SAO PAULO: Brazilian investment banks overtook foreign rivals in managing global debt offerings by the nation's government and companies last year, capturing the lion's share of a 67 percent surge in fees, Thomson Reuters data showed on Friday.
A 37 percent increase in Brazil global debt offerings was mostly the by-product of record-low interest rates worldwide that allowed for a balance between higher returns and fundraising alternatives, bankers said.
They expect volumes to keep growing this year, especially in segments where risk and returns are higher, such as so-called junk debt.
According to Thomson Reuters' annual deal-making report, the federal and sub-national governments and companies sold a total $50.93 billion of debt last year, up from $37.29 billion in 2011. The largest 10 bond underwriters handled eight in every 10 issues last year, slightly more than in 2011, the report showed.
In 2012, Itaú Unibanco Holding SA overtook HSBC Holdings Plc and Banco Santander SA to become the No. 1 manager of global debt sales by Brazil's government and companies - the highest ranking for a local firm since Thomson Reuters began tracking the data in 2010. Itaú, which oversaw about $6.02 billion worth of bond sales in 2012, ranked third the prior year.
"Issuers in Brazil were offering to pay attractive interest rates and I don't see why this would change," Jean-Marc Etlin, managing director for investment banking at Itaú BBA, Itaú's wholesale banking unit. "As investors seek attractive risk and returns, more issuers may be able to sell debt overseas under favorable conditions."
Etlin expects 2013 to be an active year where "any reasonable products offered to the market should likely draw robust demand." Itaú's pipeline of potential deals this year, which Etlin said "looks better" than last year, will likely be bulked up by a handful of investment grade-type issuers such as infrastructure companies trying their luck in the bond market.
Banco do Brasil SA's investment banking unit ranked second after underwriting $5.59 billion worth of bond deals last year. The 2011 league table leader, Santander, ranked third in 2012, with $5.15 billion, and HSBC's bond unit headed by veteran banker Alexei Remizov fell to fourth place from second, according to the Thomson Reuters report.
Bond activity in Brazil outpaced global debt capital markets by a large margin. According to the Thomson Reuters report, bond sales across the globe rose 10 percent to $5.6 trillion last year. Furthermore, 2012 was the strongest year on record for sales of so-called high-yield bonds debt rated below investment grade as well as the least risky securities.
"There is demand for yield and Brazilian companies offer good returns because they remain well capitalized and investors are willing to take a little more risk," Roberto Barbutti, co-head of investment banking at Bank of America Merrill Lynch, said.
As a result, imputed fees for bond deals rose to an industry total of $249.6 million last year, after falling 26 percent in 2011, according to the report.
Center>Copyright Reuters, 2013
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