Local banks top Brazil bond rankings as deals surge 37 percent

Fri Jan 4, 2013 5:59am EST

  * Itaú is first local bank to top ranks      * Bankers expect a surge in high-grade bond deals      * Imputed fees rose 37 pct in 2012; deals surge        By Guillermo Parra-Bernal      SAO PAULO, Jan 4 (Reuters) - 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  favorable conditions."      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,  said in an interview.      As a result, imputed fees for bond deals rose to an industry  total of $249.6 million last year compared with $201.4 million a  year earlier. Fees fell 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  acquisitions.            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  year.      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  ================================================================  

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