2010 Regional awards for excellence: Latin America
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2010 Regional awards for excellence: Latin America

Latin America’s economic performance over the past 12 months can be summed up in one word – resilient. While many of the world’s advanced economies are stuck in a trough, emerging regions such as Asia and Latin America have rebounded much faster from the global downturn thanks to sound monetary and fiscal policies and generally healthy banking systems.

Awards for Excellence 2010


Best regional bank Banco Santander
Best project finance house Banco Santander
Best bank in the region Itaú Unibanco
Best investment bank Credit Suisse
Best M&A house Credit Suisse
Best debt house JPMorgan
Best equity house no award
Best risk management house Deutsche Bank
Best FX house Deutsche Bank
Best at cash management Citi

Country awards


The region spent most of the 1980s and 1990s fighting financial crises, so it has plenty of experience of the problems facing Europe and the US. Over the past few years, however, policymakers in Latin America have followed a more cautious approach, irrespective of whether they lean politically to the left or right. This has left the region better placed to cope with the crisis. Latin America is much less indebted than the western world.

Some countries are, of course, faring better than others. Venezuela, Argentina, Bolivia and Ecuador continue to be trouble spots where economic and social breakdown is never far away. Mexico has struggled because of its dependence on the US. Other countries, though – especially Brazil, Peru, Colombia and Chile – have proven themselves to be equal to the shocks.

There are still challenges, including timing the removal of fiscal stimuli, absorbing capital inflows and addressing the huge inequities that mean that even the region’s best-performing economies remain emerging rather than advanced markets.

Still, there is no denying the progress that has been made. In 2002, just ahead of the presidential election that year, Brazil’s benchmark bonds were trading at spreads of up to 2,000 basis points over US treasuries as investors took fright at the prospect of former trade unionist Luiz Inácio Lula da Silva becoming president. A default seemed inevitable. Today, as Lula comes to the end of his two terms in office, those same bonds are trading at about 220bp over. The issue facing Brazil is an overheating economy not a stagnant one.

In this context it is perhaps not surprising that the awards for best regional bank and best bank in the region go to two firms whose fortunes are inextricably tied up with Brazil’s. The best regional bank award goes to Banco Santander, which reclaims the crown from rival BBVA. The difference between the two banks’ performance is stark. BBVA’s net attributable profit fell by 16% in 2009 on the previous year; Santander’s bottom line grew by 6.2% over the same period. Santander has maintained its momentum in the first quarter of 2010 too. Its profits increased by 14.6% compared with the first three months in 2009; BBVA’s grew by only 4.3% over the same period.

Although critics can justifiably carp about the integration process in Brazil following Santander’s acquisition of Banco Real from ABN Amro, there is no denying the added financial firepower the deal has brought the Spanish bank. Santander Brazil is now the country’s third largest private-sector bank, with nearly a 10% market share in overall banking business. In October 16% of the bank was floated, raising €5.1 billion in the year’s biggest IPO by a financial institution.

Santander Brazil contributed $833 million to the group’s results in the first quarter, up 14% in the same period in 2009. For 2009, Brazil’s contribution rose 20%. All in, the Brazil business’s profits grew 38.2% in the first quarter of 2010 compared with the same period in 2009.

Emilio Botín, Santander: a diversified revenue base and bigger profits make this bank the regional winner

Emilio Botín, Santander: a diversified revenue base and bigger profits make this bank the regional winner

And it’s not just the Brazil business that’s going well. In Uruguay Santander’s profits surged by 85.4%; in Mexico they increased by 31.8%; in Colombia they grew by 19.7%; in Argentina they rose by 14.8%, and in Chile they were up 14.7%. The only country where the bank is struggling is Puerto Rico, where profits shrank by 7.9% in the first quarter compared with the same period in 2009.

The bank’s strategy has been to focus on high- and medium-income customers, on maintaining high levels of liquidity and selectively growing its lending business, especially in consumer credit. Its corporate and investment bank is also becoming much more competitive and is now a top-five debt capital markets house, a top-three equity underwriter and a leader in project finance.

The latter business is particularly impressive and Banco Santander wins the best project finance award too. Last year the bank structured 18 loans in the region as mandated lead arranger. Its transactions included the Norbes drill ships project – the largest project financing transaction in the Americas launched in the debt market after the US sub-prime crisis; the Santo Antonio hydroelectric project – one of the most important projects under the Brazilian government’s Growth Acceleration Plan; and the Dom Pedro toll road project, which involved an innovative limited-recourse R$1 billion ($536.2 million) project finance 18-month loan.

The best bank in the region is Itaú Unibanco, the Brazilian powerhouse. Bank of America is selling its 5.4% stake in the firm – for capital-raising reasons – but analysts continue to be bullish on Brazil’s biggest private-sector bank by assets.

Its first-quarter profit jumped more than expected on the back of stronger lending volumes and a decline in delinquencies. The bank posted a recurring profit of R$3.2 billion, 25% up on the same period in 2009 and better than the R$3 billion expected by analysts.

This was partly a result of robust growth in its consumer lending business, which surged 12.5% from a year earlier, reflecting the strong performance of Brazil’s economy. The bank’s overall credit portfolio grew by 4.4%.

In addition, Itaú’s bad-debt ratio improved from the fourth quarter, falling to 4.9% of total debt compared with 5.6% at the end of the previous quarter. The ratio, however, is still above the 4.4% level at the end of the first quarter of 2009.

Another encouraging indicator is the bank’s return on equity, which averaged 24.4% in the quarter, up from 23.1% a year earlier and above rival Bradesco, which had a ROAE of 22.2% in the first quarter.

Itaú is also the best-placed local bank to challenge the global firms in investment banking and capital markets. It was the leading arranger of project finance loans in the region last year and is a top-four underwriter for Brazilian debt and equity, according to Dealogic, for the year under review.

However, Itaú’s inability to distribute capital internationally on the same scale as, say, Citi, HSBC, Deutsche Bank or Credit Suisse, means that its capital markets business is limited – although recent perpetual deals for Globo and Odebrecht demonstrate that it is beginning to play a meaningful role in some cross-border transactions. As the region’s biggest bank by market capitalization, however, Itaú has the potential firepower to beef up its international distribution business, organically or through acquisition.

The title of the region’s best investment bank came down to a straight fight between Credit Suisse and JPMorgan. Both are strong across M&A, debt and equity capital markets, although in the end Credit Suisse ’s greater consistency across all three products helped it take the award. It ranks first in the equity and M&A league tables for the relevant period, according to Dealogic, and although the same tag cannot be applied to its debt business, it is still one of the leading DCM firms in the region.

In the equity capital markets, Credit Suisse’s landmark transactions include Santander’s IPO as well as acting as a bookrunner on offerings by Brazilian toll-road operator Ecorodovias (a $656 million IPO), conglomerate Hypermarcas (a $686 million follow-on) and property firm Cyrela Brazil Realty ($690 million follow-on). Its superiority over JPMorgan in Brazil, by far the most important equity market in the region, was marked.

In the debt capital markets, one measure of the bank’s success over the period under review can be gauged by the fact that it acted as sole lead manager on 11 transactions, according to Bond Radar, nine more than its nearest competitor. Altogether the bank was involved in placing $9.9 billion of bonds through 24 transactions, Ps6.45 billion ($499 million) in local market transactions in Mexico and $700 million-equivalent in securitizations.

In M&A, Credit Suisse was also the number one adviser in terms of revenues, number of deals and deal volume, according to Dealogic. More than that, though, it was involved in several key transactions in the region’s two most important countries – Brazil and Mexico.

In Mexico, for example, it was sole adviser to Heineken in its $7.6 billion acquisition of Femsa Cerveza – the largest cross-border transaction in Latin America.

Credit Suisse also advised Americas Mining Corporation on its $3.9 billion plan of reorganization to take its subsidiary, Asarco, out of bankruptcy, clearing it of all bankruptcy-related liabilities. Credit Suisse also arranged and led a $1.5 billion senior secured term loan facility to help fund the reorganization. Americas Mining Corporation is a wholly owned subsidiary of Grupo México.

Credit Suisse is also adviser to América Móvil in its dual tender offer for the acquisition of Carso Global Telecom and Telmex Internacional. The value of the still-pending transaction is $34 billion and if executed will be the biggest M&A deal in Latin America since 2006.

In Brazil, the Swiss bank acted as adviser to telecom GVT in its sale to France’s Vivendi for $4.2 billion. The transaction generated publicity because a bidding war developed between Vivendi and Spain’s Telefónica that the French group eventually won. Also in Brazil, Credit Suisse was a sole adviser to agribusiness Bunge in the sale of its fertilizer division to Vale for $3.8 billion. It was sole adviser to construction firm Camargo Correa too in its $2 billion acquisition of a 28.6% stake in Portugal’s Cimpor, making the Brazilian company Cimpor’s biggest shareholder.

Credit Suisse also has an impressive record in other parts of Latin America, with keynote deals in Colombia, Peru, Uruguay and Argentina in sectors including retail, pulp and paper, consumer products and power generation.

It’s this breadth and depth of business that makes Credit Suisse the standout M&A firm in the region.

JPMorgan can take consolation from winning the best debt house award. The debt category is the toughest to call, with up to five or six firms in contention. JPMorgan’s closest competitors were HSBC and Citi, both of which had impressive stories to tell.

Citi’s ability to keep winning business, despite its well-documented problems, is noteworthy. Its debt exchange for Jamaica, for example, is especially worth a mention, garnering a remarkable 97% participation rate. Although Jamaica’s troubles are far from over, the exchange has eased immediate pressures. Without it all of the country’s tax income would have been spent on financing its debt burden.

HSBC has the largest share of bond deals (local and international) in Brazil and Mexico. Its clients range from the big names, such as Petrobras, Pemex and Vale, to newcomers such as the Cayman Islands.

But although HSBC and Citi came close neither could match JPMorgan’s volumes, its consistency across all markets and, more than anything, its reputation. When Euromoney asked bankers which rival firm stood out most, invariably the answer was JPMorgan.

Its standout transactions include hybrid bonds by Banco do Brasil (a $1.5 billion tier 1 perpetual – the first-ever bond issuance complying with Brazilian central bank regulation for tier 1 capital treatment) and Banco de Crédito del Perú (a $250 million 60-year non-call 10). JPMorgan was also a bookrunner on Latin America’s largest corporate transaction – América Móvil’s $4 billion, triple-tranche bond issued in March.

The bank led deals for all the big sovereigns too – Brazil, Mexico, Peru and Colombia. It was also a strong player in the high-yield market, arranging transactions for El Salvador, Brazilian pulp and paper manufacturer Fibria and Caribbean wireless firm Digicel among many others.

The bank’s business was not all about international public bonds either. In liability management, it executed deals for Enersis and Endesa to reduce their exposure to risk related to their operations outside Chile. It also acted as sole active dealer manager for Cemex on four separate exchange offers for outstanding dollar and euro perpetual debentures.

In the local markets, JPMorgan does not have the geographic presence of Citi or HSBC so it’s always going to be difficult for it to match their volumes. But it can cite enough successes, including the biggest corporate deal of the year in the Chilean market – a $360 million-equivalent for forestry and paper company CMPC.

There is no award for best equity house in the region. None of the regional banks has a strong enough case, largely because of paltry issuance volumes outside Brazil, which dominates supply. And the winner of our best equity house in Brazil award, BTG Pactual, has no equity capabilities elsewhere in the region. The closest contender is Credit Suisse, which is a leading player in Brazil and has regional capabilities but did nothing of note anywhere else in the region in our review period. It was a bookrunner on Grupo Comercial Chedraui’s Ps5.2 billion ($402.2 million) IPO, the first Mexican debut deal in nearly two years. However, that transaction came after our review closed. JPMorgan has a better track record outside Brazil but it lags too far behind in the region’s most important equity market.

In risk management Deutsche Bank yet again takes the award. Its all-round product capabilities across FX, rates, credit, fixed income, structured finance and equities are second to none. Two transactions in particular stand out. In the first, a Brazilian financial institution wanted to obtain long-term financing. It had a large portfolio of long-term Brazilian sovereign bonds. There was a relatively liquid market for short-term sovereign bond repos but term financings were limited in both scope and tenor by financial institutions’ difficulty in taking gap risk – the risk of a sudden drop in collateral value accompanied by the inability of the debtor to service its outstanding debt. Deutsche provided over $500 million of 10- to 15-year finance with low initial haircuts by passing the risk off to hedge funds. This source of financing became an important source of liquidity for Latin American entities during the crisis.

The second example also involves a Brazilian financial institution. The firm had issued $500 million of dollar debt offshore and wanted to hedge its exposure to changes in the dollar/real exchange rate via a cross-currency swap. The client wanted to minimize the cost of the hedge given the high carry of reais.

An extinguishable swap, where the swap would knock out if the client defaulted, was the obvious solution. But Cetip, the Brazilian derivatives registrar and clearing house, only accepted registration of plain-vanilla derivatives. Therefore Deutsche Bank used its local subsidiary bank in Brazil to do a plain-vanilla cross-currency swap with the client and registered this contract in Cetip. At the same time, it entered into a mirror swap through its London subsidiary (where the client paid dollars and received reais) that only knocks out if the client is in default. This effectively created the same economic impact as the extinguishable swap. The trade was for $500 million over three years.

This example showcases Deutsche Bank’s FX capabilities as well as its risk management skills, which allow the German bank to win the best FX house award too. Deutsche’s case is always a strong one. In June it was ranked the number one market maker in the region, according to Euromoney’s annual FX survey in May.

Over the past year it has extended its lead over rival firms thanks to continued investment in its technology and its people. What is especially notable is the bank’s ability to execute large-scale transactions regularly in both spot and futures markets.

The best cash management award goes to Citi. The US bank was voted the leading cash manager in Latin America in Euromoney’s cash management poll in October 2009. Citi’s reach in the region is unrivalled, with a presence in 23 countries. That allows it to win business that few other banks can compete for. Last year, for example, a Mexican telecommunications firm mandated Citi to standardize its liquidity and payables management in 14 countries.

Overall, Citi’s cash management business grew deposits by more than $5.3 billion last year. It also increased local payments transaction volumes by 3% and international payment volumes by 4% over the same period.

Citi’s investment in technology is also paying dividends. Last year the bank experienced an 8% increase in electronic transactions through the CitiDirect online banking platform.

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