Latin Finance (August 2005)

52 Pages·2005·1.39 MB·English

AUGUST 2005 NUMBER 169
www.latinfinance.com
The Latin Banking Guide
The Key Data on
Latin American Banks
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Contents
August 2005
DEALS
4A summary of the month’s most important business deals and financial
market transactions.
DATA
7 Doing the Numbers
What five years of data on Latin America’s banks tell us about the health of the
financial industry and where it is heading.
SURVEY
12 Being Good is Good for Business
The findings of the first-ever survey of ethics, transparency and corporate social
responsibility in Latin America’s biggest banks.
16 Banking Guide Data
Complete balance sheet, profit and loss, market share data and performance
ratios for every bank in Latin America.
Sources
LatinFinanceis grateful to the following organizations for their help and
support in providing data for this year’s Latin Banking Guide.
Austinet Pacific Credit Rating
Erivelto Rodrigues Oscar M. Jasaui
Director President
Austin Rating Pacific Credit Rating
Rua Leopoldo Couto de Magalhães Jr., República de Panamá 3531,
110 . Cj. 73/74, Itaim Bibi Oficina 1302, San Isidro,
São Paulo, Brazil Lima 27, Peru
E-mail: [email protected] E-mail: [email protected]
Tel: [phone] Tel: [phone]
Fax: [phone] Fax: [phone]
www.austinet.com.br www.ratingspcr.com
COVER ART “Blue 24,”15 3/4 X 15 3/4-inch 2004 acrylic on canvas
by Michelle Concepción,courtesy of ArtSpace/Virginia Miller Galleries,
Coral Gables (Miami),Florida.
Moody’s Progesa
Eduardo Barker Max Claren
Relationship Manager Latin America
Progesa
LatinFinance® (USPS 004-662),(ISSN 1048-535X) is published monthly Moody’s Investors Service Las Bellotas Nro. 200,
except bimonthly December/January and April/May by Latin American Av. das Nações Unidas, Providencia,
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August 2005 LATINFINANCE 1
front notes
EDITORJohn Barham
MANAGING EDITORMary A.Dempsey
WALL STREET EDITORMaria O’Brien
STAFF WRITERMichael Thomas Derham
ART DIRECTORRosa Matamoros-Sense
Why Be Clean?
ASSOCIATE PUBLISHERGreg Ewing
SENIOR MANAGER,BRAZIL Teresa Aguilar
SENIOR MANAGER,MEXICO & CENTRAL AMERICA
José Victor Lewis
SENIOR MANAGER,SOUTHERN CONE & SPECIAL EVENTS
Alison Kulach
E SPECIAL EVENTS DIRECTORDanielle Assis
thical Latin American banking may seem an oxymoron, but as a survey carried out
EUROPEAN REPRESENTATIVERobert Logan
forLatinFinanceby the Madrid consultancy Management & Excellence has T [phone]
established, the region has several banks that meet and in some cases exceed CARIBBEAN & VENEZUELA REPRESENTATIVE
world-class standards for ethics and transparency. Matthew Perks
T [phone]
Most banks, however, scored poorly on a series of categories that also include
ADVERTISING,PROMOTIONS & REPRINTS COORDINATOR
corporate governance, social responsibility and sustainability, indicating that the bosses
Patricia Arcic
of Latin America’s biggest banks do not take these issues seriously. Many pay lip
service to improving transparency or investing in sustainability. The ethical standards of DIRECTOR OF EVENTSSantiago Fittipaldi
some banks are lamentable. SPECIAL EVENTS MANAGEROmar Suarez
Yet why should banks that are well-entrenched in their local markets, and have close
MARKETING & CIRCULATION MANAGER
relationships with key clients and regulators care about questions that seem to be of Kate Mayfield
greater concern to earnest business school professors and meddlesome NGOs? Busy MARKETING & CIRCULATION ASSISTANT
executives are trying to improve the financial performance of their banks, fending off Virginia Perez
DISTRIBUTION & SUBSCRIPTIONS COORDINATOR
competition and hunting for acquisition opportunities.
Janice Figueras
Unfortunately, banks and bankers are very unpopular in most countries – as they are
around the world – and can scarcely afford to create new enemies. Clients, regulators, OFFICE MANAGERTeresa Romero
politicians and investors are demanding that banks clean up their act. Regulations and SYSTEMS ADMINISTRATOROscar Blanco
controls are already becoming more burdensome and intrusive. The new Basel II
LATINFINANCE BOARD OF DIRECTORS
international capital adequacy rules that most Latin American banks will eventually
Stuart Allen,Christopher Brown,
have to comply with, requires new and highly sophisticated controls that will in turn Colin Jones,Giuliana Moreyra
require management to adopt stricter internal checks and balances. The same goes for
the Sarbanes Oxley Act and the Patriot Act, which affect most large banks that have CHIEF EXECUTIVE OFFICER & PUBLISHER
Stuart Allen
issued securities in the US.
CHIEF OPERATING OFFICERGiuliana Moreyra
Investors, especially foreign fund managers, will avoid buying stock or debt issued
by banks that fail to measure up to minimum international corporate governance Telephone:[phone]
standards, such as independent boards, audit committees and enforceable guidelines for Fax:[phone]
related party transactions. Witness the case of Brazil’s Banco Santos, which collapsed E-mail:[email protected]
earlier this year, and the more recent Banco Rural affair. Five Banco Rural executives www.latinfinance.com
were indicted in a political financing scandal and Moody’s reduced its outlook on the
bank’s ratings to negative. Fitch Ratings cut its rating. Mexico’s Banco Azteca delisted Subscriptions hotline:
in the US in the wake of a financial scandal. U.S.[phone]
Conversely, banks that have put controls in place and actively enforce them can [phone]
expect greater support and better valuations in the market. Brazil’s Banco Itaú is U.K.44 (0) 870 906-2600
consistently held up as an example of what to do. For years, it has pursued the highest E-mail address:
standards for corporate governance, ethics and transparency as a matter of policy. [email protected]
Although it is only Brazil’s fourth-largest bank by assets it is the most valuable bank in
COVER ART “Blue 24,”15 3/4 X 15 3/4-inch 2004 acrylic
Latin America. Itaú trades at a price-to-book ratio of 3.3 and has a market
on canvas by Michelle Concepción,courtesy of
capitalization of $48.67 billion.
ArtSpace/Virginia Miller Galleries,
Far from being an imposition, banks such as Itaú have proved that trusting investors
Coral Gables (Miami),Florida.
and the marketplace with information once thought to be strictly confidential pays off
by creating an environment of openness and trust in management.
Banking is a business built on mutual trust and confidence. Furthermore, the art of
modern management embraces a range of disciplines that go beyond constantly
improving financial performance to include human resources, social responsibility,
corporate governance and sustainability. The global banking industry began moving
Subscriptions: one year US $235 ($20 additional for postage outside
sharply in this direction years ago. It’s time Latin American banks began following their the US). Send subscription orders to: LatinFinance,
2600 Douglas Road, Suite 410, Coral Gables, FL 33134 USA
example. T 305-448-6593, F 305-448-0718. Copyright© 2005 Latin American
Financial Publications, Inc. is owned by Ell Holdings, Inc. All rights
reserved. Reproduction in whole or in part of any text, photograph,
or illustration without written permission from the publishers is
2 LATINFINANCE August 2005 strictly prohibited. Title is protected through a trademark registration
with the US Patent Office. Indexed in Information Access Company.

deals
CVRD Upgraded
since 1990, accumulating $2.7 billion of losses in the period. The
Rio de Janeiro-based Companhia Vale do Rio Doce, the world's company sought protection in the US to bar creditors there from
largest iron-ore exporter, became the first Brazilian company to get interfering with its restructuring in Brazil.
an investment-grade rating after Moody’sraised its rating for Vale
Satmex Seeks Protection
Overseas, a CVRD offshore debt-issuing vehicle. Its rating rose to
Baa3 from Ba1. Vale’s rating is now four levels above the Brazilian Mexican satellite company Satmex, half-owned by Loral Space &
government's B1 rating. The upgrade will cut Vale's financing costs Communicationsof the US, filed for bankruptcy in Mexico to
as it plans to invest more than $16.8 billion on steel mills and mines restructure debt with creditors. The Mexico City-based company,
in Brazil and around the world through 2010. Vale has invested which faces an involuntary bankruptcy petition from its US
about $1.8 billion a year since 2000 to expand capacity to meet creditors, said the filing should enable it to launch its Satmex 6
soaring demand from China, Europe and the US. satellite in early 2006. Satmex, which is 24%-owned by the Mexican
government, defaulted on more than $520 million in bonds.
Green Light for Peru Debt Deal
Itaú’s Double Whammy
TheParisClubof government creditors formally accepted a plan by
Peruvian Finance Minister Pedro-Pablo Kuczynski to prepay $1.8 São Paulo-based Banco Itaú raised $345 million in a two-tranche
billion-$2.0 billion in loans due between 2005-2009. This should asset-backed issue backed by future US dollar payment streams. The
lighten the government’s debt service burden by about $400 million first seven-year tranche for $200 million was backed by insurer
over the coming years. The government will issue about $800 Ambac, giving the bonds a AAA-rating and issued at Libor plus 20
million in bonds on the global markets and a further $400 million basis points. The second, $145 million three-year tranche is also
on the domestic capital markets to finance the prepayment. JP backed by the bank’s payment flows but has no further credit
Morganwill lead an offering of dollar-denominated bonds and will enhancements. The BBB-rated bonds were priced at 30 basis points
co-lead with UBSa euro-denominated offering. The government will over Libor. Paris-basedCalyonled the transaction. The second
contribute a further $500 million from its reserves to prepay the tranche refinances an earlier issue backed by US insurer MBIA and
Paris Club debt. The operation will both improve Peru’s debt profile priced at 63 basis points over Libor.
and cut its foreign debt by replacing a portion of its hard currency
debt with local-currency bonds. This deal follows a $400 million standby facility agreed earlier in
June. Itaú will pay an undisclosed commitment fee for the three-year
Steinbruch Buys Out Partner
financing arranged by bookrunner HSBC. The financing will be
Brazil’s Steinbruch family took control of Companhia Siderúrgica available to Itaú irrespective of Brazil’s sovereign rating or other
Nacional (CSN), the Rio de Janeiro-based steelmaker, after buying material changes. HSBCsyndicated the deal to 20 other banks
out the stake held by the Rabinovich family, their long-time business includingWest/LB, Calyon and Wachovia.
partners, for a reported $800 million. The Rabinovich family had a
JC Penney Sells Lojas Renner
majority of the voting shares and 46% of CSN’s total stock. The
Steinbruchs won a bidding war for CSN against Brazil’s leading steel US retailerJC Penneysold its 98% stake in Brazilian subsidiary
groupGerdau. According to Brazilian media reports, a new holding Lojas Renner in an offering on the São Paulo Stock Exchange led by
company will control the Steinbruchs’ interests in companies CSFB. JC Penney raised R$542 million ($230 million) with the deal.
operating in steel, iron ore and logistics; textiles; and cement. Banco Lojas Renner raised a further R$231 million with the sale of 6.25
Fibra, a bank controlled by Steinbruch family, will also be folded million in new shares. The company will use proceeds from the sale
into the new holding company. of new shares to pay off $80 million in debt to JC Penney and
finance part of its expansion plans. Francisco Gros, a former
Brazil Reopens February Bonds
investment banker and a senior business leader, is the company’s
In its sixth bond offering this year, Brazilsold $600 million in 10- chairman. International institutional investors in the US and Europe
year bonds, completing its $6 billion financing target for 2005. The bought 78% of the offering. Lojas Renner is the only company in
issue was priced to yield 363 basis points over comparable US Brazil without a single controlling shareholder group. CSFB says
Treasuries, or 7.732%. The government reopened its $1 billion issue Lojas Renner’s largest shareholder now holds just 7% of the
of 10-year bonds launched in February at a spread of 352 basis company and three others have 5%. The shares were launched at
points, to place the June bonds. CitigroupandHSBCwere the lower end of the R$37-R$42 price range.
bookrunners on the offering. Brazil is rated B1 by Moody’s and BB-
Dominican Republic Reschedules
by Standard & Poor’s, four and three notches below investment
grade respectively. The government of President Leonel Fernándezreached an
agreement with creditors to reschedule some $200 million-worth
Varig Files for Bankruptcy
of commercial loans due in 2005 in 2006. This should allow the
Latin America’s biggest airline, Rio de Janeiro-based Varig, filed for government to narrow its budget deficit, which analysts estimate
protection from creditors in Brazil and the US to restructure $2.8 at about $170 million this year and $350 million in 2006. The
billion in debt. Varig has suffered years of weak management and deal should also satisfy the Paris Clubof government creditors’
failed to respond to aggressive competition from rivals such as TAM requirement of “comparability of treatment.” The government’s
and low-cost carrier Gol. Varig has posted a profit in only two years agreement with commercial banks allows for a two-year grace
4 LATINFINANCE August 2005
deals
period for bank loans insured by the export finance agency and Ecuador’s financing requirements could reach $1.50 billion this year,
that have been completely disbursed. The government will compared with original projections of a $1.25 billion gap. According
resume principal payments on the rescheduled commercial loans to Barrionuevo, “All past savings from the oil fund likely will be
in July 2007. spent, resulting in both higher domestic debt issuance than expected
and in the accumulation of arrears.”
CAF Reopens Samurai Market
CMPC Issues Debt
Caracas-based development bank Andean Development Corp.
(CAF) reopened Japan's Samurai market for Latin American issuers Chilean pulp and paper manufacturer CMPCsold $208 million-
with a ¥20 billion ($184 million) two-tranche bond offering, with equivalent in 10-year bonds on the local market. The bonds pay
maturities of three and seven years. Japan's Mizuho Securities and annual interest of 3.22%. The family of company chairman Eliodoro
Nomura Securitiesled the deal. Investment grade-rated CAF last Matteowns a majority of the company.
issued on the Samurai market in 2001. The three-year ¥15 billion
EDF Quits Argentina
tranche was priced to yield 0.58%. CAF issued a further ¥5 billion
in seven-year bonds yielding 1.31%. Pricing was in line with CAF’s State-owned French electric utility Electricité de France(EDF) sold a
dollar curve. 65% stake in Argentine electricity distributor Edenorfor $100
million to Argentine investment fund Dolphin, headed by financier
Ecuador’s Rating Cut
Marcelo Mindlin. EDF, which first invested in Edenor in 1992, will
Citing plans by the new government of Alfredo Palaciosto increase retain a 25% stake in Edenor and will nominate two board
spending,Standard & Poor’scut Ecuador’s credit rating one level to directors. EDF will continuing operating Edenor under a five-year
CCC+, or seven levels below investment grade. S&P worries that technical assistance contract with Dolphin. Edenor employees who
increased government spending could affect its ability to cover debt indirectly hold the remaining 10% of the company want to sell their
payments. Ecuador defaulted on $6.5 billion in bonds in 1999. holding. Edenor is virtually bankrupt following the effects of a 75%
Congress recently approved legislation dismantling the FEIREP and devaluation of the peso in 2002 and a three-year government-
FEP oil stabilization funds intended to accumulate savings from oil mandated freezing of charges. EDF began proceedings before a
price windfalls. José Barrionuevo of Barclays Capitalwarns that World Banktribunal to demand $1 billion in damages.
August 2005 LATINFINANCE 5
deals
Top Latin 20 American and Caribbean M&A transactions - June 1 to June 30, 2005
Rank Date Target Bidder Value Target Bidder
(US$ million) Adviser Adviser Adviser
1 13-Jun Oil & Gas Assets (in Colombia and Venezuela) Maurel & Prom 460.0 JP Morgan
2 21-Jun Consorcio Siderurgia Amazonia (20%) Techint Group 279.2 Morgan Stanley Citigroup
3 17-Jun Banco ABN Amro Real (3.86%) ABN Amro Holding 248.8
4 21-Jun Polibrasil Resinas (50%) Suzano Petroquimica 240.0
5 17-Jun Oil & Gas Assets (Teak, Saman & Poui Oilfields, Trinidad) Perenco; Neal & Massy Energy 229.0
6 10-Jun Companhia Siderurgica de Tubarao - CST (9.5%) Arcelor 184.5 Morgan Stanley Deutsche Bank
7 16-Jun Banco de Entre Rios Nuevo Banco de Santa Fe 171.9
8 6-Jun Shopping centers (10 hypermarkets in Brazil) Carrefour 130.6 Santander
Investment
Services
9 9-Jun Manquehue Net GTD Teleductos 117.9
10 21-Jun Property portfolio (Torre Mayor, Mexico) DIFA Deutsche Immobilien Fonds 101.5
11 3-Jun American Founders Life Insurance Sagicor Financial 58.0
12 9-Jun Gafisa (32.18%) Equity International Properties (EIP) 54.9
13 6-Jun Banco Dibens (49%) Unibanco 52.8
14 10-Jun Grupo Corvi (chocolate and candy business, Mexico) Grupo Bimbo 43.3
15 22-Jun Hormigonera Mayaguezana Cemex 30.0
16 1-Jun Mining Assets (Ojos del Salado Copper Project, Chile) Sumitomo Metal Mining Co, Sumitomo 24.9
17 16-Jun Oil & Gas Assets (Four Land Rigs, South America) Saxon Energy Services 22.9
18 12-Jun Supermarkets (Megasuper, Costa Rica) Supermarkets (Supertiendas &
Droguerias Olimpica, Colombia) 19.9
19 20-Jun Summit Oil & Gas Worldwide - SOGW Summit Oil 16.7
20 20-Jun Grupo Super Motores Grupo Q 10.0
Source: Dealogic
Top 10 Latin American and Caribbean bond issues - June 1 to June 30, 2005
Value Original Amount
Rank Date Issuer Bookrunner (US$ million) currency (million)
1 1-Jun Pemex Project Funding Master Trust Lehman Brothers, CSFB 1,500 US dollar 1,500
2 7-Jun United Mexican States Barclays Capital, UBS 920 Euro 746
3 21-Jun Republic of Brazil HSBC, Citigroup 600 US dollar 600
4 21-Jun Voto - Votorantim Overseas Operations CSFB 400 US dollar 400
5 1-Jun Republic of El Salvador Deutsche Bank 375 US dollar 375
6 7-Jun Corporación Interamericana de Entretenimiento (CIE) Citigroup 200 US dollar 200
7 22-Jun Banco BMG Morgan Stanley 200 US dollar 200
8 28-Jun Air Jamaica Bear Stearns 200 US dollar 200
9 23-Jun Eletropaulo Merrill Lynch 198 Brazilian real 474
10 10-Jun Braskem Merrill Lynch 150 US dollar 150
Source: Dealogic
Latin American syndicated loans - June 1 to June 30, 2005
Rank Date Borrower Mandated Arranger Value
(US$ million)
1 1-Jun Pemex Project Funding Master Trust Banc of America Securities, Barclays, HVB Group, BNP Paribas, Mizuho 1,250
2 16-Jun Energia Concon BNP Paribas, Calyon, Citigroup 410
3 3-Jun Banco Continental de Panama Calyon, HVB Group 225
4 15-Jun Votorantim Celulose e Papel Calyon, HVB Group 100
5 9-Jun Corporación Interamericana para el Financiamiento
de Infraestructura (CIFI) IDB 50
Source: Dealogic
6 LATINFINANCE August 2005
data
Doing the Numbers
L What the balance sheets and P&Ls say about the
atin America’s banks have not grown
very much in asset terms over the last
health and performance of the region’s banks and
five years. Even though their asset base
is still just over $1 trillion (roughly one- financial markets.
third less than Citigroup’s balance sheet),
profitability has recovered impressively
from a return on assets of almost zero in A Bigger Bang agency Caixa Econômica
2002 – thanks to the collapse of Latin American banks total assets - US$ billion Federal, will be privatized. Both
Argentina’s banks and Brazil’s currency are among the five largest banks
collapse – to 1.5% last year. Net income 1,200 175% in Brazil. Meanwhile, private-
surged last year by 35% to a record Assets ROA sector banks are steadily
1,000 150%
$15.15 billion. In 2002, Latin America’s guzzling up smaller competitors,
banks posted a profit of just $610 million. 125% especially those in the fast-
800
High interest rates in many countries (real growing consumer credit
100%
interest rates in Brazil are among the segments.
600
highest in the world), stinging increases in 75% Unsurprisingly, the
fees and more lending thanks to 400 Argentine banks have vanished
50%
generalized economic recovery are from the list of Latin America’s
responsible for the bank’s strapping health. 200 25% ten biggest banks. Meanwhile,
Consolidation and a crackdown on international banks led by
efficiency ranging from more effective use 0 0% Spain’s Banco Bilbao Vizcaya
2000 2001 2002 2003 2004
of banking technology to job cuts across Argentaria and Santander
Source: LatinFinance
the region have also driven up profits, Central Hispano have tightened
suggesting a higher new baseline of Recovering from Argentina their grip over the market. They
performance for the region’s banks. Latin American banks net income - US$ billion now account for 15% of assets
Some major trends lurk behind these against less than 2% five years
16
numbers. To begin with, the region’s ago. Since 2000, Citigroup,
biggest banks – nearly all of them Brazilian 14 HSBC and Bank of America
– have grown larger. In 2000, five of the have entered the Mexican
12
region’s ten largest banks were Brazilian market. Santander bought
with about one-quarter of total assets. In 10 Brazil’s Banespa and ABN Amro
2004, the top five held 31% of total assets 8 has increased its investments in
and one Mexican bank – BBVA Bancomer Brazil. This contrasts with an
6
– had pushed its way in at fourth position. exit from Argentina by several
Yet the Brazilian domination continues: 4 small- and mid-sized foreign
now seven of the top ten are Brazilian and banks since 2001 and a pitiless
2
they control one-third of Latin America’s reduction in activity there by the
banking assets. Five years ago, the 0 larger banks that have chosen to
2000 2001 2002 2003 2004
Brazilians had one-quarter of all assets. remain.
Source: LatinFinance
The Brazilian domestic banking Despite the upheaval in
system is itself highly concentrated. The banks – both private- and public-sector Argentina and the uncertain outlook in
country’s 10 biggest banks already account institutions – still dominate the market. Venezuela, it seems likely that the foreign
for 81% of loans and 82% of deposits, Furthermore, there is no sign that banks will continue their advance into the
according to Moody’s. Unlike most other federally-owned Banco do Brasil, a region. Brazil is at the top of several banks
major Latin American economies, local commercial bank, or savings and mortgage for expansion. However, they will probably
August 2005 LATINFINANCE 7