* Itaú is first local bank to top ranks
* Bankers expect more high-grade bond deals
* Imputed fees rose 37 pct in 2012
By Guillermo Parra-Bernal
SAO PAULO, Jan 4 Brazilian investment banks
overtook foreign rivals in managing global debt offerings by the
nation's government and companies last year, capturing the
lion's share of a 67 percent surge in fees, Thomson Reuters data
showed on Friday.
A 37 percent increase in Brazil global debt offerings was
mostly the by-product of record-low interest rates worldwide
that allowed for a balance between higher returns and
fundraising alternatives, bankers said. They expect volumes to
keep growing this year, especially in segments where risk and
returns are higher, such as so-called junk debt.
According to Thomson Reuters' annual deal-making report, the
federal and sub-national governments and companies sold a total
$50.93 billion of debt last year, up from $37.29 billion in
2011. The largest 10 bond underwriters handled eight in every 10
issues last year, slightly more than in 2011, the report showed.
In 2012, Itaú Unibanco Holding SA overtook HSBC
Holdings Plc and Banco Santander SA to become
the No. 1 manager of global debt sales by Brazil's government
and companies - the highest ranking for a local firm since
Thomson Reuters began tracking the data in 2010. Itaú, which
oversaw about $6.02 billion worth of bond sales in 2012, ranked
third the prior year.
"Issuers in Brazil were offering to pay attractive interest
rates and I don't see why this would change," Jean-Marc Etlin,
managing director for investment banking at Itaú BBA, Itaú's
wholesale banking unit. "As investors seek attractive risk and
returns, more issuers may be able to sell debt overseas under
Etlin expects 2013 to be an active year where "any
reasonable products offered to the market should likely draw
robust demand." Itaú's pipeline of potential deals this year,
which Etlin said "looks better" than last year, will likely be
bulked up by a handful of investment grade-type issuers such as
infrastructure companies trying their luck in the bond market.
Banco do Brasil SA's investment banking unit
ranked second after underwriting $5.59 billion worth of bond
deals last year. The 2011 league table leader, Santander, ranked
third in 2012, with $5.15 billion, and HSBC's bond unit --
headed by veteran banker Alexei Remizov -- fell to fourth place
from second, according to the Thomson Reuters report.
Bond activity in Brazil outpaced global debt capital markets
by a large margin. According to the Thomson Reuters report, bond
sales across the globe rose 10 percent to $5.6 trillion last
year. Furthermore, 2012 was the strongest year on record for
sales of so-called high-yield bonds -- debt rated below
investment grade -- as well as the least risky securities.
"There is demand for yield and Brazilian companies offer
good returns because they remain well capitalized and investors
are willing to take a little more risk," Roberto Barbutti,
co-head of investment banking at Bank of America Merrill Lynch,
As a result, imputed fees for bond deals rose to an industry
total of $249.6 million last year, after falling 26 percent in
2011, according to the report.
WEAK IPO, M&A
The jump in underwritten volumes came as the number of total
debt deals soared to 103 from 72 in 2011, the report showed.
Debt capital markets activity, known more commonly among
bankers as DCM, was a bright spot in a grim year marked by the
slowest activity in Brazilian equity markets since at least 2005
and an 11.9 percent tumble in the announced value of mergers and
According to Valor Econômico newspaper on Friday, Banco do
Brasil plans to either list its investment banking unit this
year or merge it with a private sector rival in a joint venture.
Paulo Roberto Caffarelli, senior vice president for wholesale,
private and international banking, told the paper that the goal
is to turn the unit into the country's largest investment bank.
Brazilian companies, which for years relied on a dynamic
local equity market for new cash, are only beginning to tap debt
markets. Etlin estimates that, of the approximately 2,500 Itaú
wholesale banking customers, only 70 to 80 are active sellers of
debt locally and globally.
Sectors that could be very active include infrastructure,
where a handful of companies are undertaking huge projects
ranging from hydro power dams to ports, said Roberto D'Avola,
head of Latin America DCM for JPMorgan Chase & Co, which
rose to the top of Thomson Reuters' global debt rankings last
New York-based D'Avola also said commodity producers could
tap debt markets more actively this year as prices and demand
for some of their products improve. Demand for Brazilian debt
will not be solely a function of economic growth, but also of
company fundamentals, which look solid at the moment.
"Liquidity will keep coming to Brazil systematically ...
investors see value in Brazil's paper," he added.
Economists do not expect a robust recovery in Latin
America's largest economy. According to a weekly central bank
survey released on Monday, gross domestic product should expand
3.3 percent this year, down from estimates a couple of months
ago that it could grow as much as 4.5 percent.
The following is a table with year-to-date rankings:
FINANCIAL ADVISER VALUE RANK NUMBER OF
2012 2011 DEALS
taú Unibanco $6.022 bln 1 3 31
Banco do Brasil $5.587 bln 2 8 24
Santander GB&M $5.125 bln 3 1 10
HSBC Holdings $4.555 bln 4 2 22
JPMorgan Chase $4.307 bln 5 7 15
Citigroup GB&M $3.843 bln 6 4 15
Bradesco BBI $3.215 bln 7 6 23
Deutsche Bank $2.817 bln 8 9 13
BTG Pactual $2.409 bln 9 10 13
Morgan Stanley & Co $2.263 bln 10 14 9
TOP 10 ADVISORS $40.146 bln
INDUSTRY TOTAL $50.933 bln 103