Itaú BBA International has outlined a new strategy that leverages both its global presence and its Latin American expertise. Its head of corporate banking for North America, Europe and Asia, Renato Lulia-Jacob, explains why in an increasingly globalised and competitive market, the bank has chosen to position itself in this way.
Itaú BBA’s growth and ambition is as impressive as that of the Brazilian economy. Part of Brazil’s largest private sector banking group, Itaú Unibanco, Itaú BBA has a clear strategy for both Latin America and the rest of the world. As the group’s recent advertising slogan – 'I am a global Latin American' – suggests, the investment bank is aiming to extend its reach to companies around the globe.
This impetuousness is, of course, recent. The first bank Itaú BBA set up in Europe was in Portugal back in 1988. Acting as an independent subsidiary, it was hoped that the Portuguese bank would benefit from a strong affiliation with the 'old continent' and attain a higher investment grade for Itaú BBA. The bank was meant to be a de facto European bank and support trade between Portugal, Europe and Brazil.
Global agenda
More than two decades later, Itaú BBA's reach has grown considerably. Under the name Itaú BBA International, grouping Itaú BBA’s non-Latin American business, all front-office operations have been moved to new London offices, where it is projected that staff numbers will increase from the current 70 to 100 by the end of 2012. Back-office and support services remain in Lisbon, and operations have been opened in Frankfurt, Madrid and Paris.
The international corporate banking business relies on the New York trading platforms, and has a presence in Tokyo, Hong Kong and Shanghai. Far from wanting to be dissociated from Brazil, however, Itaú BBA International's new strategy aims at capturing multinationals interested in Brazil and Latin America.
“Now our strategy is absolutely linked with our Latin American business,” says Renato Lulia-Jacob, head of corporate banking for North America, Europe and Asia, based at the London office of Itaú BBA International. “That is our slogan; we are a global Latin American bank. So even our operations in developed markets have a Latin flavour.”
With the new strategy came a new organisation. The international corporate banking division is not only responsible for typical trade finance deals, but is effectively the link for the whole product offering of Itaú BBA.
High standing
According to data provider Dealogic, in 2011 Itaú BBA ranked second to BTG Pactual in the merger and acquisition (M&A) league table of financial advisors where bidder or target were Brazilians; it ranked fifth in the M&A rankings for advising Latin American clients, a table topped by Goldman Sachs; and it topped the table of bookrunners in both the Brazilian debt capital markets and the equity capital markets tables.
We have local knowledge... so [when] we talk about the Chilean peso or the Argentine peso, we don’t read it in the news, we are there
Mr Lulia-Jacob points to the fact that all the equity issuances originated from Brazilian operations of global groups carried out by Itaú BBA originated from the relationship that the international corporate banking division holds with those clients, as capital markets decisions of multinationals are very often taken at headquarter level.
Deals included Telecom Italia Mobile’s $920m equity offering on BM&F Bovespa, Brazil’s stock exchange; the $518m issuance by Portuguese energy group EDP’s Brazilian subsidiary; Portuguese-owned Sonae Sierra Brasil’s $277m placing; German automotive conglomerate Mahle’s $195m placing in the Brazilian market; and the $273m initial public offering of the Brazilian operations of Spain’s Autometal.
As for 2012, Mr Lulia-Jacob says: “We have a very interesting pipeline of business already. The feeling that we have is that there is a lot of energy in businesses just waiting to kick in if [global] market conditions improve slightly. That’s the part of the game that we cannot predict; [but] in Brazil we have all the conditions to have a very interesting year.
“Our goal [in Europe] or the US, or even Asia, is to compete with local banks; we are very focused, we work with about 400 multinational clients and all those clients have either invested in Latin America or are moving into Latin America. Our job here is to do local transactions for those clients but also to help them with their Latin American subsidiaries. We will open doors for them in Latin America. We have the whole [of the Itaú BBA] group for them.”
Coordination is key
The Itaú BBA group is becoming increasingly wide-reaching. Itaú BBA now has operations in Chile, Argentina (an operation set up by Mr Lulia-Jacob), a representative office in Peru and it is scheduled to open a bank in Colombia in 2012. In January 2012, the investment bank’s CEO, Candido Bracher, announced plans to enter the Mexican market.
Competition to win mandates is tough, of course, but the bank is in a much stronger position now, says Mr Lulia-Jacobs, as corporates recognise the brand and approach the bank directly. “In the old days you had to hand the client down, at least outside of Brazil,” says Mr Lulia-Jacob. “As we become more visible, clients come to us.”
As the international division was growing, much attention was paid to making sure that all divisions, within and outside of Latin America, were geared towards winning mandates for the bank, with no internal competition between product groups. “What works pretty well in our bank [is that] we coordinate the local coverage team in Latin America, the international coverage team in Europe or elsewhere, and the product or investment bank people,” says Mr Lulia-Jacob. “Those three pieces are very well coordinated and that makes our pitch very strong. There is no internal competition for business. This seems obvious but it is not the same for some of our competitors.”
I want to become the bank of choice for Asian companies moving into Latin America
Currency hedging is another business that is going from strength to strength for Itaú BBA International. With business in this sector having grown by about 150% in 2011 according to the bank, the expectation is that the division will fare well in 2012 too. The bank leverages on its market maker position in the main Latin American currencies, on its own highly sophisticated platform.
Valued presence
Coordination is key to Itaú BBA International's currency hedging too, with clients offered the concerted trading efforts of both the London and New York trading desks. Clients also benefit from having operations and people on the ground, says Mr Lulia-Jacob. “We have the local knowledge; we have people on the ground, talking to the clients, seeing the flows, talking to other banks. So [when] we talk about the Chilean peso or the Argentine peso, we don’t read it in the news, we are there.” Local presence is something, of course, that many other international investment banks have.
Beyond the longer standing presence in Europe and North America, corporate clients’ investments from Asia into Latin America are something that Itaú BBA is keen to tap. Asia has the potential to be highly lucrative but is also the most challenging of the bank’s international markets. China in particular is of great relevance to Brazilian banks, with greenfield investment flows totalling $4.48bn in 2011, according to fDi Markets.
Typically, Brazilian banks would get in touch with a Chinese investor once the company was established in Brazil, maybe to manage its payroll or help with general cash management needs. “That is probably how it has been until now and that is what I want to change,” says Mr Lulia-Jacob. “I want to become the bank of choice for Asian companies moving into Latin America.”
China is acknowledged to be a tough market to get a foothold in, with banks having to establish a presence and spend a considerable time in the country before being considered seriously by local clients. Mr Lulia-Jacob says that Itaú BBA International is still learning how to work in that market, but remains both optimistic and ambitious. Asked when he expects Itaú BBA International to become 'the bank of choice' for Chinese companies looking to move to Brazil, he says: “That should happen in the next one or two years.”
