July 13 (Bloomberg) — Itau Unibanco Holding SA overtook Citigroup Inc. and Goldman Sachs Group Inc. in Brazilian bond underwriting, leading a push by local banks to grab market share from international banks hurt by the global financial crisis.
Itau, the country’s largest bank by market value, jumped four spots this year to become the fourth-biggest manager of overseas sales by the Brazilian government and companies, the highest ranking for a local underwriter since Bloomberg began tracking the data in 1999. Itau, based in Sao Paulo, has co- managed offerings worth $4.8 billion this year, trailing only HSBC Holdings Plc, Banco Santander SA and JPMorgan Chase & Co.
Four Brazilian banks are among the top 10 underwriters, the most since 1999, allowing them to benefit from a two-fold rise in overseas issuance this year to $16.9 billion, according to data compiled by Bloomberg. Brazilian banks held up better during the financial crisis than their foreign counterparts, with none of them appearing in a list compiled by Bloomberg of the global firms posting the biggest losses.
“Brazilian banks took over when the others were concentrating on their international problems,” Ceres Lisboa, a bank analyst at Moody’s Investors Service in Sao Paulo, said in a telephone interview. They “filled the void,” she said.
Banco do Brasil SA, the state-controlled lender based in Brasilia, rose to seventh from 11th in 2009, according to data compiled by Bloomberg. Osasco-based Banco Bradesco SA, the country’s second-biggest bank by market value, climbed to eighth from 13th and Banco Votorantim SA, the financial services unit of Votorantim Group, is 10th after managing no transactions in 2009.
Brazilian banks’ presence in underwriting “gained speed during and after the crisis because some of the foreign banks had reduced substantially their capability,” Alberto Kiraly, head of investment banking of Banco Votorantim in Sao Paulo, said in a telephone interview. Brazilian “banks have made important progress,” he said.
Central bank President Henrique Meirelles said in a November interview in London that Latin America’s biggest economy has been protected from a credit-driven asset bubble by “strong prudential regulations.”
Citigroup, the New York-based bank that reported more than $100 billion of credit losses and writedowns tied to the U.S. subprime mortgage crisis, slid to 11th this year in Brazilian bond underwriting from fourth in 2009, according to data compiled by Bloomberg.
“Brazil is a priority market for Citigroup,” Alex Samuelson, a spokesman with the bank in New York, said in an e- mailed response to questions.
New York-based Goldman Sachs, which reported losses and writedowns of $9.1 billion, dropped to ninth from sixth. Credit Suisse, the Zurich-based bank that posted losses and writedowns of $20.4 billion, fell to 22nd from 10th in 2009 and third in 2007.
A Credit Suisse spokeswoman in New York declined to comment. Michael Duvally, a Goldman Sachs spokesman in New York, didn’t return e-mails seeking comment.
Brazilian bond sales are rebounding this month after the European debt crisis pushed emerging-market borrowing costs higher and snapped a record start in offerings. Sao Paulo-based Gol Linhas Aereas Inteligentes SA, Brazil’s largest airline, hired Itau, Citigroup and Bank of America Corp. to manage a sale of 10-year notes as soon as this week, according to a person familiar with the transaction who declined to be identified because he’s not authorized to speak publicly.
Brazilian companies sold $812 million of international debt this month after issuing just one bond, worth $200 million, in May and June. The $15 billion that companies sold from January to April was the most on record for the first four months of a year since Bloomberg began tracking the data in 1999.
The extra yield investors demand to hold Brazilian corporate dollar bonds instead of U.S. Treasuries fell one basis point yesterday to 326, according to JPMorgan’s CEMBI index. The yield gap has declined 28 basis points since reaching a 10-month high of 354 on May 25.
The so-called spread on Brazilian government bonds over Treasuries narrowed six basis points to 223 yesterday.
The cost of credit-default swaps to protect against a default on Brazilian debt for five years fell two basis points to 126 yesterday, according to data compiled by CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.
The real fell 0.3 percent to 1.7607 per dollar yesterday.
International banks are seeking to win back market share in Brazil after pulling through the financial crisis, boosting competition for underwriting business, said Lisboa at Moody’s.
Banks have charged on average this year fees equal to 0.25 percent of the amount of debt sold to arrange Brazilian debt offerings, down from 0.36 percent in 2009 and the lowest in at least 11 years, Bloomberg data show. In the U.S. bond market, banks have charged 0.33 percent on average this year.
“Competition will be name of the game,” Lisboa said. “Brazilian investment banks have positioned themselves in that market and now they’re very strong.”
UBS AG, Switzerland’s biggest bank, said in April it agreed to buy the Brazilian brokerage Link Investimentos for about $112 million, a year after selling its Brazilian unit, UBS Pactual SA, for $2.5 billion to raise capital following the crisis. UBS ranks 20th in Brazilian underwriting this year, down from 18th in 2009 and first in 2007.
The Link purchase “will provide a platform to further expand our business and product offering in the country,” Doug Morris, a UBS spokesman in New York, said in an e-mailed response to questions. “UBS has remained very active with Brazilian clients over the past several months.”
Alexandre Aoude, global head of fixed income at Itau in Sao Paulo, said it won’t be as easy for foreign banks to re-enter the market as it was years ago. Itau’s nine transactions this year include a $500 million offering by Marfrig Alimentos SA, the world’s fourth-largest meatpacker, and a $750 million sale by BRF Brasil Foods SA, the country’s biggest food producer.
“Before it was easy for them to leave and come back,” Aoude said in a May 19 interview in New York. “They didn’t have any type of local competition. Nowadays, every time that they do that, we get more market share.”
–With assistance from Gabrielle Coppola in New York, Alexander Cuadros and Helder Marinho in Rio de Janeiro and Lucia Kassai in Sao Paulo. Editors: Lester Pimentel, David Papadopoulos
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