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Saturday, January 9, 2010
Today's News Headlines
* BancoEstado to invest US$78mn in 2010, focus on technology, processes - Chile
* Fogape sees continued strong demand for loan guarantees among private banks - Chile
* Corp Banca sells US$130mn in bonds - Chile
* Crédito y Casa clients' service uninterrupted, SHF to help restructure loans - Mexico
* Principal aims to double mutual fund business by 2012 - Chile
* Financial sector laws need to change, support transition to socialism - congressmen - Venezuela
* Government, Bandes to provide US$380mn in capital to CAF - Venezuela
* Remittances down 7.5% in January-October - Bolivia
* Sagicor calms fears over financial health, explains US$19.5mn private placement - Caribbean
* Redrado returns to central bank after court ruling - Argentina
* IN BRIEF Interbank names Carlos Rodríguez-Pastor Persivale interim CEO - Peru
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* BancoEstado to invest US$78mn in 2010, focus on technology, processes - Chile
Chile's BancoEstado will invest US$78mn in 2010, with about half of the figure going to updating technology and improving processes, the state bank's president José Luis Mardones told BNamericas.
"The only way to have a massive, low-cost bank that remains profitable is through economies of scale and technology," Mardones said.
"In order not to lose money you have to have cheaper production functions. And I'm not talking about continuous improvement, gradual cost reductions or increasing productivity by 3% a year; that is not enough. We need to make very radical changes here."
After gaining three percentage points in market share but sacrificing profitability last year, the goal in 2010 is to defend the current market share by improving customer service, he said. The bank also outlined a three-year plan that calls for improving its efficiency ratio to 54-50% from today's 58%, among other measures.
Thanks to an aggressive price reduction strategy, BancoEstado grew loans 22% in 2009 while total loans in the financial system shrank by around 5%. This allowed the bank to increase its market share to 16% from 13%, although pre-tax profits fell to around 110bn pesos (US$224mn) for an 11.2% ROE from 125bn pesos in 2008.
"We aim to grow in all segments and we will keep operating with convenient prices although not as cheap because we aim to improve our profit margins. We hope to improve profitability this year to 12-14%, and towards 2013, return to the levels we traditionally had," said Mardones.
The bank plans on growing loans this year by 12% in nominal terms, which would be in line with that of the financial system, he said.
BancoEstado operated through 344 branches and 1,681 ATMs as of December 31. The bank was capitalized to the tune of US$500mn by the finance ministry in 2009.
By Jorge Porter
Business News Americas
* Fogape sees continued strong demand for loan guarantees among private banks - Chile
Chile's loan guarantee fund Fogape sees continued strong demand for its guarantees this year among private sector banks, Fogape's deputy manager Alessandro Bozzo told BNamericas.
The state run fund had a record year in 2009 as demand for the guarantees soared due to the global crisis and the country's economic downturn.
Fogape closed last year with approximately 52,000 loan operations backed with its guarantees, compared to 24,079 in 2008, estimated Bozzo. The previous record had been set in 2004 when the fund guaranteed 34,714 loans.
Around 45,000 of the loan operations that Fogape backed last year were for the micro and small-sized enterprise segment, approximately 6,500 for medium-sized firms with large companies making up the remainder.
Private sector banks - especially the country's largest bank Santander Chile (NYSE: SAN) - showed very strong appetite for the guarantees in 2009. A Santander executive told BNamericas at Fogape's last tender of guarantees that it would have been impossible for the bank to grow its lending last year at the rate it did without the help of those guarantees.
As global financial markets and Chile's economy improve, the big attraction for private sector banks this year with the guarantees will be their mitigating effect on provisions, said Bozzo. Chile's banking regulator Sbif will impose stricter loan loss provisioning rules for the banking sector - something banks have protested against - and loans issued with Fogape guarantees require less provisions. "It's a huge incentive for the banks, noted the Fogape executive.
While still very early to predict the outcome for this year, Bozzo said he estimates that Fogape could finish 2010 guaranteeing some 60,000 loan operations.
State bank BancoEstado administers Fogape.
By Ulric Rindebro
Business News Americas
* Corp Banca sells US$130mn in bonds - Chile
Chile's Corp Banca (NYSE: BCA) has sold 64.8bn pesos (US$130mn) worth of senior bonds, the bank said in a statement sent to the local stock exchange.
The BCOR-M1207 bonds were denominated in the country's UF inflation-linked unit and were sold with a 3.65% coupon, or 104 basis points over the comparable central bank paper. Proceeds from the issue will go to finance the bank's lending operations, the bank's IR manager Sergio Benavente told BNamericas.
The bonds were rated AA- by Feller Rate and Fitch, have a 3.23-year duration and mature in 3.5 years. The placement was handled by the bank's brokerage unit Corp Capital.
Corp Banca - controlled by local holding Corp Group - is the fifth largest bank in Chile in terms of loans.
By Jorge Porter
Business News Americas
* Crédito y Casa clients' service uninterrupted, SHF to help restructure loans - Mexico
Clients of recently liquidated low-income mortgage lender Hipotecaria Crédito y Casa (CyC) in Mexico will continue to receive service in the same branches from the new administrator of their loans, ABC Capital.
Additionally, federal mortgage bank Sociedad Hipotecaria Federal (SHF) has funds available to help restructure clients' loans, SHF said in a press release.
CyC, whose non-performing loans grew to an unmanageable size in the last year, announced its liquidation at the end of December. SHF, in its role as creditor, received CyC's loan book and transferred it to local finance company ABC Capital, of Grupo Capital, which was willing to make the capital commitment necessary to absorb the first losses in the loan restructuring process.
CyC had a loan book of 14.9bn pesos (US$1.17bn) with a non-performing loan ratio of 33.4% as of end-June 2009, according statistics from banking and securities regulator CNBV.
RATINGS
As a result of the liquidation, ratings agencies S&P, Moody's and Fitch retired their ratings on CyC, the agencies said in separate statements.
S&P also put on creditwatch its ratings on six mortgage and construction loan securitizations backed by CyC loans.
The creditwatch is expected to be resolved within 90 days, S&P said.
To read S&P's statement, in Spanish, go to this link (http://www.bnamericas.com/reports/132429.pdf)
To read Moody's statement on issuer ratings in English, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1006359&id_sector=0)
To read Moody's statement on issuer ratings in Spanish, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1006359&id_sector=0)
To read Moody's statement on SQ ratings in English, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=I&documento=1005392&id_sector=0)
To read Moody's statement on SQ ratings in Spanish, go to this link (http://www.bnamericas.com/research_detalle.jsp?idioma=E&documento=1005392&id_sector=0)
To read Fitch's statement in Spanish, go to this link (http://www.bnamericas.com/reports/132430.pdf)
By Business News Americas staff reporters
* Principal aims to double mutual fund business by 2012 - Chile
US financial services company Principal Financial Group (NYSE: PFG) is looking to double its size in the Chilean mutual fund business by 2012 to reach US$1.2bn in assets under management, the group's VP for Latin America Luis Valdés told Santiago-based newspaper Diario Financiero.
"My perception is that the industry will have a very good 2010, growing at double digit rates. Not including the money market business, which is mainly treasury, the industry should not grow below 20-25%," he said.
Principal's local mutual fund unit commands a 1.80% market share as of end-2009, according to figures from mutual fund association AAFM. The group was also the leader among the 19 mutual fund administrators operating in the country's voluntary pension market with a 27.7% market share.
Valdés also said Principal will continue to grow organically and search for acquisitions to expand both in Chile and in Latin America in the business areas where it operates. It will also develop and offer balanced funds and asset management for institutional customers among its new business ventures.
As for the chances of entering Chile's mandatory pension business, the executive said the company keeps looking at that possibility but noted that entering under today's regulations would be unattractive.
By Business News Americas staff reporters
* Financial sector laws need to change, support transition to socialism - congressmen - Venezuela
Venezuela's legislative and executive branches are discussing changes to financial sector laws and regulations that permit the country's transition towards socialism, legislators were reported as saying on the national assembly's website.
The intention is to regulate the country's financial sector in an integrated fashion, treating the activities of banks, insurers, the capital markets and securities regulator CNV as a single system that supports socialism, according to finance committee president Ricardo Sanguino.
With respect to the banking sector, "it's necessary to establish rules that oblige banks to engage in financial intermediation, because that is what they were created for. Additionally, the profits from that financial intermediation shouldn't be speculative, because even within capitalism, [banks] were created as a mechanism to drive other areas of the economy," congressman Rafic Souki, a member of the national assembly's finance committee, was quoted as saying.
The banking law dates to 1994 and does not fit with Venezuela's current direction, he said.
By Business News Americas staff reporters
* Government, Bandes to provide US$380mn in capital to CAF - Venezuela
The Venezuelan government and state-owned development bank Bandes have signed two agreements to provide a total of US$380mn in capital to the Andean Development Corporation (CAF), to be paid between now and 2017, the multilateral said in a release.
The funds are part of the 7-year US$2.5bn paid-in capital increase for CAF approved by its board in August.
CAF predicts it will approve US$1bn in loans for Venezuelan projects in 2010, in the electric power, public transport, social infrastructure and other sectors, and expects to disburse US$1.1bn over the next couple of years for projects already underway in the country.
The multilateral has approved nearly US$3bn in lending for projects in Venezuela in the past five years.
Caracas-based CAF has 16 shareholder countries from Latin America and the Caribbean, plus Spain and Portugal.
By Business News Americas staff reporters
* Remittances down 7.5% in January-October - Bolivia
Remittances sent to Bolivia totaled US$849mn in January-October 2009, down 7.5% from the year-ago period, according to preliminary figures from the central bank (BCB).
The drop in the first nine months of the year was 8.2%.
In October alone, the country took in US$91.4mn in remittances, increasing 1.9% from the previous month and up 0.44% from October 2008.
The slower flow of remittances to Bolivia in the 10 months compares favorably to decreases in other Latin American countries, such as Mexico's 16.1% drop, Colombia's 17.4% fall and El Salvador's 10%, BCB said.
Remittance flows to Bolivia have more or less stabilized since March of 2009, after beginning a steep decline in September 2008.
The central bank estimates that remittances accounted for 4.4% of GDP in 2009.
By Business News Americas staff reporters
* Sagicor calms fears over financial health, explains US$19.5mn private placement - Caribbean
Barbados-based financial services company Sagicor came out to calm fears over its financial health due to a private placement of B$39mn (US$19.5mn) in December with the country's National Insurance Board that diluted the stock of its shareholders.
Sagicor president and CEO Dodridge Miller said in a statement that the group's capital position is strong and that the private placement was not due to pressing financial needs, even as it diluted existing shareholders' ownership by 4%.
He also said that Barbados' laws give the board the right to do such a placement of shares without asking existing shareholders for approval and without first offering them the new shares.
Sagicor's 2009 business plan had included raising capital through an equity issue in Barbados, Trinidad & Tobago and the UK to finance the group's expansion, particularly to take advantage of opportunities in the US and the UK.
However, after several months of working on the plan Sagicor and its advisors concluded that conditions were not good enough for an equity issue on the capital markets and opted instead for a private placement, said Miller.
Sagicor operates in 21 countries throughout the Caribbean, Latin America, the UK and the US.
By Business News Americas staff reporters
* Redrado returns to central bank after court ruling - Argentina
Argentina's central bank president Martín Redrado has returned to the monetary entity after federal judge María José Sarmiento ordered his reinstatement, local daily Clarín reported.
Redrado had been fired from his post on Thursday (Jan 7) through a presidential decree that will allow the government to tap US$6.57bn in reserves to pay debt due this year.
According to news channel Todo Noticias (TN), President Cristina Fernández de Kirchner picked central bank VP Miguel Angel Pesce to take over as interim president.
However, judge Sarmiento accepted a precautionary measure filed and has suspended the creation of the so-called Bicentennial fund until congress holds session, local press reported.
On Wednesday (Jan 6) Redrado was fired as a result of failing to support the government's economic policies but Redrado refused to cede power, saying he would remain at his post until congress decided to end his current term, which expires in September this year.
"I didn't resign and I won't resign," local daily La Nación quoted Redrado as saying as he left the central bank at around 3am on Friday.
By Business News Americas staff reporters
* IN BRIEF Interbank names Carlos Rodríguez-Pastor Persivale interim CEO - Peru
The board of Peru's Interbank on Friday designated Carlos Rodríguez-Pastor Persivale as interim CEO, local press reported.
The executive, previously chairman of Interbank, will take the helm during the search for a replacement for previous CEO Jorge Flores Espinoza, who died of a heart attack on Tuesday (Jan 5).
By Business News Americas staff reporters
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In-deph interview
* BES follows Bradesco's bet on Brazil
Ricardo Espírito Santo
CEO
BES Investimento do Brasil
Brazil
http://www.bnamericas.com/interviews/banking/Ricardo_Espirito_Santo_,BES_Investimento_do_Brasil,/169252614
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Main companies covered in today's news
* Banco de Chile S.A.
http://www.bnamericas.com/company-profile/en/Banco_de_Chile_S,A,-Banco_de_Chile/169252614
* Principal Financial Group Inc.
http://www.bnamericas.com/company-profile/en/Principal_Financial_Group_Inc,-Principal/169252614
* Banco Central do Brasil
http://www.bnamericas.com/company-profile/en/Banco_Central_do_Brasil-BCB/169252614
* Banco Internacional del Perú S.A.A.
http://www.bnamericas.com/company-profile/en/Banco_Internacional_del_Peru_S,A,A,-Interbank_Peru/169252614
* Corp Group Banking S.A.
http://www.bnamericas.com/company-profile/en/Corp_Group_Banking_S,A,-Corp_Group/169252614
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