The announcement that Itaú Unibanco is to buy a controlling interest in Chile’s Corpbanca confirmed the regional expansion of the big Brazilian banks and demonstrates the tough local competition that HSBC faces as it invests in its Latin American equities business.
At the end of January, Itaú said that it would buy 33.58% of Corpbanca stock with a mix of cash and stock. This makes Itaú the fourth-largest bank in Chile, up from seventh before the deal, and adds substantial assets in Colombia following Corpbanca’s acquisition of Helm bank and Santander Colombia.
The deal adds brokerage capabilities for Itaú BBA – the Brazilian bank’s investment unit – in Chile and Colombia, but the main boost to market share is for Itaú’s retail and corporate businesses.
However, Itaú BBA has been very successful in growing its market share and revenues by leveraging its big corporate balance sheet in Brazil and this acquisition should provide it with a stronger base from which to replicate the strategy outside its home market.
Fantastic move
A competing senior ECM banker with responsibilities for Latin America ex-Brazil believes Itaú Unibanco’s acquisition will be a positive for its investment banking unit. "It’s a fantastic move for them – it gives them Chile on the retail and brokerage side," he says. "In Colombia they have bought Santander and Helm bank assets and [the latter] was a pretty nice high-net-worth bank with decent brokerage operations – and Santander had everything. It’s going to make them tough competitors."
Itaú BBA hired Facundo Vázquez as head of ECM in July 2013, from Bank of America Merrill Lynch. Vázquez is based in New York and is tasked with building mandates in the region – including in Mexico.
Itaú BBA is not waiting on an acquisition of a bank in Mexico to build its business and hired an entire research team, headed by Joaquin Ley, from Santander in 2012, on which to base Mexican equities growth. Itaú BBA is also looking for a new head of investment banking to work alongside its CEO of Mexico, Alberto Mulas, and is moving to new offices in Santa Fé.
Reassessment
The growing strength of local competition has been forcing the international banks in the region to reassess their investment banking strategy – in particular in ECM and Brazil where the locals are strongest.
Barclays and Deutsche Bank have reduced headcount in their equities businesses in recent times as strong competition coupled with a dramatic reduction in primary and secondary issuance makes the maintenance of teams of equity bankers expensive. It is in this environment that HSBC has been building its equities team.
In the past four years the bank has hired more than 100 people in the Americas across all equity product areas.
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| Ben Laidler, head of research for the Americas, HSBC |
Key hires include Ben Laidler, who joined as head of research for the Americas in 2012, reporting to Stuart Parkinson, CEO of global research at HSBC. Other key hires include a new head of Brazil equity capital markets (Matias Santa Cruz joined in 2012 from UBS) and a head of equities for Mexico (François Jaubert joined in 2013 and had previously worked at Deutsche Bank).
Laidler has added seven senior analysts and has been rebalancing the business towards having analysts within the local offices in the region to better counter the growing strength of the locals’ teams.
HSBC now has research teams in Argentina, Brazil and Mexico – as well as the US – and covers more than 150 stocks. According to Laidler, the dip in the Latin American equities markets has been an advantage to the bank’s growth strategy.
"It’s a great time to be building a business," says Laidler. "Three years ago it would have been nearly impossible to do what we have achieved in Brazil given the demand for talent, but if you take a counter-cyclical view to hiring, this has just been a fantastic time to build up the business and we have picked up some incredibly talented people."
Top shop
The investment in HSBC’s Latin American equities business mirrors its strategy in Asia and Europe. The bank identified equities as a weakness but believes it can build a top-five equities shop within a few years.
"We weren’t anywhere near the scale that we should be for the size of this bank, and there has been a systematic approach to building out the equity business," says O’Leary. "We feel that in the past 18 months that scale has been added for Latin America. Equities is a fairly low-RWA-type business and the returns are still very decent, so it becomes much more attractive to the bank as a whole to have a buoyant equity business. What LatAm has received recently, in terms of investment, just brings the region up to par with Asia and Europe. The market overall is under a bit of stress, but all of our gains are really coming from taking market share rather than from overall market growth. Last year was about hiring, getting the team structured, and this year it’s all about taking market share."
