Competition from locals as HSBC looks to build LatAm equities

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.

For more information visit Euromoney

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