Latin Finance - September/October 2010 - 14

investment bank fees

negotiating fees below 50 basis points on a deal split between 10 leads. This is much less than the 400 basis points paid on smaller IPOs, and the biggest deal of the year – Petrobras – will probably pay less split between more underwriters, say bankers. Equity specialists say the average fee will be 100-150 basis points this year, versus around 300 in 2007. And DCM is also dominated by jumbo transactions paying wafer thin commissions. M&A is the bright spot, which bankers say will be at least as good as last year.

Drop in a Bucket

But still, in relative terms, the fees are tiny, even with developed world markets on their knees. In the first seven months, LatAm generated $810 million

in fees, according to Dealogic, up 20% year-on-year. “It is certainly the smallest region,” concedes a LatAm head at a major Wall Street firm, who asks not to be identified. He nonetheless insists that Brazil should be positioning itself as the second most important BRIC, after China, and that investment banks should invest accordingly. Through the end of July, comparable markets of Eastern Europe paid banks $1.08 billion and emerging Asia yielded $4.60 billion in fees. Even in its depressed state, US clients paid a total of $14.8 billion in fees for the first seven months. And investment banks prized $8.9 billion from struggling Europe, says Dealogic. Even if the reversal of fortunes between developed and emerging markets

accelerates, the numbers suggest LatAm is years away from providing a major contribution to the global bottom line. While the pace of growth may seem alluring, it is coming from a very low base. “Brazil might end up being a bubble. People are expecting a lot,” says a senior LatAm banker at a major institution, who declines to be identified.

Best M&A Year

The slack in equity is partly compensated for by a surge in local consolidation and cross-border M&A. Unlike in 2007, capital markets are discounting smaller players, making M&A more attractive. Entities that are too small to float now are seeing plenty of interest from private investors, say bankers. “We’ve seen a lot of cross-border,

LatAm Fees for M&A, DCM, ECM and Loans by Bank
Credit Suisse retakes the lead Jan 1-Jul 29 2010 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Source: Dealogic

Jan 1-Jul 29 2009 % share 11.90 9.40 8.30 6.90 6.00 5.70 5.50 5.00 4.10 3.30 3.20 3.10 3.00 2.40 2.00 2.00 1.70 1.60 1.30 1.30 100.00 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Bank JPMorgan Banco Bradesco Banco Santander Credit Suisse Banco do Brasil Citi Itaú Unibanco BofA Merrill BTG Pactual Morgan Stanley HSBC Rothschild Goldman Sachs BBVA Deutsche Bank UBS Banco Fator Bancolombia Atlas Advisors Barclays Capital Total Net Fee ($m) 94 63 60 55 54 53 33 25 21 18 14 13 12 12 10 8 8 8 7 7 675 % share 14.00 9.40 8.90 8.20 8.00 7.80 4.90 3.80 3.10 2.70 2.00 1.90 1.90 1.80 1.40 1.20 1.20 1.20 1.00 1.00 100.00 97 76 68 56 49 47 45 41 33 26 26 25 24 20 16 16 14 13 11 10 810

Bank Credit Suisse Itaú Unibanco JPMorgan BofA Merrill Banco Santander Citi Deutsche Bank BTG Pactual Banco Bradesco Goldman Sachs Rothschild Morgan Stanley Celfin Capital HSBC Banco do Brasil BNP Paribas UBS Allen & Co Barclays Capital Hopu Investment Total

Net Fee ($m)

14 LatinFinance

September/October 2010

Latin Finance - September/October 2010

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