Latin Finance - March/April 2012 - 64

Andean bank consolidation

securities business and with it more transactional revenue. in the oil sector and a briskly rising income per capita, an ideal In early December Peru’s Banco de Crédito bought a 51% backdrop for financial sector growth. stake in the Correval brokerage in Colombia for $76 million Colombia’s banking services penetration remains stubbornly in what is largely seen as one of the first acquisitions spurred low, however, with a large segment of the growing population on by MILA’s equity market combination. In a similar move, still left out. As of September 2011, 63.1% of Colombian adults the region’s largest investment bank, Brazil’s BTG Pactual in received some kind of banking service, an indicator that has February put the final touches on the August 2011 acquisition been steadily growing over the past two years. of Chilean brokerage firm Celfin. Back in Colombia, rumors Foreigners see in this an opportunity to grow the business in have swirled for some time about Interbolsa, one of the largest a country with a stable democracy and in many ways enviable economic prospects. The country’s banks have long been known brokerages in the country, being open to selling itself to a larger financial institution. for a rather staid competitive outlook. Indeed, the sector with Indeed large banks in Colombia have managed to build 23 banks and $165 billion in assets is largely dominated by the generous levels of liquidity that they can now use to purchase top seven financial institutions which together hold more than assets at home and abroad. Davivienda’s purchase of HSBC’s 73% of the system’s assets. Grupo Aval alone owns four banks assets as way into Central America was the latest example of in the system and controls 28.9%, according to estimates from Colombian banks seeking Colombia’s Bolsa y Renta scale overseas, though many brokerage firm. Colombians Receiving Banking Services (%) observers believe it is unlikely “The largest players are not Room for growth Davivienda would look for for sale,” notes David Pelaez, more assets in Central America. a banking sector analyst for 70% “The natural colonizers of Bolsa y Renta in Bogota. “Many Central America are bound to 60% midsized and small banks be the Colombians,” notes an could be potential acquisition 50% M&A investment banker with targets, but expect to see high knowledge of the regional valuations for some of these.” 40% banking business. “But nearly Some smaller banks are everyone that looks at the CA already putting themselves 30% region is looking for a regional out of the realm of acquisition footprint, not just participation possibilities. Officials at Helm 20% in a particular country.” Bank in Colombia, which Colombia’s Grupo Aval holds 4% of the sector’s 10% acquired Panama-based BAC assets, recently stated publicly Credomatic in 2010 for $1.9 that the bank is not for sale. 0% billion, a deal which gave Simple math indicates that any 2010 I 2010 II 2010 III 2010 IV 2011 I 2011 II 2011 III Aval a presence in Costa Rica, remaining M&A activity in the Source: Colombia’s Asobancaria El Salvador, Guatemala, sector will involve small deals. Nicaragua, Honduras, as well Some local observers point as Mexico and Florida. Bancolombia officials have expressed to HSBC as a potential candidate to divest its unit in Colombia interest in expanding its presence in Central America and even which accounts for roughly 1% of the sector’s assets. in Peru going forward. “Bancolombia may seek to add a larger Some foreign banks have circumvented the M&A route regional player in Central America,” says Pelaez. “Grupo Aval, into Colombia by directly opening branches in the country. on the other hand, may add smaller players since it already has Brazil’s Banco Itaú, for instance, got a green light from Brazilian a sizeable presence in CA, and it has the liquidity to continue regulators in November to open Itaú BBA Colombia, the buying.” Brazilian financial powerhouse’s own bet on the sought-after The strength of Colombian banks balance sheets and the financial sector. attractiveness of its economic story may well give way to much more intra-regional M&A business in the Andes and Central Broker consolidation America as Europe and its banks struggle to strengthen their Brokerage firms in Colombia have also come under the radar capital bases, and Latin America continues to benefit from high of major international players, primarily due to the advent of commodity prices and a recovering U.S. economy. Banking in the Mercado Integrado Latinoamericano (MILA), the 2011 Colombia might just be worth more than many expected. LF integration of the Peru, Colombia and Chile equity markets under one single platform. The consolidation under MILA is a key catalyst for potential > UPDATE mergers among Andean brokerages going forward. The MILA is prompting talk about acquisitions because a consolidated For daily news on Colombia, see www.latinfinance.com Andean equities market can bring added liquidity to the

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March/April 2012

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Latin Finance - March/April 2012

Table of Contents for the Digital Edition of Latin Finance - March/April 2012