Latin Finance - July 2008 - (Page 14)

investment banking outlook offering to buy competitors in the global marketplace, and CS could also be involved in those transactions. “Fee [revenue is] going to be better in LatAm than in the US this year,” says Chomnalez, speaking of investment banking overall, in response to how his business has been affected by global turmoil and departures. Credit Suisse is the most profitable shop in the region so far this year, according to Dealogic, with $109 million booked through mid-June. The outlook for UBS Pactual appears to be less rosy. The bank suffered far more severe fixed income and subprime writedowns – $37 billion through June – than Credit Suisse. That fact alone led to a substantial change in the global strategy of the bank with regards to risk underwriting and trading. UBS says this shift to a more conservative stance is one of the reasons André Esteves, the high- Deploying balance sheet: Aguzin octane Pactual trader turned head of UBS’s fixed income division, left his global post in London after less than six months, and finally quit the Swiss bank – where he was latterly head of LatAm – to start a new fund. To top it off, Merrill took advantage of an internal rift between former heads of UBS’s investment banking business and the Pactual leadership, which assumed a dominant role following the $2.5 billion merger in 2006. In March, Merrill poached three senior bankers, including co-head of investment banking Alexandre Bettamio, as well as a handful of more junior executives. The UBS Pactual executives who remained characterized the departures as good riddance. Indeed, one of the results of the UBS-Pactual merger was a preponderance of managing directors and large egos in the merged shop, which often led to open discord on the floor. It is too early to tell how the losses Itaú: the Local Menace B razilian locals like Bradesco and Unibanco are starting to defend their turf. Bradesco BBI, which became operational as a separate unit in 2007, is looking to address its distribution disadvantage by opening an office this year in Dubai or Singapore. But Itaú – the local turned high-end local investment bank – poses by far the biggest threat to LatAm banking groups focused on Brazil. Senior officials at virtually all of the US-based and Swiss shops are quick to dismiss the merits of peers, but invariably acknowledge the success of the Itaú BBA model. “Trying to compete across the board in everything with the locals is very tough, because the locals continue to get better,” says Sigal. They are going to do very well, Itaú in particular is very impressive,” he adds. Corporates are also in awe. “Itaú BBA’s model is very interesting,” says Thiago Alonso de Oliveira, CFO of Lupatech. “They have a top three-ranked local equity business, a strong local DCM platform and now it looks like they’re starting to do the same in international fixed income.” So far, however, Lupatech has done most of its banking work with Merrill Lynch. Itaú’s biggest statement this year came with the forceful decapitation of Deutsche Bank’s Brazil office to build up structured products and fixed income. The shop hired Alexandre Aoude, Deutsche’s CEO of Brazil and a team of bankers and junior-level hires. They will focus on originating and repackaging Brazilian fixed income products for local and offshore investors, including ones based in the Middle East and Asia. The move complements last year’s initiative to begin building an offshore fixed income distribution platform in Europe and the US. “We’re going to be a lot more active in fixed income,” says Roberto Setúbal, CEO of Itaú Holding Financeira. And the bank does not see the need to team up with another financial institution to expand its reach. The goal is to become a full-service stop for anyone interested in Brazil. “We want to be a one-stop shop and we’re closing the gaps in our product offerings,” says Jean-Marc Etlin, head of investment banking at of Itaú BBA, adding that his institution will increasingly deploy balance sheet to support corporates. “We intend to support our clients in every possible way while leveraging our strong balance sheet,” he adds. Because of its local focus, Itaú’s main competitive weakness will be advising Brazilian corporates on cross-border acquisitions. On the flipside, it is particularly well suited to advise on an incoming cross border deal, says Etlin. “We are not interested in doing a partnership in which we lose the access to institutional investors,” says Roberto Nishikawa, CEO of Itaú Securities. “There is a niche for a player like us in any institutional investor market,” he adds. Markets observers say that local institutions like Itaú will never achieve the global scale required to compete with foreign shops. They suggest alliances with pure investment banks that are late gaining a foothold in Brazil. But Nishikawa says Itaú is only interested in working with other banks to access retail. It recently set up a Korea-based Brazil equity fund sold to retail in partnership with local players. A sister LatAm equity fund was launched this month. “That kind of partnership we like,” says Nishikawa. Some 70% of recent Brazilian equity deals has typically been sold overseas. Nishikawa rejects the widely held view that global investment banks have the upper hand for distribution. “This is a perception that we need to change,” says the banker. “We have people selling Brazil and we have the same kind of power when it comes to distribution,” he adds. — Dan Shirai 14 LATINFINANCE July/August 2008

Table of Contents Feed for the Digital Edition of Latin Finance - July 2008

Latin Finance - July 2008 Contents Investment Banking Outlook Compensation Survey Colombia Investment Banking Borrowers vs. Investors Banorte Profile Braskem Financing Strategy Brazil Hydro Finance Peru Port Privatization Panama Money Flows Argentina Local Markets Guide to Banking Technology Who Said That?

Latin Finance - July 2008

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