Latin America's buoyant economies are attracting a slew of foreign institutions, with banks from within Latin America itself and from further afield establishing substantial networks across the continent. Unsurprisingly, the largest foreign-owned subsidiary presence is in Brazil, but the large domestic market has quelled Brazilian banks' ambitions elsewhere and it is Colombian lenders that are forging ahead with cross-border acquisitions.

Latin America’s banks have not only been growing in their home markets, consolidating their competitive positions and improving their performance, but their presence across the whole of Latin America has also been increasing, as they seek to serve clients trading across the region and aim to reach a broader base of retail customers. While regional networks were traditionally the domain of large international banks, local lenders are becoming increasingly ambitious with their expansion strategies, which will undoubtedly lead to more competition in the Latin American markets.

The Banker sought to measure this trend of cross-border expansion into Latin America and has compared various figures and ratios related to banks’ foreign subsidiaries across the region – irrespective of where the bank is headquartered, be it North America, Europe, Asia or Latin America. So, for example, looking at Brazil, Santander and HSBC’s operations would be incorporated into the statistics but those of Brazilian groups Itaú Unibanco and Bradesco would not. Equally, in Argentina, Itaú's subsidiary would be included but Buenos Aires-based Banco Galicia would not.

Out of Colombia

Spanish banks have traditionally had a strong presence across Latin America and currently Spanish-owned subsidiaries in the region have aggregate assets of $494.5bn. Santander is by far the largest foreign bank present in the region, with total assets of $329.6bn in Latin America. It is followed by Citi, which has $171.4bn of assets, and BBVA with $165bn.

Of the top 10 banking groups by foreign subsidiary assets, only three are Latin American, two of which are based in Colombia and one in Brazil. Colombia's Banco de Bogotá and Bancolombia have $16.7bn and $11bn of foreign subsidiary assets in Latin America, respectively. This gives them the eighth and 10th largest foreign-owned subsidiary networks in Latin America, respectively.

The two banks have the highest return on assets (ROA) for foreign subsidiaries in the top 10 largest banking groups list. Banco de Bogotá's eight foreign operations have an average ROA of 3.06%, while Bancolombia’s average ROA for its two Latin American subsidiaries outside of its domestic market is 2.97%. Santander’s Latin American operations have an ROA of 2.27%, the fifth highest in the top 10 largest banking groups list.

Both of the Colombian banks’ foreign subsidiaries are in Central America. Banco de Bogotá's exposure to the region has dramatically increased following its acquisition of BAC Credomatic at the end of 2010, a credit card specialist with operations across Panama, El Salvador, Guatemala, Honduras, Nicaragua and Costa Rica.

Another slightly smaller Colombian lender, GNB Sudameris, has also expanded quite substantially outside its domestic market. In 2012, the bank bought HSBC’s operations in Peru, Uruguay and Paraguay, as well as in Colombia. The subsidiaries have $400m in assets and, while not a game changer for HSBC and its future weighting in the region, the acquisition does signal an increased appetite among Colombian lenders for foreign assets.

FOS take root in Latin America

Brazilian attraction

There is only one Brazilian bank in the top 10 largest cross-border groups list, Itaú Unibanco, which has foreign-owned subsidiaries in Argentina, Paraguay, Uruguay and Chile, with assets totalling $14.6bn. Brazil's second largest bank by foreign subsidiary assets is Banco do Brazil, which also has operations in Argentina, Chile and Paraguay, but its assets from these subsidiaries are considerably lower at just less than $5bn.

There are a large number of foreign banks with a presence in Brazil, however, and it is the largest market for foreign-owned subsidiaries, with a total of $389.8bn assets held by foreign groups in the country. Brazil is followed closely by the traditionally international banking market of Mexico, where foreign-owned subsidiaries account for $306.9bn of assets. Chile, Panama and Argentina follow with $123.7bn, $51.7bn and $43bn of foreign-owned assets, respectively.

The Colombian market, although smaller, also continues to attract interest from foreign institutions. Two significant acquisitions took place in 2012, bringing two new entrants to the country. Santander sold its Colombian operations to Chile’s CorpBanca, and locally owned Colpatria was bought by Canada's Scotiabank. As of the end of the 2011 financial year, the total assets of foreign subsidiaries in the country stood at $33.2bn. This makes it the seventh largest market for foreign-owned subsidiaries in Latin America, just behind Peru with $37.1bn.


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