Latin Finance - November/December 2009 - 48

2009 Manraj says that return on assets (ROA) dropped slightly to 2.95% in June from 3.11% the previous year because First Citizens did not make any money off the newly acquired units. However, he says the bank is set to beat its profitability target by September. “As of June our profits totaled 472 million Trinidadian dollars and we will surpass our September target of 551 million,” he explains. To continue growing, First Citizens, which offers retail and well as corporate banking, is considering extending its corporate lending, capital markets and wealth management services to other parts of the Caribbean and Latin America, Manraj says, declining to be more specific about which markets the bank is eyeing. This, he explains, would entail the opening of representative offices in other jurisdictions. The bank has hired Credit Suisse to explore opportunities to make acquisitions in the Caribbean, Manraj explains, without specifying in which particular countries the bank is planning to expand. First Caribbean already operates in St. Lucia and Barbados, in addition to T&T. Manraj explains that additional potential acquisitions, to take place in 2011 or 2012, would be financed by issuing bonds in the international market or by launching an IPO of the bank in the local stock exchange. After a local IPO, the government-owned bank could seek listings in the Jamaica or Barbados exchanges, Manraj adds. He declines to disclose how much First Citizens, rated BBB+ by S&P, would spend on an acquisition. He also refuses to be drawn on the size of a potential IPO. LF Best Bank – Banco República Oriental Uruguay The Foreign Invasion U ruguay’s banks have weathered the international financial storm well and the country’s economy is expected to grow by up to 2% this year. This small nation – with just 3.3 million people and a current GDP of $31.6 billion, according to the IMF – is meanwhile becoming more attractive to foreign banks. “Twelve months after the beginning of one of the deepest financial crises of current times, the Uruguayan banking system appears sound, liquid and profitable, without any significant consequence for economic and financial performance,” says Fernando Calloia, president of Banco República Oriental del Uruguay, the country’s biggest bank, which is state-owned and accounts for more than 40% of market share by assets. “Our bank - as well as the other 13 commercial banks that belong to leading international banks - were during the last 12 months in a completely normal condition, reflected in high levels of solvency, low delinquency, strong liquidity and reasonable profits,” adds Calloia. República’s assets were $7.9 billion as if June, according to the bank. It remained profitable, with ROA and ROE of 2.2% and 22.9%, and non-performing loans (NPLs) at 1.1%. Uruguay’s private banks, collectively, had assets of $10.7 billion, and saw ROA of -0.1%, ROE of -1.3%, and an NPL ratio of 1.0%, according to República. The Uruguayan economy grew by an average 6.8% a year between 2004 and 2008, according to the IMF. A boom in meat and soya exports, expansion in tourism, and the development of huge new pulp mills were among the main drivers. The banking system expanded greatly on the back of strong economic performance. According to PriceWaterhouseCoopers, in mid-2008 Uruguayan-peso denominated credit was growing at an annualized rate of 50%-60%, before dropping to 40% at the end of 2008 and stalling totally in the middle of 2009. “Everyone has been positively surprised by the performance of the Uruguayan economy this year,” says Mario Tucci, country manager at Tata Consultancy Services in Uruguay and vice-president at TCS for Ibero-America. “Most economists estimate that growth will come in at around 1.0% this year but it could be up to 2.5%.” Fitch says that one of the strengths of the country’s financial system is high liquidity, with a continuous growth in deposits, and liquid assets that represent some 52.5% of total deposits. The agency says that the system’s solvency is satisfactory, as equity of the private sector banks represents 8.7% of assets. “República’s strategy for next year is based on three foundations aimed at continuing to lead the Uruguayan banking market with the objective of reaching high levels of sustainable economic growth,” says Calloia. “First of all, a strong incorporation of technology that allows us to efficiently provide quality financial services; secondly, the development of specific products for micro enterprises which are not appropriately covered by the traditional financial sector; and finally, the contribution to the development of the capital markets.” He adds that the bank realizes that flow of fresh capital to the Uruguayan economy requires the evolution of new markets and institutions. Recently, the sector became more competitive, with a number of major international banks expanding their presence. Last December, Santander paid $225 million for ABN AMRO’s banking business in the country, in one of the biggest acquisitions in the financial sector in Uruguay’s history. The bank says that it expects to recoup profits within three years. Furthermore, last year, Banco Itaú purchased Union Capital Afap, a private pension provider. Itaú already owns BankBoston’s interests in the country, as well as local credit card company Oca. At the start of October, the Brazilian meat processor Marfrig issued $20 million in seven-year debt on the Uruguayan stock exchange, with an annual interest rate of 6.5%. Analysts say Uruguay is becoming more and more dependent on Brazilian investors and that the latest issuance could lead to other deals. Increasingly, Uruguay’s economic cycle mirrors that of Brazil, say local economists. “The Uruguayan banking market is becoming more and more competitive,” says Daniel Varese, Citi’s country officer for Uruguay. “It will be very difficult for Banco de la República to grow much bigger in terms of market share; the future growth lies with private sector banks, especially niche players such as Citi.” LF 48 LatinFinance November/December 2009

Latin Finance - November/December 2009

Table of Contents for the Digital Edition of Latin Finance - November/December 2009