Nor has the collapse of the system’s fourth largest bank, Banco Fassil. Regulators took over the bank in April 2023 and insist it is an isolated case of criminal failure (some of the bank’s senior management were arrested) and the rating agencies have taken a similar reassuring view of systemic robustness, but tensions around the banking sector remain elevated.
In this environment, the country’s biggest and best bank, Banco Mercantil Santa Cruz (BMSC), has been enjoying the subsequent flight to quality. Depositors have been pulling out cash – both local and dollar denominated savings – from the smaller banks and giving BMSC’s scale advantage even more weight than simple operational leverage.
Given the outlook for the country and the banking sector, it would be surprising if this dynamic doesn’t continue to play out. Any acceleration would be impressive given the high growth – at the end of the third quarter of 2022 the bank reported a 113.7% year-on-year increase in net income – that BMSC enjoyed in 2022. The bank also reported increases in both return on assets and return on average equity, 0.32% and 5.85% respectively, compared with 0.12% and 2.25% in 2021.
|
BRAZIL |
[index] |
|
Best Bank: Banco do Brasil |
||
|
Best Investment Bank: BofA Securities |
||
Banco do Brasil’s improvement in financial performance in recent years has been impressive. In 2019, Euromoney gave the bank the award for best transformation in Latin America that, among other things, recognized the improvement in its return on equity from 8% in 2016 to over 16%. At that point, neither we, nor the private-sector banks that were recording RoEs over 20%, thought the bank’s progression would end up rivalling the biggest and the best in the country. However, this year the bank not only rivalled its private-sector rivals but beat them all.
Recent results would have been hard to conceive in the dark days of the Dilma Rousseff administration, when the bank was pushed into recklessly taking market share as an effective macro-prudential tool. In the first quarter of 2023, the bank recorded a 21% RoE, just beating BTG Pactual’s 20.9% and Itaú’s 20.7% – and way above Bradesco and Santander Brasil that both reported just 10.6%.
Banco do Brasil’s net interest income grew 38% – another system high – with a net interest margin of 4.6%. The bank’s efficiency was an incredible 29% and, unlike the private-sector banks that have struggled with fee income amid growing competition from digital banks and fintechs, Banco do Brasil increased fee income by 8.1%.
Loans grew by 16.8%, reflecting the advantage the bank has in its large market share of agricultural loans. The fact that agriculture is the fastest growing industry saw the bank’s agricultural loan portfolio grow by an impressive 26.7%. Importantly, this fast growth comes with strong credit performance: non-performing loans are lower in Banco do Brasil’s credit portfolio than for its private-sector rivals, at 2.6%, while it also enjoys a 202% coverage ratio.
However, this undoubtedly strong performance, which makes Banco do Brasil a worthy winner of the award for Brazil’s best bank, comes with a caveat. The new government has appointed a new chief executive, Tarciana Medeiros, and, as always, political risk is an issue for investors looking at those shares that are listed on the Brazilian stock exchange.
The new administration is likely to encourage the bank’s new leader, its first woman chief executive, to expand credit to lower-income groups. However, these risks look contained: not only would any additional credit growth come from an already profitable base but the bank’s improved risk controls mean that risks to the downside are limited.
BofA Securities wins the award for Brazil’s best investment bank after demonstrating very strong performance in leading some of the country’s biggest and most transformative deals. League tables can be misleading – and fee income is the most disputed of all the rankings Euromoney includes as part of the evaluation process – but when local rivals validate BofA’s ability to generate much more in fees from Brazilian issuers, it answers any questions in that regard.
According to multiple sources, BofA, which in Brazil is led by co-heads of investment banking Hans Lin and Bruno Saraiva, created a wide gap between itself and its nearest rival in terms of fee income, which is usually a very good proxy of value added in capital markets transactions.
BofA was clear leader in M&A. Its mandates include being exclusive financial adviser to Localiza in its merger with Unidas, which at R$14.3 billion ($2.98 billion) was a truly transformative deal in the car rental industry. The bank also advised Oi on its R$13 billion sale of a controlling stake in V.Tal to BTG Private Equity, as well as advising the same company on the $3.3 billion sale of its mobile assets to UPI.
BofA also delivered clear market leadership with its equity capital markets platform, generating a 24.5% share of fees in a market dominated by follow-ons, with IPOs notable by their absence. Important mandates included being lead international global coordinator and stabilization agent on Electrobras’ $7.4 billion follow-on – the third-largest equity offering in the world in 2022.
The bank was also lead international global coordinator on Enerva’s $811 million follow-on, while in the private equity markets the bank was lead placement agent on XP’s July 2022 block trade – and sole placement on a subsequent XP block trade in November 2022.
While the bank’s debt capital markets franchise isn’t as strong, there was weak deal flow in international bonds and so BofA’s overall performance wasn’t negatively impacted by comparisons with stronger competitors in this asset class.
The bank also printed some solid deals during the qualification period, including acting as lead international global coordinator for Natura’s $600 million seven-year bond, which effectively reopened the international debt markets for Brazilian issuance in April 2022 following a two-month hiatus caused by geopolitical tensions.
|
CHILE |
[index] |
|
Best Bank: Banco Santander |
||
|
Best Investment Bank: Banchile Citi |
||
It has been a tough 12 months in Chile. Political risk spiked and economic output slumped. The unleashing of post-pandemic inflation has seen a strong response from the central bank, and interest rates are now in double digits, slowing growth. A country that needs strong copper prices has also been frustrated by weak Chinese demand. Hopes for a strong rebound on that front are fading.
The banking sector has therefore been looking carefully at risk, both in its own credit portfolios and as part of the scarce demand for fresh capital. In retail, deposit retention at low cost has been high on the agenda and that has translated into a fresh focus on customer service. Banco Santander, Chile’s best bank, has been the most successful on this front and it shows.
New chief executive Roman Blanco, in post since July 2022, has energized the bank’s delivery of digitalization. The bank now offers a 100% digital, zero-cost, interest-bearing current and savings account (dubbed Más Lucas), as well as new Work/Café Expresso transaction centres and a new specialized business service model for middle-market corporates.
The efforts have been reflected in the bank’s net promoter score, which has risen from 51% in December 2020 to 57% at the end of 2022, top of the Chilean retail bank market.
While innovating new products has been successful, the main driver of growth of Santander’s retail client base comes from its Life account, with a 22% increase in the number of accounts during the past calendar year. There has also been strong growth in the small and medium-sized enterprise segment, and the bank now boasts a 31.7% market share of individuals registered for corporate accounts (micro businesses).
In total, the bank’s efforts produced a record result in net income of Ps809 billion ($1.01 billion) in 2022, up 3.8% year on year – a strong performance in such a poor macroeconomic environment. Unsurprisingly retail was the best performing business, rising 6.2% in net income, and revenues rose 10.1%. That focus on SMEs meant the bank’s middle market contribution to profits rose 30.6% (on revenue growth of 20.4%).
Return on equity was a healthy 21.6% and the bank’s total equity rose 13.7% in the year with Santander’s common equity tier-1 ratio increasing to 20.6%. The bank has signalled that it intends to maintain its 60% pay-out rate for 2022 earnings, despite tough headwinds.
While Santander had its retail strength to rely on last year, the environment for investment banking was particularly tough. With high interest rates, debt was expensive, dampening any plans for corporate investment that the economic slump hadn’t already pushed off companies’ agendas. This environment favoured those investment banks that had strong domestic deal flow, something that helped to maintain volumes for Banchile Citi, Chile’s best investment bank.
With international deals in hibernation at the beginning of the awards period, the combination of Banchile and Citi drove ahead with domestic debt issuance to keep corporate finance flowing. The team topped the league tables for domestic issuance, launching 12 deals worth a total of $1.3 billion, and importantly reopened the market with a deal for CCU in April 2022.
Banchile Citi was also the lead bookrunner on the first public bond auction since the beginning of the pandemic, which enabled Elecmetal to raise competitively priced debt in July 2022. And as the international markets reopened, the team participated in seven of the 16 bonds, advising corporates, financial institutions, the sovereign and quasi-sovereign issuers on a total volume of issuance of $7.35 billion, including the landmark sustainability linked bond for the Republic of Chile.
Banchile Citi also performed strongly in M&A. The team advised JX Nippon Mining & Metals Corporation on the sale of 51% of its copper mine, Caserones, to Lundin Mining for $950 million – a key mandate given the importance of the sector to the country.
The team was also exclusive adviser to Hapag-Lloyd when the company bought 100% of Saam, a ports and logistics business, for $1 billion, and advised WOM on its sale of a portfolio of 2,334 tower sites to Phoenix Tower for $930 million.
|
COLOMBIA |
[index] |
|
Best Bank: Bancolombia |
||
|
Best Investment Bank: BofA Securities |
||
Bancolombia is Colombia’s best bank. It has been the standout performer in the country over the past year, outgrowing its competitors and generating strong financial results. The obvious question is whether such appetite for growth is justified in such a poorly performing economy.
The metrics are behaving so far and credit quality isn’t deteriorating noticeably. The bank’s decision to raise provisions in early 2023 suggests that management sees delinquencies ahead. Analysts of the country’s banks believe strong net interest income will more than compensate these credit costs.
While the decision to grab market share in the past year is notable, the bank was able to do so while maintaining strong diversification in products and geographical areas – the bank is the biggest in the country and getting bigger.
Bancolombia, led by chief executive Juan Carlos Mora (who is also the president of Grupo Bancolombia), has 18.5 million clients based throughout the country’s 1,100 municipalities; it is the fulcrum of the Colombian financial system to a point that is rare for a private-sector bank. It claims that 55.3% of the country’s financial sector operations and 33.8% of all money moves through its various channels.
The bank also leads in loans to the agribusiness sector, delivering 28% of the credit going into the industry.
Given that presence in the economy, it is interesting that the bank clearly has a bullish outlook and has decided to outgrow competitors, increasing total assets by 17.6% in 2022 to reach a market share of 26.6%, more than 11 percentage points higher than the second-largest bank.
Bancolombia has also boosted deposits, with solid growth in both current accounts (where the bank now enjoys a market share of nearly 30%) and savings accounts.
The bank clearly understands its importance to the development of the Colombian economy and has focused on expanding access to the financial system to those on the periphery. It expanded its financial inclusion initiative, A la Mano, by 50%, to cover 6.6 million individuals in 2022, with the bank granting 311,754 small loans worth a total of Ps456 billion ($97 million).
Bancolombia has also been improving its sustainable finance loan business, offering rate discounts for companies that work in the area such as clean technologies, renewable energy and the circular economy.
Colombia’s best investment bank is BofA Securities. In a tepid year, the bank’s team in the country – led by head of investment banking in the Andean region Ricardo De Bedout – has been the most active. BofA participated in nine key advisory and capital markets transactions in Colombia during the awards period and generated more fees than any other investment banking franchise.
With no equity capital market revenues from Colombian issuers, BofA had to rely on M&A, and the team captured leading roles on landmark deals during the year. It was exclusive financial adviser to Grupo Sura, which received multiple unsolicited tender offers – the first such defensive advisory assignment in the Colombian capital markets in many years.
The team was also exclusive financial adviser to Ecopetrol on the completion of its joint venture with Occidental Petroleum, which enabled Ecopetrol to gain entry to the Delaware Basin. The bank also advised Orbis on the sale of 100% of its shares to Akzo Nobel. This was the culmination of a strategic advisory process where BofA worked with Orbis and its shareholders on several strategic alternatives –and resulted in Orbis spinning off non-core assets in Mexico – to generate the best price for the business.
The bank also claimed market share in the debt capital markets and syndicated loans for Colombian companies. It led on CAF’s $1.5 billion three-year bond in January 2023 and added another development bank, Cabei, to its deal list with its $1.25 billion three-year deal in the same month.
In the private sector, BofA brought Banistmo’s $320 million syndicated loan to market in September 2022 and helped to organize Procaps’ $485 million bridge loan acquisition finance as the Colombian pharmaceutical company pursued cross-border consolidation targets in Mexico.
|
ECUADOR |
[index] |
|
Best Bank: Banco Pichincha |
||
It has been an interesting year for Ecuadorian finance. The country has pulled off a successful historic debt-for-nature swap, which fell just after the end of Euromoney’s awards period. This helped the country’s bonds rally and was another example of international investors’ willingness to invest in the country.
However, political risk continues to undermine Ecuador’s potential and president Guillermo Lasso’s decision to dissolve congress and call snap elections will be critical for a country that is facing a steep ramp-up in repayment obligations in 2025.
In this environment, Banco Pichincha remains the country’s biggest and best bank. Led by chief executive Santiago Bayas Paredes, the bank pitched an eye-catching story of financial strength and social development in the country.
The bank proved that it could deliver on both fronts, growing its loan portfolio by 20.1% and its market share to 27.1% of the system’s total loans in 2022, with a nice balance between the consumer (37.8%), corporate (36.4%) and the micro segments (17.1%).
Even with strong credit growth, the bank reported contained asset quality, with a non-performing loans ratio of 2.6%.
The bank also grew its share of total system deposits to 28.2%; the cheap cost of funding fed into better profitability, with the bank closing 2022 with a return on equity of 11.3% – up from 8.1% in 2021. The operational leverage that drove profitability was also evident in the bank’s massively improved efficiency rating of 54.2%, compared with 62.2% the year before.
While the bank’s growth points to its domestic popularity, Pichincha’s landmark $300 million international bond issuance demonstrated the broader credibility the bank has been developing with investors. Its deal was the first international bond issued by an Ecuadorian issuer under the diversified payment flows programme. The bank also issued the first gender social bond ($100 million) to support women owners and leaders of micro, small and medium-sized enterprises in the country.
As well as validating the excellent work that the bank has done to prove its financial strength and environmental, social and governance credentials, these deals may also be come to be seen as perfectly timed, given the challenges looming for the country at a sovereign level.
|
MEXICO |
[index] |
|
Best Bank: Banco Santander |
||
|
Best Investment Bank: BofA Securities |
||
In a strong and interesting market, Banco Santander claims the award for the country’s best bank this year. Good pitches were also made by the Mexican franchises of HSBC and BBVA, but Santander wins thanks to an outstanding set of financial results, increasing earnings by 46.4% in the year and by 24.2% over the pre-Covid 2019 benchmark.
The bank has generated good momentum and is the only one in the country to have doubled its size over the last five years. It points to its digital strategy as the source of this and future growth.
In 2022, the bank reconfigured its digital team to boost the development of its digital product suite, and over the course of the year it grew its digital client base by 9% to over six million. As well as helping to boost credit (total loans rose 7.9%), Santander has improved its efficiency ratio by 330 basis points (to 47.1% at the end of 2022, compared with 50.4% at the end of 2021).
On the credit side, the highlight was a 42.5% increase in auto loans, with Santander finally able to break into the established alliances between banks and car manufacturers. It also launched a credit product to serve the used-car segment, growing the business from virtually zero a few years ago to one that now represents 10% of all auto loans.
Santander’s strong earnings growth has been fuelled by low-cost deposit funding. Deposits represented 85.4% of total funding at year-end 2022, up by 6.9%. The bank’s loans-to-deposits ratio stood at 94.4% and the bank’s net interest margin rose 37bp to 4.88%. Net income rose by 14.1% and return on equity hit 15.9% – up from 11.1% in 2021.
BofA Securities is Mexico’s best investment bank. In the awards period, BofA’s team in Mexico – led by head of investment banking Diego Suarez – was the leading choice for investment banking mandates. Arguably the most prestigious of these came with the April 2022 sale of Bimbo’s confectionery business, Ricolino, to Mondelez for $1.3 billion. The transaction enabled Bimbo to generate shareholder value and implement a decision to refocus on its core bakery business.
The team can also point to strong client retention. BofA has been mandated in a range of strategic roles for Femsa as part of its plan to maximize long-term value creation. BofA led on Femsa’s divestiture of its economic interest in Heineken from 14.8% to 7.2%, where books were covered within 20 minutes of launch. In total, the US firm participated in more than 25% of all equity capital market transactions.
BofA is also leading Femsa’s exploration of strategic alternatives for Envoy Solutions and its reduction of debt, which led to a $2 billion repurchase offer for its US dollar 2043 and 2050 notes, and 2028 and 2033 euro-denominated notes in 2022. The liability management exercise is designed to keep Femsa’s investment-grade rating safe.
The bank lays claim to many other notable international debt capital markets deals from Mexican issuers in the past year.
It also had a very strong record in environmental, social and governance (ESG) issuance – a growing sector of the market. BofA was bookrunner and delivery agent for Cemex’s first green $1 billion perpetual bond. It was global coordinator for the first sustainable bond issuance for CFE; the sustainability linked bond structuring agent for the first ESG bond issue for Nemak; and was bookrunner on Femsa’s five and 10-year €1.2 billion deal – the first euro-denominated SLB issuance by a Latin American corporate.
|
PARAGUAY |
[index] |
|
Best Bank: Banco Itaú Paraguay |
||
Paraguay suffered a severe drought in the past year and GDP growth only just scraped into positive territory (0.1%) as hydrology proved the consensus forecasts of 3.5% incorrect. Rains are now predicted for this year and the central bank reckons growth will rebound under the new administration of president Santiago Peña to 4.5%.
The stress in agriculture didn’t help banks such as Banco Regional, which has a large exposure to the sector. Instead, it is Banco Itaú Paraguay that takes the award for the country’s best bank. It demonstrated a financial performance better than almost all its rivals, which will give its chief executive, Jose Luis Britez, some comfort in the face of the news that the Brazilian parent bank is considering selling its operations in Argentina.
Itaú is now the second-largest bank in the country in terms of total loans and the largest in terms of deposits, which creates a strong funding base and source of profitability. The bank generated more net income than any other bank, with the highest operating margin and the highest market capitalization. Itaú generated a return on equity of 25.4% and a return on assets of 3.2% in 2022 – both comfortably higher than any other comparable bank in the country.
Itaú Paraguay continues to drive efficient growth through greater digitalization, adapting the digital platform developed in its Brazilian operation to local needs.
In the past 12 months, the bank has been particularly focused on expanding its investment product suite and its new Itaú Invest platform, which offers corporate clients structures to raise funds in the local capital markets. Meanwhile, Itaú Asset Management covers the other side of the investment coin with its expanded digital investment platform for the retail market.
Other innovations include Cuenta On, a new account for young adults to access financial services with minimum requirements, and Itaú Transforma, an account aimed at the country’s entrepreneurial class.
|
PERU |
[index] |
|
Best Bank: BBVA |
||
|
Best Investment Bank: BofA Securities |
||
The steam has run out of Peru’s recovery from the Covid pandemic. As the banking system entered 2022 it faced a reduced fiscal impulse, and it soon became clear that renewed Chinese demand wouldn’t be a strong enough substitute. Deep and persistent popular protests have increasingly impacted economic performance.
GDP growth in 2021 hit 13.6%, but fell to just 2.7% for 2022, while the country registered negative (-0.4%) year-on-year growth in March 2023. The banking sector hasn’t been immune, with credit demand faltering and most banks taking their foot off the credit risk pedal.
BBVA wins the award for Peru’s best bank this year for its ability to resist these downward pressures and report a 28.4% increase in its gross financial margin in 2022 thanks to higher volumes and the repricing of its loan portfolio.
BBVA’s ability to pass on a higher cost of credit for its loan clients was essential given the upward pressure on rates throughout the financial system in Peru. This enabled the bank’s pre-tax profit to jump by 18.9%, with net profit up 18.8% and exceeding pre-pandemic levels.
The bank, led by chief executive and country manager for Peru, Fernando Eguiluz, has clearly made progress in its operational effectiveness in recent years. It has been investing to balance out its consumer portfolio; this year’s 70% leap in its net loan portfolio is testament to the success of this strategy. Credit cards grew 31.8% and while this raises concerns in a slowing economy, the bank’s asset quality and provisioning appears to be under control.
However, BBVA’s non-performing loan ratio did move above the system average at the end of 2022. It hit 4.3%, compared with 4%, but analysts say the profitability of portfolios with higher delinquency rates generates sufficient revenues to absorb any costs related to higher portfolio losses.
And the bank’s main performance metrics look good: it has an efficiency ratio of 39.1%, below the system’s 42.5%, while its return on equity is a solid 18.2%.
BofA Securities wins the award for Peru’s best investment bank. It wasn’t a stellar year for investment banking in the country, but the US firm put together a strong claim for market leadership. The bank’s nearest rival was Credit Suisse, and it will be interesting to see whether UBS maintains that market presence.
Deal flow would not seem to encourage many investment banks into Peru at the moment. BofA’s $6.6 million fee revenue was equal to a 48% market share – and that was generated from just six deals. BofA was exclusive financial adviser to Grupo Romero on its sale of a 50% stake in Tramarsa, the ports and logistics company, to Global Infrastructure Partners.
The BofA team, led by Antero Carrillo, head of investment banking in Peru, was also exclusive adviser to Hortifruti on its $424 million sale of a 49.9% stake to PSP Investments. The transaction, which was sparked when PSP launched a public tender offer for the company’s outstanding float, was the country’s first take-private transaction involving a third-party investor. It is an important precedent as several companies in the region are assessing these types of transactions, driven by reduced public-market valuations.
As well as topping the league tables for M&A, BofA was also out front for international debt deals. In August 2022, it was lead arranger on Alicorp’s $220 million, two-tranche revolving credit facility, while in April 2022 the bank was sole solicitation agent on Hunt Oil’s consent solicitation for its outstanding 2028 notes. The liability management exercise ultimately boosted the company’s liquidity and flexibility, as it amended provisions of the indenture governing the notes.
|
URUGUAY |
[index] |
|
Best Bank: Banco Santander |
||
Unlike many countries in Latin America, Uruguay’s post-pandemic recovery hasn’t stalled in the past year. The economy continues to expand, with 5% GDP growth in 2022, up from 4.4% in 2021.
The country has benefited from commodity export strength, renewed tourism receipts and inward foreign direct investment encouraged by the country’s market friendly regulatory and taxation environment.
Even inflation, a perennial issue in the country, was well behaved: strong fiscal and monetary discipline saw it continue to fall but, at 8%, it remains above the central bank’s target band.
Given this strong economic background, it was risk-on mode for the banks. Uruguay’s best bank, Banco Santander, put in the best performance.
Its strength is demonstrated by the fact that it generated more profit than the next three largest banks in the country combined, despite having a market share of just 16%, compared with those banks’ combined 27%. This is testament to the efficiency and profitability of Santander’s Uruguayan operation.
The bank’s efficiency ratio was 49% (its nearest private-sector competitor was 65%) and it had a return on equity of 21%.
How has this been achieved? A simple answer could be that it ranks first in terms of customer and employee satisfaction – it has the best net promoter score of all the local private-sector banks and it is the best bank according to Great Places to Work.
These strong survey results are a reflection of the success of the bank’s digital strategy, which included the creation of F1rst, its own tech subsidiary that delivers innovative cybersecurity and other systems to accelerate the bank’s digital proposition.
The creation of F1rst, taken under the leadership of Uruguay chief executive Gustavo Trelles, has required an annual commitment of $10 million over the past two years. It is a gamble that has paid off.
The retail business continues to expand rapidly, and the bank credits its loyalty programme as a key part of that growth. In 2022, more than 40,000 retail clients redeemed Soy Santander points.
In the past year, Santander celebrated its 40th year of operations in Uruguay, holding an event that brought together a host of past finance ministers.
CENTRAL AMERICA & CARIBBEAN
|
BAHAMAS |
[index] |
|
Best Bank: Scotiabank |
||
The Caribbean has traditionally attracted far less attention from international banks than central America. Therefore, Scotiabank’s successful investment in the region is interesting from a strategic point of view.
In the Bahamas, that investment included replacing all its ATMs (in-branch and external) and increasing its network to 50 offsite locations through several corporate partnerships. Scotiabank, led in the Bahamas by vice-president and country head Roger Archer, has also refreshed and upgraded its physical and digital channels – with 50% of branches now boasting social hubs where clients can do their banking in-branch and talk to customer-service representatives.
To boost customer service outside the branch system, the bank also launched a dedicated sales centre, complete with a drive-through digital bank. This increased sales infrastructure and enabled the bank to conduct a targeted business development drive towards small and medium-sized enterprises delivered through a financial education campaign. The result was more than 100 new SME accounts, as well as interaction with around 500 existing clients.
Crucially in a market of this size, the bank has been winning market share. At the end of 2022, it had grown total loans by 90 basis points to give it a market share of 21.2% (retail loans stood at 21.6% and commercial loans at 18.6%), while Scotiabank’s share of total deposits – important for low-cost organic funding – reached 15.2%, up from 13.9% the year before.
In terms of financials, Scotiabank Bahamas bounced back from Covid 19 and net profits are now 135% of their 2019 pre-pandemic level.
|
COSTA RICA |
[index] |
|
Best Bank: Citi |
||
As both an economy and a country, Costa Rica is an outlier in many ways. The country’s farsighted policies on reforestation and decarbonization have helped develop a niche in sustainable tourism, while the country continues to adopt environmentally friendly policies that create a benchmark that challenges almost all other countries. For example, the country generated 98% of its energy from renewable sources in 2022.
However, it was its fiscal performance that was more surprising last year – the indebted nation’s strong start to 2023 has had private and public-sector organizations alike scrambling to raise GDP forecasts. The country posted a 1% primary surplus in the first quarter, well above its target of 0.37%, which led the IMF to disburse $527 million of its support package.
Private-sector banking also continues to be healthy, well capitalized and profitable. Citi wins the award for Costa Rica’s best bank this year after delivering a strong set of results that mix its longstanding business with a very modern overlay of digital banking innovation.
It has been a potent mix for the bank, led by country officer for Costa Rica Ed Sanchez, with rapid growth across the diverse segments in which the bank operates.
In total, revenues rose by 88.1% to $207 million and net income increased by 49.8% to $34.4 million, with an impressive return on equity of 39.8%. And while total loans fell slightly by 5.8% to $896 million, deposits increased 4.4% to $896 million, and the strong funding position, greater fees and other income saw Citi able to post an impressive set of financial results in Costa Rica.
|
DOMINICAN REPUBLIC |
[index] |
|
Best Bank: Banreservas |
||
In May this year the IMF heralded the Dominican Republic’s economy as “one of the most dynamic and resilient in the Western Hemisphere over the last year.” The fund said economic growth is likely to slow to 4% in 2023.
As well as being a success story, it is an interesting version of state-driven capitalism. The role of the state-owned bank Banreservas, which is led by chief executive Samuel Pereyra, is an important part of this. The bank is a rare example of a state bank that has both scale and a client-orientated culture; it receives state development investment mandates and delivers a profitable loan portfolio.
This year Banreservas stepped in to help an economy heavily dependent on the tourist industry and particularly badly hit by Covid. The bank financed important infrastructure projects in tourism, real estate, construction and energy generation, as well as established special financing programmes for small and medium-sized enterprises in the supply chains that support these sectors.
It also financed initiatives for schools, sports, cultural associations, health associations, hospitals and social and community clubs.
The bank grew to more than Ps1 trillion ($18 billion) in assets in the past year and now has a 39% market share. Total loans increased by 14%.
This was delivered while also generating profits. Net income reached $390 million in 2022 – up 37% year on year. Return on those assets hit 2.3% while return on equity came in at 35%.
Part of this profitability comes from its access to low-cost funding through deposits. Banreservas has to earn its retail base – it is an extremely competitive banking market – and so growing to more than one million credit-card clients demonstrates a savvy use of technology to win and retain clients.
The bank also continues to innovate: it opened new representative offices in Madrid, New York and Miami in the first quarter of 2023. The branches will have multiple product and service functions, but the core of the strategy is to offer remittance-based banking services to the large diaspora of Dominicans living in those cities.
Banreservas is an example that large banks in other emerging markets should look to – both public and private.
|
EL SALVADOR |
[index] |
|
Best Bank: Bancoagrícola |
||
El Salvador’s financial system survived the past year. And, given the number of pessimistic predictions that the country’s experiment with bitcoin would end up in default, that is something of a success.
The country made bitcoin an official currency in September 2021, and by July 2022, its 2025 and 2027 bonds were trading at 26 cents and 25c respectively. Today, they’ve rallied to 78c and 56c. Investors that timed those trades would have done better than investors in bitcoin itself.
While the improvement in the price of the cryptocurrency has been part of the story, the main driver of the country’s financial stability has been the old-fashioned concept of liability management. In July last year, El Salvador executed a $1.6 billion buyback funded by special drawing rights and a $200 million loan from the Central American Bank for Economic Integration.
The deal reduced the outstanding principal on the 2025 bond to around $350 million from $800 million. This orthodox approach helped allay fears of default by reassuring investors about the country’s ability and willingness to pay upcoming bond maturities. This was backed up by improving financial metrics.
El Salvador’s debt-to-GDP ratio fell to 78% in 2022 from 84% in 2021, while the fiscal deficit improved to -2.7% in 2022 from -5.7% in 2021, helped by a 7.1% jump in GDP in 2021 and more effective tax collection.
The avoidance of the worst-case scenario and the rebound in economic growth was positive across the financial industry. The country’s best bank, Bancoagrícola, led by chief executive Rafael Barraza, maintained its market leadership. The bank grew its revenues by 18.9% in 2022, while keeping non-performing loans well below the system average and at just 1.1% of total loans.
Net profits increased by 8.2% and the bank delivered a 12.1% return on equity.
The bank’s scale is impressive; it has a market-leading 27.9% share of loans and 29% share of deposits. And it is clearly generating operational efficiencies as it reported a 43.6% market share of total system profits and an efficiency ratio of 47.7% – no other bank in the country had a ratio in the 40s.
|
GUATEMALA |
[index] |
|
Best Bank: Banco Industrial |
||
As the largest bank in the largest economy in central America, Banco Industrial has enjoyed the fruits of a stable macroeconomic environment. Guatemala grew at 4.1% in 2022, back to its long-term trend after the post-pandemic flush of 8% in 2021. This year the IMF anticipates a still solid 3.6%.
But while Banco Industrial could have been forgiven for simply riding this wave as the market leader, it has relaunched, with a new logo that is a deliberate play, adopting a tech-sector visual as part of its investment in its digital banking capabilities.
The bank has launched new digital products and accounts across its corporate and consumer segments, introducing features such as face-recognition technology and virtual financial advice to boost the client experience, and increase share of wallet and the cost efficiencies of onboarding.
The bank says the new mobile banking app has been particularly important in improving its credit-card offering. Clients can request new cards, activate accounts, configure payment dates and limits, and freeze cards all through their phones or through Fitbit and Garmin smartwatches.
Sales channels have also benefited from the bank’s bet on digital. Banco Industrial’s loan portfolio grew by 13.2% in the year, and those digital efficiencies have helped to drive the efficiency ratio to 48.8% in December 2022 from 52.2% in 2021. They have also driven net income, with profit jumping 37.2% in the same period. Return on equity, unsurprisingly, also grew strongly, reaching 26% from 21.1% the year before.
This exceptional growth story also fed into even higher market share across the banking segments: share of total banking system assets was 29.4%, loans 28.9%, deposits 27.9%, equity 23.7% and net income 26.2%.
|
HONDURAS |
[index] |
|
Best Bank: Ficohsa |
||
Honduras’s recent problems with slowing economic growth and stubbornly high inflation have led its government to turn to China. It has cut its diplomatic ties with Taiwan, with Honduras’ foreign minister citing economic interests rather than ideology as the motivation behind the pivot.
Whether or not Honduras will succeed in attracting Chinese investment is yet to be seen. For now, however, the economy has been helped by strong international remittances.
Led by chief executive Camilo Atala, Ficohsa is the country’s best bank and it has demonstrated its ability to navigate the difficult economic and financial environment. It is the biggest bank in the country in terms of assets, growing its base by 7.5% in the past year, and it is now in the top 10 of central American banks by assets.
The bank continues to build scale within the country. It has 1.8 million clients and opened another eight branches in new cities over the past year as it tries to diversify its growth.
The bank’s strategy to lower the cost of its liabilities was also successful, with a 2.9% average cost in 2022, down from 4.5% a year earlier. Ficohsa’s ability to grow its large public-sector deposit base gives it a competitive funding advantage.
Efficiency and profitability continued to improve, with the bank’s cost-to-income ratio improving 250 basis points in 2022 and return on equity improved to 15.9% from 14.1%, with return on assets up 5bp to 1.1%.
|
JAMAICA |
[index] |
|
Best Bank: Scotiabank |
||
Scotiabank cemented its operations in Jamaica in 2022 through investment to improve its physical and digital infrastructure. The Jamaican bank benefited from the integration of the firm’s global platform – which the Canadian parent undertook throughout its Caribbean franchises in 2021 – and its clients are now able to open and activate accounts 100% digitally.
The bank, led by president and chief executive officer Audrey Tugwell, also boosted the range of products sold online, improved online security and revamped its physical branches.
This helped it to grow market share in the retail segment, with the retail loan portfolio increasing by 19% in 2022, outpacing the corporate loan portfolio’s growth of 7%. This rapid expansion was achieved while also improving the credit quality of the total book, with the non-performing loan ratio falling sharply to 1.65% from 2.81%.
The bank was also successful in capturing more of the country’s deposit base, growing this funding source by 5%. Scotiabank launched a more flexible mortgage that allows the customization of the product’s features for individuals – and encourages new clients. The result is that the bank disbursed 28% more in mortgage volume in 2022 than it did in 2021.
Digital investment also improved the bank’s bottom line as efficiencies flowed to the cost side of the balance sheet. Scotiabank’s efficiency ratio improved from 61.9% in 2021 to 55.8% by the end of 2022.
While the bank’s assets only grew by 1.7% in the year, its operational leverage generated by technology helped to increase net profits by 35%. Return on equity increased from 7.5% in 2021 to 10.4% and return on assets saw a material improvement, reaching 1.96% from 1.48%.
|
NICARAGUA |
[index] |
|
Best Bank: Banco de la Produccion |
||
Nicaragua’s economy continues to recover from the pandemic. While GDP growth is expected to slow to 3% this year from 4% last year, the outlook is stable.
The award for Nicaragua’s best bank is usually a two-horse race between two financial institutions – Banco de la Produccion (Banpro) and Banco Lafise Bancentro – that enjoy a combined market share of 80%. This year the standout performer was Banco de la Produccion, which saw continued broad-based and risk-adjusted growth in its loans.
The bank, originally established to serve the agricultural sector, now serves all corporate and consumer segments. It still has a 51% market share of agricultural market loans and its legacy dominance in the sector helps add stability to credit performance through business and economic cycles.
Banpro’s non-performing loan ratio was just 0.93% at the end of the first quarter – well below any other bank – and an important sign that targeting more aggressive growth in its retail credit segments hasn’t led to asset quality deterioration. The bank also reported a non-performing loan coverage ratio of 335%, enabling any weakness in the coming year to be manageable without increasing provisions. Return on equity ended 2022 at 11.1% and return on assets hit 1.7%.
|
PANAMA |
[index] |
|
Best Bank: Banco General |
||
That financial services are important for the Panamanian economy is no surprise and neither is the news that Banco General has again won the award for Panama’s best bank.
Under president Raúl Alemán, Banco General’s domination of the country’s banking sector continues. It is the leader in loans, with a top-ranked 17.5% market share, as well as in deposits, with 27.4% of the market. Despite this, its client acquisition continues to accelerate and the bank added more than 200,000 customers in 2022.
Just over half (56.5%) of the bank’s total loan portfolio consists of retail loans, with 39.6% to corporates, of which 29.7% are domestic companies and 9.9% are foreign. The balance is a mix of other products such as pledge loans, overdrafts and leasing.
Around 79% of clients now transact online, up from 54% in 2019, and digital transactions now account for 61% of the total. The shift online has pushed even greater efficiencies and the bank’s cost-to-income ratio has fallen to 36%. Its closest competitor has a ratio of 46.9%, illustrating the extent to which Banco General benefits from scale and operational efficiency.
This in turn has driven profitability to levels most of its competition can’t hope to match. Banco General has a return on equity of 21.2%, with its closest competitor at 16.2% and the sector average at just 8.6%. The bank’s return on assets is 2.9%, comfortably ahead of any other bank.
All this translated into net income of $538.3 million in 2022, an increase of 31.9% from the previous year and a new record for General. The bank cites an improving net interest margin and higher fee income (due to increased debit and credit card usage) as the main reasons why it was able to generate record results last year and why it has positive expectations for 2023.
|
TRINIDAD AND TOBAGO |
[index] |
|
Best Bank: Scotiabank |
||
Unlike elsewhere in the Caribbean, Scotiabank’s subsidiary in Trinidad and Tobago was already a market leader before the recent investment in its growth strategy. The implementation of that strategy just put more daylight between Scotiabank and its competitors.
For example, Scotiabank’s return on equity at 16.1% in 2022, up from 14.1% in 2021, is much better than the other private-sector banks active in Trinidad and Tobago – only one other managed to get into double figures. The bank, led by senior vice-president and managing director Gayle Pazos, saw net profits rise by 15% in the year.
But if Scotiabank in 2022 was mainly competing with Scotiabank in 2021, then it still succeeded. Its return on assets increased 30 basis points in the year to 2.25%, and its efficiency rating – already strong at 42.8% the previous year – fell to 41% thanks to the digital implementation that has been driving Scotiabank’s strong improvement throughout the Caribbean.
The bank says that its digital improvements saw non-branch transactions increasing by 34% and digital adoption hit 51%.
It recorded a strong and positive set of results across the board. Its capture of another 100bp of market share in total loans (to 22%) and an 80bp rise in its deposit market share (17.5%) give Scotiabank the momentum to keep building the scale that will continue to dilute its cost base, further driving efficiency and profitability in the year to come.
