Bank of America Corp’s Latin America hiring binge is paying off.
After adding 300 people in the region during the past two years, including one of Credit Suisse Group’s top merger advisers, Bank of America unseated regional powerhouse Banco Itau BBA for the No 1 ranking by investment-banking fee revenue last year, data from consulting firm Dealogic show.
The first-ever top ranking for Charlotte, North Carolina-based Bank of America came as demand for investment-banking services waned with falling commodity prices and a recession in Brazil. The regional economy contracted an estimated 0.9%, and industrywide investment-banking fees plunged 42% in Brazil to $436mn, the lowest in a decade, according to Dealogic. Latin America fees fell 40% to $1.08bn.
Bank of America saw the downturn as a time to invest, hiring 150 employees for the region in both 2014 and 2015 to bring its total there to about 1,000, according to the bank. One of the hires was Marcus Silberman, the former co-head of the emerging-markets M&A group at Credit Suisse who moved to Bank of America as co-head of Latin America M&A in September 2014. Martin Sanchez, who joined in 2005, helps lead the business with Silberman.
Sanchez and Silberman’s team advised Brazil’s Hypermarcas on the sale of its $1bn personal-care and beauty division to New York-based Coty, a transaction announced on November 2 and one of the firm’s biggest of the year from the region, according to data compiled by Bloomberg.
“We have been steadily investing in people because investment banking is largely about talent,” Alexandre Bettamio, the firm’s president for Latin America, said in a phone interview in New York. “This has resulted in us improving gradually across all areas of our businesses.”
Bank of America, which ranked fourth in 2014, took in about 8% of the industrywide fee total last year. That was enough to replace Sao Paulo-based Itau BBA, which held the No 1 spot in 2014 and took fourth last year.
Itau has been focusing on Mexico and other markets outside Brazil as its home market contracts.
“Mexico gained market share on the total fee pool for Latin America and our business there is just starting,” Roderick Greenlees, head of the investment-banking division for Itau BBA, the corporate and investment-banking arm of Latin America’s biggest bank by market value, said in an interview in Sao Paulo.
Mexico’s investment-banking fees fell 25% to $376mn last year, the worst since 2011. The country’s stake in Latin America revenue grew to 35% last year from 28% in 2014.
Itau hired JP Morgan Chase & Co’s Enrique Camacho in March to head its broker-dealer in Mexico and is planning to increase staffing there.
“We will hire in Mexico and already are transferring some people from Brazil,” said Christian Egan, Itau’s deputy head for corporate and investment banking.
Industrywide revenue from equity underwriting decreased 58% to $146mn in Latin America last year, while fees from merger advice totalled $377mn, a 32% drop, according to Dealogic. Debt underwriting tumbled 46% to $337mn.
“We had a very strong debt capital-markets business and we invested very heavily in M&A in Latin America over the last five years,” Mark Rosen, Bank of America’s head of investment banking for Latin America, said in a phone interview from New York.
“As there was little activity last year on the equities front, that business didn’t really move the needle for anyone.”
Grupo BTG Pactual, which took first place in revenue from M&A advising last year in Latin America, is predicting a strong year for that business this year.
“Credit is restricted, the international debt market is closed to many countries such as Brazil, and the cost of funding increased on local markets,” said Guilherme Paes, head of investment banking at BTG, which was the top investment bank in fee revenue in Brazil last year, according to Dealogic.
“So the way for companies to finance themselves is through asset sales,” Paes said. “M&A driven by cost-cutting strategies will also pick up, with foreign companies and private equity funds taking advantage of weaker Latin American currencies.”
Bank of America is also benefiting as some of its international competitors scale back in the region. In August, HSBC Holdings Plc sold its unprofitable Brazilian unit to Banco Bradesco. Two months later, Deutsche Bank said it was closing offices in Argentina, Mexico, Chile, Peru and Uruguay and moving Brazilian trading activities elsewhere. Barclays is shrinking its operations in Brazil as well.
BTG is reducing its total loan book and selling assets as a way to shore-up cash following the November arrest of then-chief executive officer and chairman Andre Esteves in connection with a nationwide corruption scandal.
Esteves, who was moved from jail to house arrest last month, has denied any wrongdoing through his lawyers. BTG said it isn’t part of the investigation.
Bank of America’s strategy of hiring during the downturn positions the company to benefit when the business rebounds. The slide in total fees is probably over, and investment-banking revenue in 2016 will probably remain stable, Rosen said.
LEAVE A COMMENT Your email address will not be published. Required fields are marked*
With airline fleets grounded, plane recyclers bet on parts boom
Qatar fiscal strength limits vulnerability from oil price shocks, says Moody’s
Good time for small businesses to go digital: says entrepreneur
Nomura CEO signals more job cuts in Europe to reverse losses
RBC eyes more private-equity dealings in 2019 to gain edge
Europe markets test investor nerves in roller coaster ride
Foxconn to begin assembling top-end Apple iPhones in India in 2019: Source
Japan factory output falls, sales slow as risks to economy rise
Nissan to make fewer cars in China as demand slows