awards
Leading banks in Latin America and the Caribbean pursue varied strategies, from the traditional to the digital, to navigate today’s challenges
LatinFinance’s annual Bank of the Year awards recognize institutions that have achieved outstanding performance. In making the selection, the editorial team considered the opinions of analysts, publicly available data and information from the banks themselves. This year’s winners are listed below.
Santander
Nubank
Bradesco
Bancolombia
BBVA
Banco Galicia
Goldman Sachs
Banco BISA
BTG Pactual
Republic Bank
BAC Credomatic
JPMorgan
Banco de Bogotá
Bank of America Merrill Lynch
Banco Popular Dominicano
Banco Pichincha
Banco Cuscatlán
Grupo Financiero Ficohsa
National Commercial Bank
Banorte
Banco Lafise Bancentro
Banco General
Itaú
Banco de Crédito del Perú
IDB Invest
After a recent financing round, the Brazilian fintech has reached a $10 billion valuation and is moving to extend its reach in Latin America
Although only six years old, Brazil’s Nubank has helped revolutionize banking in Latin America, taking a lead in the fintech challenge to traditional brick-and-mortar banks with 12 million customers for its credit card, consumer banking and lending business.
Co-founded by CEO David Vélez, a former partner at Sequoia Capital, Nubank continues to draw private equity investors. In a July financing round led by growth stage venture firm TCV, the bank raised $400 million to expand its business in Brazil and kickstart its international reach into Mexico and Argentina.
It was the first major investment in Latin America by the Menlo Park, California fund, which has also invested in Facebook and Netflix. The deal values Nubank at a reported $10 billion, the highest valuation of any tech start-up in the region.
Existing investors that also participated in the latest round include China’s Tencent, Sequoia Capital, DST Global, Dragoneer, Ribbit Capital and Thrive Capital. The company has raised $820 million in seven venture capital rounds since 2013.
Nubank started out with an app-based credit card and rewards program but has expanded its menu of products to include loans and digital bank accounts for individuals and small and medium size businesses. Measured by customers, it’s now Brazil’s sixth-biggest financial institution.
Nubank’s funding success reflects the growing influence of Latin America’s fintech ecosystem, which has made huge inroads in the banking industry by tapping into the region’s under-banked population.
A big target has been tech-savvy “digital natives†in the 25- to 34-year-old age bracket who don’t have any strong banking relationships.
One of Brazil’s largest banks is charting its technological future with a digital bank that is attracting new customers and boosting efficiencies
Less than two years after its launch, Bradesco’s Next digital bank has 1.1 million clients, CFO Andre Rodrigues Cano said in a recent earnings call. The bank hopes to reach 1.5 million clients by the end of the year.
Next is a key feature of the bank’s ambitious digital transformation as it, like other legacy banks, confront the competitive challenge of fintech start-ups in Brazil. The goal isn’t just to stop them from poaching existing customers, but to attract a new audience of digital-savvy clients. Since its launch in 2017, Next has attracted 1.5 million accounts. What’s more, 77% of Next’s customers were new to Bradesco. And the business continues to grow, with the bank receiving 10,000 requests a day to open new accounts .
Bradesco’s digital push isn’t just limited to Next. Technology also plays a central role in the bank’s efforts to overhaul its back office operations and to increase sales via digital channels. Credit origination through digital channels in the individual segment totaled BRL 11.8 billion through the first half of 2019, an increase of 53%. The bank is also revamping its back-office operations to handle the new digital business.
Bradesco has also taken steps toward open banking to share information with third parties. It has been working on a platform called Bradesco Artificial Intelligence (BIA), which draws on cognitive computing technology developed by IBM’s Watson. The platform allows more than 1.4 million customers to check balances, ask questions and access other bank services through WhatsApp.
The bank also has partnerships with Uber and iFood that allows customers to interact with those services. This month, BIA became available on Amazon’s Alexa so customers can ask questions about their accounts.
A focus on small- and medium-sized clients helped this bank grow deposits, loans and profits
Colombia is home to some 3 million small- and medium-sized enterprises, and Bancolombia banks around half of them. In a sign of its focus on SMEs, the bank holds a 36% market share of Colombia’s SME loans.
Competition is heating up to provide banking services to this critical sector of Colombia’s economy, but Bancolombia continued to show its market leadership by rolling out new products, growing its total SME deposits by 12% from May 2018 to May 2019, and increasing its net earnings by 10% over the previous year.
Bancolombia has revamped its approach, moving beyond a client segmentation that focused on big, medium and small companies to a more detailed segmentation that includes sector, transactional details and other information. The approach is helping the bank to better tailor new products.
Last year, Bancolombia unveiled a new platform designed to offer improved services to SMEs. The platform includes a broad range of sector data and news and offers services ranging from payroll to consulting and digital marketing.
The bank also specifically targets startups, attracting clients from the edtech, agrotech, fintech and e-commerce sectors.
In January, Bancolombia announced it had formed a partnership with MercadoPago, the payments unit of the Argentina-based e-commerce retailer MercadoLibre, aimed at helping the bank’s SME clients process online payments.
The banking innovator is helping to grow sustainable financing in Latin America with green bonds and loans
BBVA has assumed a leading role in promoting and introducing sustainable bank financing solutions throughout Latin America. It’s a commitment underscored by the size and scope of the deals it led over the past year.
In April 2018, BBVA led the very first green loan in Latin America, a $400 million debt facility for Iberdrola, the first green loan to be syndicated, according to Eddy Lacayo, BBVA’s head of corporate lending for Latin America.
A few months later BBVA led a $70 million sustainability-linked financing in Peru for Ferreycorp.
During the awards period, BBVA also helped place two green bonds in the Mexican local debt market.
The first was Bancomer’s 3.5 billion peso ($182 million) green bond in September.
Then in October 2018, it helped manage a green bond by Fondo Especial para Financiamientos Agropecuarios (FEFA).
Bancomer’s Mexican pesos issue was especially noteworthy. While 80% of green bonds are dollar- or euro-denominated, this local currency issue opened the market to local investors. Ãngel Tejada, BBVA’s head of sustainable bonds, considers the deal a milestone.
Despite the growth in sustainable financing, obstacles remain. Securing green financing takes extra work. Lacayo points out that investors want to see that corporate borrowers are adhering to ESG (environment, social, governance) criteria.
As for the outlook for green bonds, Tejada says much will depend on sovereign borrowers to lend confidence and liquidity to the market.
He cites the positive impact of Chile’s inaugural $1.4 million issue in June.
Tejada says sovereigns will play a critical role in the market and expects Brazil and Mexico to have influential roles.
Riding sky-high returns on central bank notes, the bank is navigating Argentina’s economic turbulence
With Argentina’s economy in a tailspin marked by high inflation, soaring interest rates and a deep recession, the country’s banks are again facing severe economic headwinds. Gone is the enthusiasm from three years ago when Argentina’s banking sector appeared poised for growth.
Still, Banco Galicia has again demonstrated its ability to navigate Argentina’s economic turbulence.
In the second-quarter, Galicia notched the highest quarterly profit among Argentina’s four largest listed banks which include BBVA Banco Frances, Banco Santander Rio and Banco Macro.
Galicia reported a profit of 11.58 billion pesos ($199 million)in the April-June period, a 315% increase from the same quarter last year, buoyed by its gains in short-term central bank notes known as Leliqs.
The notes carried interest rates above 60% during the second quarter, proving to be attractive investments for Argentine banks as Argentina’s economy contracted.
Galicia, Argentina’s largest domestically owned bank, also continued its digital push, implementing new personal financial management software that the bank hopes will be a tool of financial education for clients and help deliver a more personalized digital banking experience.
Like other Argentine banks, Galicia is ramping up its digital investments at a time when several high-profile fintechs have started to operate.
By developing an on-the-ground presence, the investment bank won advisory business and worked on top deals in a troubled market
Last year, Goldman Sachs reopened its office in Buenos Aires as part of deeper push into Latin America. And the move paid off.
Even as the Argentine economy unraveled, unleashing a sharp devaluation of the peso and sharply slowing capital markets activity, Goldman landed and executed several eye-catching deals.
“It has been a difficult environment,†says Matias Rotella, who heads Goldman’s Buenos Aires office. “But we adjust to operate in different environments.â€
Goldman was one of the lead bookrunners and stabilization agent on Globant’s $348 million equity follow-on in June last year.
The investment bank also led financing for e-commerce pioneer MercadoLibre, which included a $750 million strategic investment by PayPal and a $1.15 billion equity follow-on in March.
In particular, Goldman sees Argentina’s tech sector as an opportunity. “A handful of regional technology companies are headquartered in Argentina,†Rotella says. “They are growing quickly, and they need to do more complex and bigger transactions as they develop.â€
During the awards period from July 2018 to June 2019, Goldman ranked atop both the equity capital markets and M&A league tables, according to Dealogic.
In January, Goldman was the exclusive financial advisor to Prisma Medios de Pago, Argentina’s leading payments company, in its sale of a 51% stake to Advent International.
Rotella credits Goldman’s performance to its on-the-ground presence. “Having a local business allows us to cover more companies,†he says. “We don’t have to rely on San Francisco or New York bankers coming down.â€
The bank is growing its business and transforming customer experiences through digital services
Digital innovation and a healthy balance sheet have marked Banco Bisa’s performance.
Banco Bisa rolled out several new digital products and services that are helping it strengthen its relationship with clients.
“Execution and focus helped us have an excellent 2018, while our balance sheet has maintained a solid performance,†says Marco Asbún, Bisa’s executive vice president.
Although it’s known for servicing a large number of corporate clients, Bisa has also worked to grow its microcredit and consumer businesses. Asbun says microcredit now represents 10% of the bank’s portfolio with a heavy emphasis on digital services.
Among digital innovations, Bisa in May introduced Simple Pagos Express, a new payment and collection system that uses QR barcodes.
In July, the bank announced it had added Swift GPI to its online banking platform that allows customers to track their cash transfers abroad.
The new services followed the bank’s unveiling last year of its “BISA chatbot†on Facebook, which allows clients to check their account balances, make transfers and conduct other transactions.
Asbun says the digital push is about the bank transforming its customer experience.
“The future isn’t going to be about interest rates,†he says. “It will be about how customers interact with their bank.â€
An emphasis on investment banking and wealth management helped the bank stage an impressive turnaround
Thanks in large part to solid returns from its investment banking and wealth management businesses, BTG Pactual reported a 56% increase in profits at the end of the second quarter of 2019 to 972 million reais as revenues jumped 76% to more than 2 billion reais ($258 million).
The bank’s return on equity topped 20%, up more than 5 percentage points from the year earlier. The turnaround in investment banking has been stunning. Less than four years ago, some feared the bank was on the brink of collapse. During the awards period, BTG Pactual ranked fourth in fee generation in the league tables in Brazil behind Itaú, JPMorgan and Morgan Stanley.
What’s more, BTG Pactual ranked fourth in Brazilian M&A and debt capital markets. The bank has also moved up the league tables in Chile and Colombia as it begins to reassert its regional presence.
When it comes to building a wealth management business, BTG Pactual has been the most aggressive of the country’s legacy banks. Its digital platform, BTG Pactual Digital, was launched in January 2017.
It has 150 fund managers responsible for about 400 different funds, including those offered by third-party managers.
In the fourth quarter of 2018, it introduced an equity investing platform. The bank hopes to expand the digital services to Mexico, Chile and Colombia.
At the end of the second quarter, the BTG Pactual reported a 30% increase in assets under management in its wealth division compared to a year ago. Revenues were up 26% in the same period.
A buying spree outside its home base helped the bank retain regional momentum
Republic Bank continued to pursue an aggressive growth strategy over the past couple of years, once again turning to acquisitions to expand its banking franchise throughout the Caribbean.
In 2017 and 2018, the bank acquired controlling stakes in banks in Grenada and the Cayman Islands, while the economy continued to sag at home in Trinidad and Tobago. The World Bank recently revised upward its forecast for the country’s GDP in 2019 to 0.9% from -0.5%.
This year Republic entered into an agreement to acquire Scotiabank’s banking operations as the Canadian institution focuses its strategy in larger markets in Latin America.
The deal includes Scotiabank’s operations in Guyana, St. Maarten and the Eastern Caribbean territories, including Anguilla, Antigua and Barbuda, Dominica, Grenada, St. Kitts and Nevis, St. Lucia, and St. Vincent and the Grenadines. The purchase price was $123 million.
The acquisition, once approved by all the regulators involved, could increase Republic’s asset size, which stood at TTD85 billion ($12.5 billion) at the end of the fiscal third quarter ended in June. The bank posted profits of TTD497 million in the same period, compared to TTD362 million a year earlier.
But regulatory approvals are taking longer than initially anticipated.
The Eastern Caribbean Central Bank (ECCB) approved the deal for Scotiabank’s operations in Anguilla, Dominica, Grenada, St Kitts and Nevis, Saint Lucia and St Vincent and the Grenadines.
But the ECCB said discussions concerning the banks in Antigua and Barbuda would continue.
Meanwhile, the Central Bank of Guyana said it couldn’t approve the deal because of concerns it would give Republic a dominant position and stifle competition in Guyana. The government of Guyana agreed.
Geographic diversity gave the Central American banking powerhouse an edge
BAC Credomatic’s deepening regional presence in six Central American countries helped to boost profits in 2018 by 27% to $405 million despite sluggish economies in the region.
The bank’s assets stood at $22.7 billion. Retail credits accounted for roughly 60% of its $16.2 billion loan book with the rest largely commercial loans.
Meanwhile, deposits rose more than 9% in 2018 to $15.7 billion.
The bank’s return on equity was 15.4% at the end of last year compared with a regional average of 12.6%. BAC Credomatic’s return on assets stood at 1.8% vs. 1.3% regionally.
The bank attributes much of its success to its diversified geographical presence.
BAC Guatemala grew profits to $101 million in 2018 from $69.6 million in 2017 despite the country’s political turmoil, beating out all of Guatemala’s other banks.
BAC Costa Rica grew its 2018 net income to $115 million from $77.2 million in 2017 to cement its position as the largest private bank in the country.
BAC Costa Rica generated some 25% of BAC Credomatic’s earnings in all of Central America.
The Costa Rican bank had $4.3 billion in loans and $4.5 billion in deposits. Assets climbed to $6.3 billion at the end of 2018 from $5.9 billion a year earlier.
On the digital front, BAC Credomatic rolled out a chatbot in 2018 that interacts with customers through artificial intelligence.
Its digital bank customers stood at more than a million at the end of 2018, up 26% from 2017. The bank also deployed a new mobile app, attracting almost 800,000 customers.
By going big, the investment bank is dominating landmark Chilean IPOs
JP Morgan has led five of the six largest initial public offerings in Chile since 2017, with the latest being Cencosud Shopping’s $1.05 billion June offering.
The largest owner and operator of retail malls in Chile floated about 28% of its shopping center division. It was the largest ever offering on the Santiago stock exchange and opened the door for future large-scale IPOs. The deal took time to pull together.
Andrés Errázuriz , executive director of investment banking in Chile for JP Morgan, says the investment banking team spent nine months preparing the offering before taking Cencosud on the road.
Local pension funds ended up buying nearly 60% of the offering, while local financial institutions picked up almost 12%. Foreign investors purchased the rest.
The reception demonstrated the Santiago exchange’s ability to digest such a huge IPO, raising the possibility of more deal activity in the future.
“We can take larger transactions to the market,†says Errázuriz, who expects to see one or two additional IPOs in Chile this year and next.
Another notable deal for JP Morgan was Chile’s euro-denominated green bond in late June.
The bank served as bookrunner, along with Crédit Agricole and Société Générale, for the sovereign €861 million ($979 million) issue. The notes were priced at 0.83%, a new low for a Chilean sovereign eurobond.
Errázuriz says the sovereign green bond has attracted wide attention among possible issuers concerned about climate change. “It’s competitive in terms of rates,†he says. “We believe other companies will be looking at it.â€
Banco de Bogotá reported net income of COP 2,825 billion ($825 million) for 2018. That gave the bank a leading 29.2% of market share among Colombia’s four leading banks according to Asobancaria, Colombia’s largest banking association. Bancolombia followed in second place with 28.1%; Davivienda with 12.4% and BBVA with 5.7%.
Banco de Bogotá managed the achievement although it held only 12.2% of loans, 13.8% of deposits and 14.6% of assets in Colombia’s banking system.
The strong results come as the bank embarked on an ambitious digital push.
Its Digital Lab, launched in 2017, is meant to grow the use of its digital channels by customers, improve user experience and capitalize on its increased digital capacity to help improve profitability.
The bank launched two new digital products in 2018 focused on mortgages and personal loans. That brings Banco de Bogotá to a total of five digital products, including credit cards, payroll loans and savings accounts.
As of March 2019, digital savings accounts reached a compound monthly growth rate of 14.5%, with the bank opening some 27,000 accounts per month.Digital accounts represent around 40% of the bank’s total savings accounts.
Banco de Bogotá’s digital credit cards now represent 30% of the bank’s total credit card sales, with around 80% of the bank’s digital credit card holders being new customers.
Complex dealmaking bolstered the advisor’s standing in two countries, where it worked on eye-catching deals
Bank of America Merrill Lynch participated in some of the biggest Latin American deals of the past year. In Mexico, it advised Grupo Financiero Banorte in its $1.4 billion acquisition of Grupo Financiero Interacciones.
Not only did the deal create the second-largest bank in Mexico, it was the biggest Mexican-owned bank in a market long dominated by foreign institutions.
BAML also had to carefully piece together a transaction that involved Mexico’s influential Hank family. The deal had been rumored since 2014 when Carlos Hank González resigned as CEO of Interacciones to join the board of Banorte, where he is now chairman. At the time, González denied his move was a prelude to a merger.
Given the added scrutiny of the deal, Ricardo Fernandez, BAML’s head of investment banking in Mexico, says the transaction had to be fair to all shareholders and fully transparent.
Another notable transaction was the $1.4 billion acquisition of 80% of Enel Green Power’s wind farm in Mexico by Canada’s Caisse de dépôt et placement du Québec (CDPQ) and CKD Infraestructura México. BAML represented the buyers.
BAML also worked on two of the biggest transactions out of Colombia during the awards period.
It served as global coordinator on Grupo EnergÃa Bogotá’s $670 million follow-on offering, the first Colombian international equity offering in four years and the largest Colombian energy and power ECM in eight years.
BAML also participated in Colombia’s $2 billion, dual-tranche bond offering in January 2019.
Innovation, including a new “bank without tellers†prototype, is designed to help the bank attract new customers
The Dominican Republic has continued to outpace many of its neighbors in the Caribbean and Latin America. The International Monetary Fund forecasts its economy will expand by 5.5% this year, a drop from the 6.4% growth achieved last year, but still among the fastest in the hemisphere.
Over the last decade, led by the construction and tourism sectors, the Dominican Republic has had the highest growth in the Americas after Panama.
Banco Popular Dominicano has capitalized on the country’s prosperity. In 2018, it increased assets by 11.1% and expanded deposits by 10.2%. It also registered the highest net income of all of the country’s banks at 8.56 billion Dominican pesos ($162 million).
Digital transactions represented nearly 80% of total transactions in 2018, according to the bank. Banco Popular last year opened its first “Digital Center†branch.
There are no tellers, but customers can learn about the latest in the bank’s digital products and also take part in talks covering personal finance, innovation, business trends and entrepreneurship.
The center serves as a platform and laboratory to identify and launch technological innovations. It also has a co-working meeting space for small and medium-sized enterprises and entrepreneurs.
Banco Popular has also rolled out green loans aimed at promoting a clean energy economy.
Despite Ecuador’s economic challenges, the bank is achieving growth and continues to strengthen its position
Banco Pichincha has benefitted from recent positive news in what has been a challenging environment in Ecuador. Its profit was the highest among local banks in 2018 at $119.7 million followed by Banco del Pacifico with $100.2 million . What’s more, Fitch revised the outlook for Pichincha and other local banks in August to stable from negative, while affirming their long-term issuer default ratings at B-.
The change follows Fitch’s recent revision of Ecuador’s sovereign rating outlook to stable from negative. In explaining the revision, the ratings agency cites the $4.2 billion package from the IMF and a recent bond buyback that have helped take pressure off the country’s finances.
Fitch also cites Pichincha’s strong local brand, diverse business model and solid liquidity for its market of operation.
In February, Ecuador took a financing package from the IMF that called for steep spending cuts, higher bank reserves and business-friendly reforms.
The country also secured another $6 billion in funding from the World Bank, IDB, CAF, FLAR, EIB and AFD.
The agency says it expects a more stable financial environment in the country will benefit local banks. Still, Fitch reports banking ratings will likely remain constrained by Ecuador’s low sovereign rating, which remains at B-.
Ecuador still faces a financing gap of $1 billion in 2019 and $2 billion in 2020.
But Fitch says the country has room to maneuver after it repurchased the $1.5 billion it had in 10.5% 2020 bonds in June. Fitch expects Ecuador’s GDP will be unchanged in 2019, compared to 1.4% in 2018.
After a rebranding, the branch network expects to step up expansion — and profitability
Banco Cuscatlán relaunched in June 2016 after Grupo Terra acquired Banco Citibank El Salvador and rebranded it.
Now it appears Cuscatlán is ready to take on the country’s other big banks. In December 2018, the bank led all other Salvadoran banks with a 11% net margin.
With a 18% share of the El Salvador market and a return on equity of just 4.5%, its goal is to improve performance and eventually to capture 25% of the local market through a wider menu or products and expanded digital platforms.
On the traditional banking front, Cuscatlán plans to expand its branch network of full service and mini branches to 63 by 2021 from 58 in 2019, which will give it nationwide penetration.
This expansion will also help increase its ATM network to 258 by 2021 from 226 this year. That would make it the third largest in the country.
The bank is moving aggressively on the digital front. The central bank estimates that half of banking customers in El Salvador will be digital users by 2012 2022, compared to 20% this year. When it comes to mobile technology, the central bank believes 35% of bank customers will access bank services with their smart phones by 2021, compared to 14% this year.
Cuscatlán’s recent digital strategy can be traced to 2018 when it launched enhanced digital platforms, including a more responsive website and apps for Android and iPhones. Customers no longer need to visit branches for most services.
The bank expects to expand its digital capabilities even more by allowing customers to interact with chats on Facebook and WhatsApp.
Remittances and digital initiatives have combined to help the solid performer navigate the country’s turmoil
Political turmoil has gripped Honduras for much of the past year, but the country’s economy has proved resilient, helped in large part by a steady flow of remittances from Honduran migrants.
Banco Ficohsa has continued to build on its position as a leader in the Honduran banking system. As of March 2019, the bank grew its assets by 11.4% compared to the same period of 2018, making Ficohsa the country’s largest bank in terms of assets. The bank now accounts for approximately one fifth of the Honduran banking system.
Other data points highlight the bank’s solid performance. Ficohsa grew its loan portfolio by 12.6% and deposits by 2.3%, bolstering its position as one of the best-funded banks in the country.
The bank has also worked to build out its Tengo mobile app, which customers can use to perform financial transactions at gas stations, supermarkets, pharmacies and other locations.
In other key initiatives, Ficohsa has invested more than $1.3 million in cybersecurity to help strengthen clients’ data protection and prevent them from falling victim to phishing, hacking and other cyberattacks.
Buoyed by an expanding loan book and wider range of products, the bank’s improving results reflected better days in its home country
Profits at Kingston-based National Commercial Bank (NCB) continued to climb during the awards period as the bank’s return on equity rose to 20% from 15% in the previous year period.
Net profits stood at JMD$8.8 billion ($65.6 million) at the end of the third fiscal quarter ended in June, compared to JMD$6.9 billion a year earlier. For the first nine months of 2019, profits had risen to JMD$20.7 billion.
The bank’s loan portfolio climbed 14% in the nine-month period to JMD$411.8 billion. The ratio of non-performers declined to 4.5% from 4.8% a year earlier. The expanded loan portfolio contributed to a 27% increase in net interest income to JMD$6.9 billion.
The bank’s improving results mirror the turnaround in the Jamaican economy. Credit the economic revival to a bailout from the International Monetary Fund (IMF) and the decision by the government to strictly adhere to IMF conditions.
In November, the Caribbean nation will exit its standby arrangement with the IMF, which expects the country’s GDP will expand 1.7% this year from 1.4% in 2018.
Meanwhile, in May, NCB completed its acquisition of Trinidad and Tobago-based insurer Guardian Holdings Ltd. (GHL).
Under the deal, NCB paid $207 million for a majority stake in the company, boosting its share to almost 62% from about 30%.
The deal allows NCB to offer a wider range of financial products and makes it one of the Caribbean’s largest financial groups. Income from insurance more than doubled in the nine months ended in June to JMD$5 billion. GHL contributed 45% of net insurance revenues for the third quarter.
Following a high-profile merger, the new banking powerhouse reported profit increases
In June 2018, Mexican regulators approved Grupo Financiero Banorte’s bid to acquire Grupo Financiero Interacciones in a deal that created Mexico’s second largest bank by assets, loans and deposits.
The $1.4 billion cash-and-stock transaction, first announced in October 2017, marked the largest deal in Mexico’s banking sector in 17 years. Before the merger, Banorte was Mexico’s third-largest bank by loans and assets and fourth by deposits.
The merger allowed Banorte to add Interacciones’ expertise in infrastructure financing and government loans to its consumer banking business, helping to create economies of scale, improve margins and diversify sources of revenue.
The deal has started to pay off. In July, Grupo Financiero Banorte reported a 21% increase in second-quarter net profit versus the same period a year earlier. Growth during the quarter was powered by the banking business, with government lending rising 44% after the acquisition of Interacciones.
Banorte also made inroads on its digital transformation strategies. Last year, the bank teamed with Amazon and MasterCard to launch Amazon’s first-ever debit card in Mexico, a product intended to help shoppers who do not possess bank accounts to buy online. The card, known as Amazon Rechargeable, can be loaded with cash at convenience stores across the country.
Analysts say the card may serve as a bridge to help bring some of Mexico’s unbanked population into the formal economy.
As Nicaragua faced its worst economic slump in decades, this bank maintained liquidity and steered through the financial headwinds
Nicaragua’s political crisis has taken a toll on the economy, which contracted by 4% in 2018, the greatest dip since the country’s 1980s civil war.
And forecasts for this year suggest the economic troubles will continue, with the World Bank predicting the economy will shrink by another 5% in 2019.
Among Nicaragua’s banks, Banco Lafise Bancentro stood out for how it has navigated the economic and economic turbulence.
Faced with the deteriorating economy, the bank raised a total of $634 million in funding, including $99 million in senior debt, $52 million in subordinated debt, $132 million in short-term debt, along with $350 million in repurchase agreements with the central bank.
“Nicaragua was going through a period where deposits were falling significantly and one of our priorities was to shore up our liquidity,†says Justo Montenegro, the bank’s chief financial officer.
“Given the economic and political context, we set key goals: improving our liquidity, strengthening our solvency, and improving our revenues, efficiency and the quality of our assets.â€
The focus on funding helped the bank raise its cash and cash equivalents to 89.4%, well above the industry average of 75%.
Lafise also grew its foreign exchange, remittance and investment securities commissions business. Over the last year, the bank saw its earned fees from remittances grow 34.6%, representing a 19.3% market share. The bank also decreased its administrative expenses by 4.6%, making it the most efficient bank in the country.
“I’d say we successfully accomplished what we set out to do,†says Montenegro.
Banco General’s long-term issuer rating stands at BBB+, a notch above Panama’s sovereign rating. There’s ample reason to justify the rating, according to Fitch.
In a recent report, the ratings agency cited the bank’s strong domestic franchise and a long track record of successful operations.
In addition, Fitch singled out Banco General’s strong asset quality which compares favorably with Panamanian competitors.
Claiming a market share of 20% of the country’s loans and 25% of deposits, Banco General president Raúl Alemán Zubieta says the success of the largest bank in Panama has a lot to do with its diverse business footprint.
Its loan portfolio is roughly split between consumers and companies, he says. Loans outside of Panama account for 10% of the portfolio.
With interest rates low and the Panamanian economy slowing, Alemán says the bank is emphasizing greater efficiency. “There’s not much you can do on the margin side,†he says.
By adding digital to its diversification strategy, the bank maintains strength despite lower rates
Banco General’s digital strategy is key to improved efficiency. Of the bank’s 1 million customers, “more and more are banking through digital channels than the branches,†says Alemán.
Customers can tap into a range of services through their iPhones, such as opening accounts and paying bills.
The bank recently started offering insurance products. Along with the expanded digital menu, the bank is improving its cybersecurity measures, says Alemán.
An important part of the digital effort is data analysis, according to Alemán. Banco General has accumulated a trove of information that shows how people interact with the bank and highlights possible new digital strategies. “We know about people’s past behavior and perhaps their future behavior,†he says.
The Brazilian bank’s units in Paraguay and Uruguay posted strong results and pushed ahead with an aggressive digital strategy
Itaú Paraguay posted one of the highest returns on equity in 2018 among Paraguayan banks, while maintaining its top spot in deposits and profitability. At the same time, the bank pursued a far more aggressive drive into digital banking than its competitors.
“We have clients that don’t have to come to any of our branches,†says André Gailey, CEO pf Itaú Paraguay. “That’s different from the other banks.â€
He believes fintechs pose the biggest challenge to his bank, not the traditional lenders in Paraguay. That means “changing the way we do business, a change in mindset,†he says.
A smart use of technology, according to Gailey, will also help Itaú tap into the 70% of Paraguay’s seven million people who don’t use banks, he says.
The bank’s digital ambitions reflect the overall strategy of its parent, Brazil’s Itaú Unibanco, which is pushing further into digital banking throughout Latin America.
This relationship allows it to adapt technological innovations developed throughout the Itaú network. “We can bring the experience in the region into Paraguay,†says Gailey.
In Uruguay, the return on equity for the Uruguayan unit of Itaú was the highest among all banks in the country last year, topping 27%. It was a sizeable leap from the 16% posted in 2017 and was powered by the bank’s profits, the biggest among private banks.
CEO Horacio Vilaró credits the performance in part to the bank’s positioning in the agriculture industry and its relationship with large corporate clients. “It was a very good year, and it will be a very good year this year,†he says.
The bank’s digital strategy also played a role in driving returns, according to Vilaró. Itaú Uruguay’s customers can perform most banking functions through a mobile platform accessible through WhatsApp.
The CEO says 75% of customer business is conducted through digital channels; the remaining 25% of clients use the telephone or visit a branch. “That’s an evolution for the market,†he says.
Steady, impressive growth and attention to risk factors boosted the bank’s prospects
Banco de Credito del Peru’s return on equity for the first half of 2019 hovered at more than 20%, the highest among Peruvian banks. Meanwhile, its net earnings in the first quarter rose 11.4%, and its loan portfolio increased by an impressive 9.3%.
A recent report by Fitch credited the Lima-based bank, Peru’s largest lender with more than a third of the country’s loan book, for its conservative underwriting and sound risk controls, pointing out that Banco de Credito’s loan quality improved during 2018, with past due loans dropping to 2.2% of its loan portfolio at the end of 2018 from 2.5% a year earlier.
In addition, the ratings agency said bank’s loan loss reserves stood at twice the value of loans that were 90 days past due at the end of last year.
Fitch also pointed out that Banco de Credito’s “sustained profitability and reasonable earnings retention†has benefited its capital position with its Tier 1 capital ratio growing over the past four years.
The bank’s core ratio of operating profit to risk weighted assets compares better than other regional peers, according to Fitch, which also pointed out that the bank has a diversified and low cost deposit base, largely made up of demand and savings deposits.
In the second quarter, the bank’s profits rose 11.3% from the same period a year earlier.
Peru’s banking industry has traditionally benefitted from the government’s market-friendly economic policies.
The country’s relatively strong growth in the region has also helped, though Fitch warned in a recent report that the current political crisis could undermine the economy. President Martin Vizcarra dissolved Congress in September after lawmakers refused to call new parliamentary elections.
Following a three-pronged approach, the multilateral has strengthened its social commitments
From water and sanitation to telecommunications and the internet, IDB Invest has participated in a range of deals over the past year as part of a new strategy to drive social development in Latin America and the Caribbean, according to James Scriven, CEO of the private sector arm of the Inter-American Development Bank (IDB).
“We came up with three basic ideas to have a broader impact,†says Scriven.
These include diversifying the sectors where IDB invests, as well as diversifying its funding, often switching from dollars to local currency, he says. Finally, the multilateral wanted to move more people into local markets instead of concentrating staff in its Washington DC headquarters.
“We had to be closer to our clients,†according to Scriven, who points out that IDB Invest now has 100 field personnel spread across 25 countries.
The multilateral has strengthened its involvement with the technology, media and telecom sectors, financing transactions with Telefónica in Chile and Ecuador, Claro in Guatemala, and Millicom in Panama and Costa Rica.
Among its most notable deals of the year, IDB Invest teamed up with Telefónica del Peru, Facebook and CAF, to invest $15.5 million in equity for Internet para Todas, which will provide internet access in Peru. It also contributed $40 million to a $119.5 million syndicated loan to build a resort in an impoverished area of the Dominican Republic. Scheduled to open in 2021, the resort is expected to create 1,800 jobs during construction. When it opens, the resort is expected to employ 500.
Scriven says education and sustainability are also priorities and sees an expanded role for gender bonds. In August, IDB Invest and Panama’s Banistmo announced that they were issuing a $50 million gender bond to help women-led small and medium size companies.
