Global bank sector shifts on euro crisis

European banks are reducing exposure to some markets, leaving room for others to step in.

By Jim J. Jubak Dec 9, 2011 11:05PM
Image: Globe with money (© PhotoAlto/SuperStock)Winners from the euro debt crisis?

Well, sure. Just take a look in the banking sector. Most of the attention has focused on the losers in the crisis, the European banks that are reducing their lending, selling assets, and exiting entire markets in an effort to reduce assets and up capital ratios to the 9% required by suddenly vigilant European banking regulators.

But if somebody is exiting a market, it’s likely that someone is entering. And if somebody is selling assets, somebody has to be buying.

So, for example, for the first 11 months of the year Banco Itau, the investment banking arm of Brazil’s Itau Unibanco (ITUB), has taken over the top spot in Brazil for merger advice, equity underwriting and initial offerings. What banks used to have those spots? Rothschild for merger advice, Citigroup (C) for equity underwriting, and Credit Suisse (CS) for IPOs. 

Banco Itau advised on 27 deals (worth $35.4 billion) including the biggest deal of the year, the $17.3 billion merger of two units of Telemar Participacoes.

Having less competition from developed market banks is a very good thing in a market that’s down in size overall in 2011. Investment banking fees in Brazil fell this year to $783 million for the year through November from $1.2 billion in 2010, according to Dealogic. But by jumping up in the rankings, Banco Itau saw its investment banking fees grow.

In Asia, a similar process is at work. Commerzbank (CRZBY) has announced that it will take a pass on any new lending business that isn’t tied to its core markets in Germany or Poland. France’s Societe Generale (SCGLY) is reviewing its acquisition and export finance business in Asia. The beneficiaries any withdrawal will be banks such as Australia’s ANZ (ANZBY), Singapore’s DBS Group Holdings (DBSDY) or Standard Chartered (SCBFF).

And don’t forget the winners through outright acquisition. Chile’s CorpBanca (BCA) has just entered its first market outside of its Chilean home market through the $1.2 billion purchase of Banco Santander’s Colombian banking business.

Columbia’s economy is projected to grow by 6% in 2011, one of the fastest growth rates in Latin America. As recently as June Banco Santander (STD) said it had a goal of growing its market share in Colombia to 10% from a current 3%. But that was before regulators told the Spanish bank to raise $20 billion in capital to bring its capital ratio above the 9% threshold.

Columbia’s own Grupo de Inversiones Suramericana (GIVSY), or Grupo Sura for short, has just received clearance from regulators to buy the pension assets in Columbia and Peru from the Netherland’s ING Groep (ING). The deal will give Grupo Sura a 35% share of the pension fund management market in Colombia and entry into the pension management market in Peru.

The financial sector will look very different after this crisis.

Jim JubakAt the time of this writing, Jim Jubak didn't own shares of any companies mentioned in this post in personal portfolios. The mutual fund he manages, Jubak Global Equity Fund (JUBAX), may or may not own positions in any stock mentioned. The fund did own shares in Standard Chartered as of the end of September. The fund also owns a position in Itau Unibanco. For a full list of the stocks in the fund as of the end of the most recent quarter, see the fund's portfolio here. 

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