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Thursday, January 14, 2010
Today's News Headlines
* Country not in default, Cabei will wait for new govt - CFO - Honduras
* Bank stocks most battered by central bank legal standoff - Argentina
* Fitch ups outlook on banks, insurers, sees tough 2010 - Honduras
* Penta sees commodities driving investment opportunities in Latin America - Chile, Regional
* BB shows 19% increase in agricultural lending disbursements July-December - Brazil
* Bond Roundup: BNDES, BB, Votorantim, BicBanco - Brazil
* CEF increases housing disbursements by 112% in 2009 - Brazil
* ACCION International gets US$5.8mn grant for micro savings program - Regional
* BRC rates Banco Popular AAA, BRC 1+ - Colombia
* International aid pours in following earthquake - Haiti
* S&P affirms Banorte at BBB-/A-3, outlook stable - Mexico
* Reason for optimism on corporate NPLs, less so for consumers - Serasa Experian - Brazil
* IN BRIEF BICSA to issue US$5mn in bonds Jan 15 - Panama
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Editor's Choice
* Country not in default, Cabei will wait for new govt - CFO - Honduras
Despite the official declaration earlier this week by the government of Honduras that it would cease payment on its debt with the Central American Bank for Economic Integration (Cabei), the country is not currently considered in default, Cabei CFO Hernán Danery Alvarado told BNamericas.
The final maturity on the debt, which totals US$407mn, is in 2020, and the country is actually only behind in its payments with the bank by US$4.7mn as of end-December, Alvarado said.
The loan contract stipulates a 180-day period to consider the payment in default, and the country made its last payment in early September, about four months ago.
Another US$31.2mn comes due in 2010, Alvarado said, adding that of the country's total debt with the bank, 62%, or US$252mn, is guaranteed by US treasury bonds.
POLITICAL SITUATION
Honduras stopped payments on the debt after member countries in Cabei, a multilateral lender based in capital Tegucigalpa and of which Honduras is a founding member, voted formally for a pause in lending to Honduras in late September. The decision was made as a result of the coup in the country on June 28.
Cabei stopped lending to Honduras immediately following the coup, as did other multilaterals, but did not make the official announcement until three months later. The country's finance minister Gabriela Núñez said earlier this week that Honduras considers Cabei's actions to be against its statutes and to be especially wrong considering Honduras' close relations with the institution, which is headquartered in the country.
"The most important thing here is that the conflict in Honduras is coming to a close, with the incoming president [Porfirio Lobo] due to take office on January 27," Alvarado said.
"Our expectation is that the new government will be more open to working with Cabei, which should allow us to resolve the situation and resume lending to Honduras," he said. "We expect the country to restart payments after the change."
The bank will not take any actions before that time, the CFO said.
He preferred not to comment on finance minister Núñez's statement that the Honduran congress this week would discuss taking up a lawsuit against Cabei, which the minister said "will be brought for all the damages to Honduras, not only for the amount of undisbursed and committed credit, but for the violation of Cabei's statutes."
Cabei is a financial development organization whose shareholders are governments, with 59% held by its so-called five founding member states: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.
By William Schatz
Business News Americas
* Bank stocks most battered by central bank legal standoff - Argentina
The crisis generated by the Argentine government's attempt to fire the president of the central bank has taken its toll on the stocks of local banks, which hold a high proportion of government bonds.
On Tuesday (Jan 12) the Merval stock index fell 2%, the most since November 26, 2009, to 2,270 points.
Since the crisis broke out last week, Banco Patagonia shares have lost 13.7%, Grupo Financiero Galicia (NasdaqSC: GGAL) 12.1%, Banco Hipotecario 7.5%, Banco Macro (NYSE: BMA) 4.9% and BBVA Banco Francés (NYSE: BFR) 0.9%.
However, banks gained the most in 2009 on the Buenos Aires stock market: Patagonia was up 210%, Hipotecario gained 177%, Macro 169%, Galicia 155% and Francés 143%.
"Banks are the ones that were most affected [by the central bank crisis], and fell accordingly," local brokerage Allaria Ledesma analyst Guido Bizzozero told BNamericas.
"Fourth quarter results are expected to be very good again, but if bond prices keep falling, that will have an impact. The most worrisome thing is that banks' liquidity could be an alternative to the exchange. Banks have a lot of liquidity these days," he said.
Local banks have high exposure to government bonds, which have been battered since the crisis broke. These instruments total 25.6% of Banco Macro's total assets, 24.7% of Patagonia's, 16.8% of Banco Francés' and 12.3% in the case of Grupo Financiero Galicia.
Bank stocks could keep getting hit if the central bank dispute goes on, but peso bonds had also experienced a rally in the last few months, and a technical correction was bound to happen sooner or later, Javier Luna, analyst at brokerage Rava Sociedad de Bolsa, told BNamericas.
Argentina's central bank president Martín Redrado was asked to resign from his post on January 6, and after he declined to do so he was fired the next day through a presidential decree that will allow the government to tap US$6.57bn in reserves to pay debt due this year.
Redrado was reportedly fired as a result of failing to support the government's economic policies but he 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.
Redrado returned to the monetary entity on Friday after federal judge María José Sarmiento ordered his reinstatement. Judge Sarmiento also accepted a precautionary measure filed and suspended the creation of the so-called Bicentennial fund to pay off the debt in question until congress holds session.
Economy minister Amado Boudou told reporters on Tuesday (Jan 12) that the dispute is harming the country's planned exchange of defaulted bonds.
Also on Tuesday, US district judge Thomas Griesa froze US$1.7mn in Argentine central bank funds held at the US Federal Reserve and sought by holders of defaulted debt bank. The embargo could reach US$15mn, Griesa said.
By Jorge Porter
Business News Americas
* Fitch ups outlook on banks, insurers, sees tough 2010 - Honduras
Fitch has changed its outlook on Honduran financial institutions and insurance companies to stable from negative, and raised some ratings, the agency said in a report.
Fitch raised the outlook, which was listed at negative solely based on potential effects of the volatile political situation following the country's coup in June, because of recent improvements in the political and business environment in the country, the ratings agency said.
"It's difficult to distinguish between the effects of the financial crisis and those of the political crisis," Fitch director for Central American financial institutions René Medrano told BNamericas. "Banks' performance has worsened, but it's hard to say what can be attributed to the political crisis."
"[In 2010] banks will see relatively high levels of non-performing loans - as high as those in 2009 - not very high profitability ratios, low loan growth and stable deposits," he said, "No worse than what we are seeing right now, but also no better."
As for insurance companies, "There was an effect in terms of lower written premiums, which dropped 4% through the first 10 months of 2009, due to the combination of the economic and political issues," Eduardo Recinos, Fitch Central America insurance director, told BNamericas.
However, insurers were able to free up reserves in order to make up for the drop in written premiums, and they actually saw higher net profits as a result, he said.
Given that the effect of reserves is a one-time effect, this year insurers will need to improve both claim and efficiency levels, particularly in auto and medical lines, and likely raise prices in order to maintain profitability, Recinos said.
By William Schatz
Business News Americas
* Penta sees commodities driving investment opportunities in Latin America - Chile, Regional
Chilean investment bank Banco Penta is recommending investing in Latin American countries with high exposure to commodities such as Brazil, Peru and Chile, the bank's investment director Andrés Chechilnitzky told reporters.
"The whole Latin American region is benefiting from higher commodity prices, which will boost employment and consumption in countries where Chilean companies are already positioned or are expanding," he said.
Latin American economies have weathered the global crisis relatively well, and even though they entered the crisis after the more industrialized economies they seem to be getting out of it at the same time as developed nations, Chechilnitzky said.
There are two explanations for this, he said: the financial woes were not created by Latin American countries this time, and the macroeconomic environment in the region was generally much better than during previous crises. However, there are some significant differences in the growth rates of the region's different economies, Chechilnitzky added.
STRONGER PESO
As for the Chilean currency, economist and Penta advisor Patricio Rojas said he did not rule out the central bank intervening in the exchange market if the peso hits 470-475 to the US dollar. The peso has strengthened to around 490 to the greenback from over 600 one year ago.
Rojas said that given the expected economic scenario, and as long as the central bank does not intervene, the peso will probably float at around 490-510 in the first part of the year. But as governments withdraw their expansive monetary and fiscal policies and global economic recovery solidifies, the greenback should strengthen against the world's main currencies, including the Chilean peso, he said.
Owned by local financial holding Empresas Penta, the investment banking unit began operating in 2004. Banco Penta had 131bn pesos (US$261mn) in assets as of November 30.
By Jorge Porter
Business News Americas
* BB shows 19% increase in agricultural lending disbursements July-December - Brazil
Brazil's federally controlled Banco do Brasil (BB) increased its disbursements of agricultural credit 19% in July-December 2009 over the same period in 2008, the bank said in a statement.
The total disbursements came to 21.8bn reais (US$12.5bn) in the period, which makes up the first half of the crop year.
In the full 2009-10 crop year, BB is planning on 20% growth over the 2008-09 crop year, agribusiness director José Carlos Vaz told BNamericas.
Businesses took 16.6bn reais in credit, up 18%, while family operations took 5.2bn reais, up 23%, the statement said.
Family farm credit is growing at a faster clip, due to mandatory crop insurance and federal government price guarantees, as well as the fact that agricultural businesses have had more consistent access to credit than family farms, Vaz said.
There were 113bn reais in rural agricultural loans in Brazil at end-November, rising 7.6% in the previous 12 months, according to the latest data from central bank BCB.
By James Newman
Business News Americas
* Bond Roundup: BNDES, BB, Votorantim, BicBanco - Brazil
Brazilian national development bank BNDES has concluded a US$1bn issue of bonds maturing in July 2020, the bank said in a statement.
The annual interest rate will be for 5.634% and marks the lowest interest rate that BNDES has ever had on its international bonds.
Barclays and HSBC (NYSE: HBC) coordinated the offer, while federally controlled Banco do Brasil (BB) was a distribution agent.
***
BB is also planning a US$1bn issue in separate tranches of five and 10 years, local brokerage Ativa said in a research note.
The coordinators are Deutsche Bank (NYSE: DB) and JPMorgan Chase (NYSE: JPM), along with BB itself and Banco Votorantim.
Ativa said in the research note that BB would likely not get credit for the funding in its capital adequacy BIS ratio, but that the bank will need to increase this ratio in order to keep up its large-scale lending expansion after 2010.
This will put pressure on the bank to do a primary offering over the next year, the note said.
***
Both Banco Votorantim and midsize bank BicBanco also look set to sell bonds, according to local and international press reports. Votorantim, in which BB holds just under 50%, will sell US$750mn in 10-year bonds, while BicBanco wants US$275mn in a three-year issue.
By Business News Americas staff reporters
* CEF increases housing disbursements by 112% in 2009 - Brazil
Brazilian federal savings bank Caixa Econômica Federal (CEF) upped its housing loan disbursements in 2009 by 112% over 2008, the bank said in a statement.
The bank made 45bn reais (US$25.8bn) in disbursements in the housing segment in 2009 compared to 22.1bn reais in 2008.
The strong growth in mortgage lending is a result of partnerships with local governments in Brazil and the private sector to increase the number of housing units in the country, Caixa CEO Maria Fernanda Ramos Coelho said in the statement.
CEF is expected to receive the remaining 4bn reais of a 6bn-real capital injection in 2010, after receiving the first 2bn reais in late October 2009. The bank dramatically increased its lending in the wake of the global financial crisis and wanted additional capital to strengthen its capital adequacy BIS ratio.
By Business News Americas staff reporters
* ACCION International gets US$5.8mn grant for micro savings program - Regional
Global microfinance nonprofit ACCION International has received a three-year grant of US$5.8mn from the Gates Foundation to work with microfinance institutions (MFIs) in Bolivia, Colombia and Ecuador to offer savings account products tailored to their clients.
ACCION will work through the grant with MFIs BancoSol in Bolivia, Finamerica in Colombia and Credi Fe in Ecuador to expand beyond their focus on microlending to offering savings products, the nonprofit said in a press release.
The project will include developing appropriate savings products and facilitating their integration into each MFI's offering, as well as further expanding the institutions' reach.
ACCION anticipates that the program will result in its three partners reaching more than 1mn savings clients in five years, and expects to develop a proven, replicable savings model for Latin America and expand the program to other institutions.
"Until now, savings accounts have been too costly and inconvenient for the poor to obtain, and too expensive for banks to provide to clients who deposit just a few dollars at a time," said Michael Schlein, president and CEO of ACCION International. "Meeting these needs sustainably, and ensuring these services reach the poorest, will require new models and approaches."
In the last 10 years alone, ACCION partners have disbursed more than 28.5mn loans totaling US$23.4bn.
By Business News Americas staff reporters
* BRC rates Banco Popular AAA, BRC 1+ - Colombia
Colombian ratings agency BRC has assigned AAA and BRC 1+ ratings to Colombia's sixth largest bank Banco Popular's long and short-term debt, respectively, the agency said in a report.
The ratings are based on the bank's consistent financial results, strengthened equity and a conservative loan disbursement policy, which has allowed Banco Popular to maintain outstanding asset quality, coverage and risk indices compared to its peers, BRC said.
The agency also took into consideration support provided by its parent company as well as its operating efficiency, adequate risk management and technological development, the report reads.
Banco Popular is a unit of Colombia's second biggest financial group Grupo Aval, which controls about one fourth of all loans in the country's financial system through a chain of banks.
To read the full BRC report, in Spanish, go to this link (http://www.bnamericas.com/reports/133193.pdf)
By Business News Americas staff reporters
* International aid pours in following earthquake - Haiti
A 7.0-magnitude earthquake that shook the Haitian capital city Port-au-Prince on January 12 has devastated the city and caused widespread damage to buildings, houses, roads and bridges.
It is still too soon to estimate the extent of the damage or the number of people affected, but reports fear the death toll might be in the thousands.
In response, countries and international entities are offering humanitarian aid and financial support. IDB has approved a US$200,000 grant for emergency assistance.
"We are monitoring these events very closely and stand ready to help Haiti address this catastrophe. In coordination with the Haitian government, we will redirect our uncommitted portfolio to provide additional reconstruction resources at this moment of dire need," IDB president Luis Alberto Moreno said in a statement.
"We are working with other donors to exchange information and coordinate response activities. The IDB and its staff express their solidarity with the people of Haiti."
The IDB resources will be used to provide food, potable water, medicines and temporary shelter to the victims.
At the same time, the World Bank, whose local offices were destroyed by the earthquake, is ready to mobilize a team to help assess damage and losses and plan recovery and reconstruction.
"The bank stands ready to help with financial assistance," World Bank president Robert Zoellick said in a release.
European countries such as the UK, Spain, Germany and France have pledged their support and assistance. Other countries including Mexico, Canada, the US, Venezuela, Panama and the Dominican Republic have also guaranteed humanitarian aid.
Haiti is the poorest country in the western hemisphere and has suffered a number of recent natural disasters, including four hurricanes and storms in 2008 that killed hundreds.
By Business News Americas staff reporters
* S&P affirms Banorte at BBB-/A-3, outlook stable - Mexico
S&P has affirmed its BBB-/A-3 counterparty credit and CD ratings on Mexican bank Banorte, with a stable outlook, the agency said in a release.
"The ratings on Banorte reflect its good business profile, supported by its good market position and successful strategy focused on maintaining sound asset quality," said S&P credit analyst Alfredo Enrique Calvo.
Competition in the Mexican banking industry and the challenging economic environment - reflected in lower customer payment capacity, pressured profitability levels and lower-than-peers adjusted capitalization levels - constrain the ratings.
Banorte was Mexico's third largest bank with 11.5% of the system's loans and 11.7% of deposits as of end-September.
For the full statement in English, go to this link (http://www.bnamericas.com/reports/133171.pdf)
For the statement in Spanish, go to this link (http://www.bnamericas.com/reports/133192.pdf)
By Business News Americas staff reporters
* Reason for optimism on corporate NPLs, less so for consumers - Serasa Experian - Brazil
Brazilian credit information firm Serasa Experian has released its November delinquency perspective indicator, which points to significant improvement in non-performing loan (NPL) ratios for corporates in coming months, but a possible worsening for consumers.
The indicator showed a 7.6% reduction in November compared to October - its seventh straight decline - and points to a likely solid decline in NPLs in the next 6-18 months, as a result of economic growth, positive cash flow trends and better access to credit, the firm said in a statement.
However, the same indicator for consumers showed an increase of 0.8% - the third consecutive monthly increase. Serasa Experian said this gives less clear evidence about where consumer NPLs are headed, but may be a result of slow wage growth.
The 90-day consumer NPL ratio stood at 8.1% at end-November, after starting to fall from its peak of 8.6% in May and June, according to central bank BCB. It was 7.8% in November 2008. The same measure for corporates was 3.9% in November, after jumping significantly from 1.7% in November 2008.
By Business News Americas staff reporters
* IN BRIEF BICSA to issue US$5mn in bonds Jan 15 - Panama
Panama-based Banco Internacional de Costa Rica (BICSA) on Friday (Jan 15) will offer US$5mn in bonds on the Panama stock exchange.
The up-to-US$10,000 bonds carry a 4.5% interest rate, to be paid monthly, and mature on January 15, 2011, the bank said in a filing with securities regulator CNV.
BICSA, which specializes in wholesale banking, is owned by Banco de Costa Rica (51%) and Banco Nacional de Costa Rica (49%), Costa Rica's two largest banks, both of which are government-owned.
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,/169883856
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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/169883856
* Banco Central do Brasil
http://www.bnamericas.com/company-profile/en/Banco_Central_do_Brasil-BCB/169883856
* Banco Popular S.A.
http://www.bnamericas.com/company-profile/en/Banco_Popular_S,A,-Banco_Popular/169883856
* J.P. Morgan Chase & Co.
http://www.bnamericas.com/company-profile/en/J,P,_Morgan_Chase_*_Co,-J,P,_Morgan_Chase/169883856
* Entel PCS Telecomunicaciones S.A.
http://www.bnamericas.com/company-profile/en/Entel_PCS_Telecomunicaciones_S,A,-Entel_PCS/169883856
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