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Capital requirements driving LatAm assets sales

As Banco Santander prepares to sell a near 8% stake in its Chilean business, Euromoney Skew reveals that it is a sign of the times in Latin America

Santander is selling a 7.8% stake in Santander Chile and hopes to raise $1 billion. Unlike HSBC, which recently sold its retail Chilean bank to Itaú as part of a strategic withdrawal from what it sees as non-core Latin American markets, Santander wants to remain in Chile it just needs the money. But both are examples of European banks using regional assets to rebuild core capital.

The announcement of Santander’s Chilean sale - Santander will work with Bank of America Merrill Lynch and Credit Suisse on the international portion and with LarrainVial on the domestic tranche - follows Santander’s recent renewal of a shelf to sell secondary shares of Santander Brasil. The bank could sell up to 8.2% of the Brazilian unit in a transaction that would fetch about $2 billion. The banks need to find close to $11 billion in new regulatory capital.

“How times have changed,” one Latin American banker tells The Skew. “I remember when Santander was warned by the rating agencies that it was going to be downgraded in Spain because it was too reliant on revenues from ‘precarious’ Latin American countries. Now the bank runs adverts boasting that one-quarter of its profits come from Latin America.”

And as well as boasting about Latin American profitability, banks are also liquefying their Latin American assets to remain solvent. Banks across Europe are faced with the need to sell assets and rebuild capital and banking assets in the region are trading at multiples that will make it hard for European banks to resist.

Outside Chile, HSBC is trying to offload its consumer finance unit Losango, although a banker who was involved in process, bidding on behalf of a Brazilian bank, when Losango was sold by Lloyds to HSBC believes this sale could be trickier than its Chilean disposal: “It’s a difficult asset – it’s hard to make that business work, even if you’re a local,” he says. And of course since Lloyds sold to HSBC the locals have developed significant and sophisticated consumer finance operations of their own – and who else but locals will be in the market?

It truly is a sign of the times: Latin America units that were once seen as a weakness to their European parents are now viewed as their parent’s best chance to raise the money needed to keep them afloat.


- Euromoney Skew Blog

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