Javier Artigas, head of BTG Pactual’s Mexico office, has played down expectations that the bank is close to acquiring a business in the country. The bank’s CEO, André Esteves, was reported by the Financial Times in August as saying: “If there is a place in Latin America where some acquisition is possible, I would say that is Mexico.”
| Our success has been based on two things: research and distribution|
However, Artigas says the bank wants to grow without relying on the acquisitions that have been its strategy in Chile and Colombia: “The main plan is to grow organically and that has proven to be successful so far,” says Artigas. “Esteves is very happy with the results so far and it has been less than two years [since we opened] and [the progress of] all the lines of business has been very good.”
BTG Pactual opened in Mexico 18 months ago, after exploring opportunities for acquisitions proved fruitless. Unlike in Chile (BTG bought Celfin) and Colombia (Bolsa y Renta), with both deals in 2012) the bank has been building its three main areas – investment banking and asset and wealth management – as a ‘greenfield’ venture.
“Mexico is a little different in the strategy of BTG Pactual,” says Artigas. “The Mexican market is closer to the US and closer to the US banks – they have been established in Mexico longer and so maybe it is a more competitive market than other markets in South America. For capital markets and corporate banking you have the largest New York players and for wealth management you have the Swiss banks and local operations.
"On the asset management side you have Sura and Santander – so it is a sophisticated and competitive market, but we have positioned ourselves as a Latin American bank, with a lot of credit committed to the region. We play with a very large balance sheet dedicated to Latin America and it is proving to be a very interesting model.”
The Mexican banking system is dominated by foreign institutions and the scale – and positioning – of these explains BTG’s decision to go it alone. In investment banking, the bank differentiates itself as providing access to the region’s investors, who are becoming an increasingly important portion of distribution for many deals – especially equity transactions.
Despite opening just 18 months ago, the bank has already led on five ECM deals for Mexican issuers: for Fibra Shop, Banorte, Inbursa, Macquarie Mexico and Fibra Uno. “Our success has been based on two things: research and distribution. We can compete head-to-head with any US bank internationally and we combine distribution into LatAm and the US and Europe.”
However, it is the LatAm distribution that has been connecting with clients and the timing has been good: the growth in participation of intra-regional institutional – and to a less extent retail – investors in deals has become significant. “[Distribution in] South America - Brazil and Chile – is a must if you want to raise equity,” says Artigas. “For Mexican issuers that want to raise equity the institutional investors in Chile, Peru and Brazil can account for maybe 20% of the demand.”
The bank has established a Mexican broker/dealer and is trading equities, fixed income and derivatives. The asset management division has established two equity funds – one LatAm based and the other exclusively Mexican and the capital markets teams are active (M&A mandates have already been won – such as advising Carlos Slim’s Banco Inbursa on its acquisition of Standard Bank’s Brazilian business and Artigas reports a healthy pipeline) and are also helping to originate deals for the credit department.
|BTG goes to Switzerland|
for private banking
The wealth management operation has been slower to establish, given the more conservative approach of the segment’s client base towards shifting portfolios. Artigas says BTG Pactual’s recent acquisition of Swiss-based private bank BSI did bring some Mexican clients but with no office the impact on the bank’s wealth management operation in Mexico isn’t significant.
It is in this area that Artigas says the bank is most open to acquisitive growth: “[Acquisitions could come] in wealth management because that is a business that takes a long time to grow and there are certain areas where you need to acquire to grow faster. If we find these opportunities along the way we will act. If not, we will continue [growing organically].”
Artigas’ links with BTG Pactual come from his days at UBS but he joined the bank to head up its Mexican growth plan from the Mexican Stock Exchange, where he was deputy director. As such, Artigas has a unique perspective on the likely impact of the Mexican exchange’s coming entry into the pan-Andean stock exchange integration project known as MILA.
“I have recently been to Chile, Colombia and Peru and I have seen the changes to the securities markets’ infrastructure and to the stakeholders in terms of looking for alternative investments,” says Artigas.
“The pension funds have been limited to local securities but they are starting to look outside and Mexico is a good place to look for that diversification. Mexico is also looking to diversify and Chile and Peru are good places – Colombia is also attractive. So while I see this as a political project – the Pacific Alliance – I do foresee opportunities from the financial project – MILA – from integration among these four countries.”