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Monday, January 18, 2010
Today's News Headlines
* Steep rise in mutual funds not as impressive as it appears - Peru
* M-banking penetration still low despite increased offer - Regional
* Effect of currency devaluation on banking system still unclear, analyst says - Venezuela
* Cabei launches credit program for non-bank lenders - Central America
* Industry to experience material, maybe dramatic changes in 2010 - Sterne Agee - Puerto Rico
* IDB concludes public consultation process for capital increase - Regional
* Mutual funds association forecasts 25% growth for 2010 - Chile
* Value Grupo Financiero merges 2 units - Mexico
* BCI December earnings down 6.4% on November - Chile
* Itaú Unibanco to expand brokerage in the US - Brazil
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* Steep rise in mutual funds not as impressive as it appears - Peru
The big rise in mutual fund assets under management in Peru last year amounts to little more than a recovery from the large drop in 2008, according to a consultant in the industry.
Mutual funds reached US$4.86bn at the end of 2009, up 72.5%, securities regulator Conasev said in a report.
"Mutual funds' performance in the year, though at first glance impressive, was really nothing more than a rapid recovery from the significant drop seen in 2008," consultancy FundPro director of research Guillermo Mazzoni told BNamericas.
The end-2009 figure was up 12.1% from assets under management as of the end of 2007. In local currency terms, mutual funds were up 58.7% in 2009, but up just 8.1% from end-2007, Mazzoni said.
Fixed income and short-term funds drove the recovery, thanks to the drop in interest rates in the local financial market, while mixed and variable income funds grew at a slower pace, he said.
Public sector bonds made up 15.5% of the industry's portfolios as of end-2009, up from 4.7% a year earlier, while exposure to private sector bonds dropped to 22.3% from 37.2% of the total. Savings and time deposits increased to 49.8% from 46.6% in the same comparison.
In terms of currency, 36.6% of mutual funds were denominated in soles, slightly higher than a year before.
"As for 2010, the market will face a number of significant challenges, but it should still grow," Mazzoni said.
According to the analyst, these challenges will include the possibility of higher interest rates affecting the funds that drove growth in 2009, while the industry must regain investor confidence in stock-based funds, which experienced significant volatility starting in 2H08.
The number of mutual fund clients in the country stood at 263,031 as of end-2009, an increase of 31.1% in the year.
By William Schatz
Business News Americas
* M-banking penetration still low despite increased offer - Regional
Penetration of mobile-banking services in Latin America remains low despite the increasing number of banks and financial institutions offering the service in the region, international consultancy Frost & Sullivan analyst Venessa Aznar told BNamericas.
The analyst said that during 2009, the number of banks offering m-banking services surged over 30% compared to the previous year.
Brazil and Argentina currently lead m-banking in the Latin American region in terms of m-banking transactions, Aznar said without providing hard figures.
The analyst added that the development of new applications - such as one developed for the iPhone - could boost adoption of m-banking across the region this year, for which the consultancy has "positive expectations."
Aznar called on banks to continue developing advanced applications for m-banking in order to make the service more massive. "Institutions should promote the use of m-banking services. If users are informed about the possibilities and advantages of the service, more people will use the service," she said.
According to a previous report by Frost, SMS continues to be the main channel for m-banking in the region, mainly because this service is less expensive for customers and does not require a sophisticated device.
With the evolution of m-banking services, people will also make more sophisticated operations such as deposits and transfers and not only basic operations such as consulting account balances, she said. "People also need to know that m-banking services are secure."
Aznar added that the increasing penetration of advanced mobile devices such as smartphones is contributing to the development of the m-banking segment.
By Juan Pedro Tomás
Business News Americas
* Effect of currency devaluation on banking system still unclear, analyst says - Venezuela
The effect on the banking system of Venezuelan monetary authorities' devaluation of the bolívar is still unclear, Fitch Venezuela director Pedro El Khaouli told BNamericas.
The bolívar, whose rate is set by government decree, was devalued on January 8 from its previous 2.15 per US dollar to 2.60 for "priority" imports and to 4.30 for items dubbed "non-essential."
Under current law, the country's banks have a limit of 30% of equity in foreign currency, but the government has not yet specified which rate will be applied to banks' foreign-denominated securities, El Khaouli said.
The effect on banks' results will be relatively significant or very significant, depending on which rate is applied, he said.
The devaluation, however, should not impact banks' day-to-day operations, according to the analyst.
By William Schatz
Business News Americas
* Cabei launches credit program for non-bank lenders - Central America
The Central American Bank for Economic Integration (Cabei) has launched a "special eligibility program" to provide financing to microfinance-oriented financial institutions previously considered ineligible.
The program aims to provide funds to entities such as non-bank financial institutions and cooperatives that are not yet sustainable, Cabei said in a press release.
Cabei will lend a total US$10mn through the program, for a maximum of US$500,000 to each institution, Sergio Avilés, coordinator for "financing for the majority," of which the program is a part, told BNamericas.
Institutions must be socially focused, provide at least 50% of services in rural areas and 50% to women, average no more than US$1,500 per loan and count with at least three years of operations.
The development bank has identified 44 institutions in the region that meet criteria as possible beneficiaries of the program.
Cabei is a financial development organization whose shareholders are governments, with 59% held by its five founding member states: Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua.
By William Schatz
Business News Americas
* Industry to experience material, maybe dramatic changes in 2010 - Sterne Agee - Puerto Rico
It is becoming abundantly clear that the Puerto Rican banking industry will experience material, if not dramatic changes in 2010, with the potential for select institutions to significantly improve their market share and profitability, US brokerage Sterne Agee said in a report.
The overall weakness in the banking sector has opened the door for potential foreign investors to make a material investment in Puerto Rico, but politically there will be a push for local institutions to step up and take the reins of the struggling institutions which would likely result in a few deals, the report reads.
The main catalyst behind the much-awaited consolidation process will be the cease and desist orders put in place by regulators, as three of the seven local banks in Puerto Rico currently face these orders, analyst and author of the report, Adam Barkstrom, told BNamericas.
"I think Popular [Nasdaq: BPOP], Oriental Financial Group [NYSE: OFG] and Santander [NYSE: STD] are potential participants," he said.
Popular is the logical consolidator on the island given its number one deposit market share (27%) and improved capital base following its numerous capital initiatives, Barkstrom wrote.
Oriental is also in a solid position from capital and profitability perspectives to absorb a sizable amount of assets in an effort to transform its balance sheet to become more bank-like.
The company has stated its desire for loans to increase from about 20% of assets to 50% of assets in the next five years.
"We believe a meaningful asset purchase, if not a whole bank acquisition, is well within the realm of possibility," Barkstrom wrote.
Although First BanCorp (NYSE: FBP) holds the second biggest deposit market share, depressed capital levels will likely limit its ability to act at this time, the report reads. Canada's Scotiabank (NYSE: BNS) holds 10% of First BanCorp.
By Jorge Porter
Business News Americas
* IDB concludes public consultation process for capital increase - Regional
The Inter-American Development Bank (IDB) has completed what it described as a far-reaching public consultation related to its proposed capital increase, a process that began on September 8 last year and ended January 9.
Last March the board of governors - IDB's top policymaking body, where all member countries are represented - called for an assessment of the need to add resources to the bank's ordinary capital and the fund for special operations, its source for concessional lending for the region's poorest countries. The capital increase is expected to come close to US$175bn.
About 500 civil society organizations in the Americas and Europe participated in the consultation either through meetings with IDB management or by submitting their recommendations through the bank's public consultation page.
IDB said that during the period, management met with organizations in the US, Europe and Latin America and the Caribbean, and conducted face-to-face meetings in seven countries.
Civil society organizations provided inputs about the bank's future challenges, strategic priorities and how IDB operates.
IDB said that suggestions ranged from increased support for the private sector to greater emphasis on urban development, community participation in projects and an expansion of poverty alleviation programs, and that during the meetings, participants unanimously supported the public consultation process.
Vincent McElhinny, project manager at Building Informed Civic Engagement for Conservation in the Andes-Amazon (BICECA) told BNamericas that IDB is the only multilateral development bank to attempt a consultation on its global capital increase.
"They deserve credit. We've also pointed out a number of crucial flaws in the process. The main one is the lack of adequate documentation to know whether any input we provided will actually be considered in the final GCI proposal. Still, the consultation process is an important commitment by the IDB," McElhinny said.
A final report on the results of the consultation process will be provided to the IDB governors. Governors are expected to discuss a proposal for the ninth capital increase of the bank during IDB's annual meeting in Cancún, Mexico at the end of March.
By Jorge Porter
Business News Americas
* Mutual funds association forecasts 25% growth for 2010 - Chile
Chile's mutual fund industry is poised to see assets under management grow 25% and reach at least 1.4mn customers by year-end, local daily Diario Financiero quoted mutual fund association AAFM general manager Mónica Cavallini as saying.
The industry's assets under management rose to 17.6tn pesos (US$35.2bn) as of end-December, up 51.7% compared to end-2008, led by Latin American equity funds.
The total number of mutual funds customers was up 22.4% last year to 1,339,691.
According to Cavallini, one of the industry's main challenges is to keep developing products tailored to customers' different risk profiles.
Mutual funds bought local stocks to the tune of US$339mn last year, reaching 5.8% of total funds under management, local brokerage Banchile said in a research note.
The largest purchases were of electric generator Endesa at US$19.3mn, retail-focused investment holding Cencosud at US$18.5mn and wood pulp company CMPC at US$11.0mn.
On the flipside, in December alone mutual funds decreased their exposure to local fixed income by a further 100 basis points while increasing their allocations to foreign instruments by 60 basis points, Banchile said.
By Business News Americas staff reporters
* Value Grupo Financiero merges 2 units - Mexico
Financial leasing company Value Arrendadora will merge with factoring company Value Factoraje, both part of Mexico's Value Grupo Financiero.
The move was approved in an extraordinary shareholders meeting Thursday (Jan 14), the company said in a securities filing on Friday.
As a result of the merger, the paid-in capital of Value Arrendadora will increase by 68.4mn pesos (US$5.39mn) to some 122mn pesos, per the companies' value as of end-December, and Value Factoraje will no longer exist.
The operation will strengthen Value Arrendadora's financial structure and unify and simplify the companies' administration, the filing reads.
Value Grupo Financiero also counts with brokerage house Value Casa de Bolsa.
By Business News Americas staff reporters
* BCI December earnings down 6.4% on November - Chile
Chile's BCI - the system's fourth largest bank - posted a 14.1bn-peso (US$28.6mn) profit in December, down 6.4% on November as gross profit was down 1.2% and support expenses rose 10%, according to preliminary figures.
While the bank does not break down net interest margin figures, local brokerage Banchile said in a research note it believes negative inflation in December would have been compensated for by a 2.5% monthly increase in loans.
BCI's 2009 profit totaled 161bn pesos, as fourth quarter earnings reached 51.6bn pesos, both in line with Banchile's estimates.
Banchile said it expects BCI's net interest margin to remain under pressure in January considering the negative 0.3% inflation registered in December. However, the brokerage reiterated its positive view for the banking sector in 2010, led by a resurge in loans, lower provisions and a slight pickup in net interest margin.
BCI - controlled by the local Yarur family - is Banchile's top pick for the sector.
By Business News Americas staff reporters
* Itaú Unibanco to expand brokerage in the US - Brazil
Brazil's Itaú Unibanco (NYSE: ITUB) will develop its brokerage in the US as part of its expansion plan abroad, financial daily Valor Econômico quoted the brokerage's head Christian Egan as saying.
Itaú Securities will expand its New York staff to more than 80 from 68 and invest US$10mn in 2010 in technology, rent and office refurbishments, the report said.
"We want to be a global house with Brazilian DNA," Egan was quoted as saying.
The firm also plans to increase its equities coverage to other Latin American countries, namely Mexico, Argentina and Chile, the newspaper said.
Itaú Unibanco is Brazil's largest private sector bank.
By Business News Americas staff reporters
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In-deph interview
* BancoSol takes top spot in microfinance clients, sticks to its roots
Kurt Koenigsfest
CEO
BancoSol
Bolivia
http://www.bnamericas.com/interviews/banking/Kurt_Koenigsfest_,BancoSol,/170324132
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Main companies covered in today's news
* Banco Central do Brasil
http://www.bnamericas.com/company-profile/en/Banco_Central_do_Brasil-BCB/170324132
* Banco de Chile S.A.
http://www.bnamericas.com/company-profile/en/Banco_de_Chile_S,A,-Banco_de_Chile/170324132
* Deutsche Bank AG
http://www.bnamericas.com/company-profile/en/Deutsche_Bank_AG-Deutsche_Bank/170324132
* Itaú Unibanco Holding S.A.
http://www.bnamericas.com/company-profile/en/Itau_Unibanco_Holding_S,A,-Itau_Unibanco/170324132
* Instituto Fondo Nacional de la Vivienda para los Trabajadores
http://www.bnamericas.com/company-profile/en/Instituto_Fondo_Nacional_de_la_Vivienda_para_los_Trabajadores-Infonavit/170324132
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