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Banco do Brasil Unseats Itau in Corporate Debt Underwriting

Banco do Brasil Unseats Itau in Corporate Debt Underwriting

State-run Banco do Brasil SA is overtaking traditional Brazilian bond underwriting leaders Banco Bradesco SA and Itau Unibanco Holding SA after acquiring four rivals and boosting lending to a record.

Banco do Brasil, based in Brasilia, arranged 5.5 billion reais ($3.1 billion) of local corporate debt sales in the first six months of 2010, surpassing Itau and Bradesco, the top two managers last year, according to the Brazilian Association of Financial and Capital Market Institutions, which counts bonds, commercial paper and securitized assets. Banco do Brasil ranks second this year, trailing Banco BTG Pactual SA, according to data compiled by Bloomberg that exclude some commercial paper and securitized assets.

Lending from Banco do Brasil increased 36 percent in the first quarter to 327.4 billion reais, making the bank the biggest in Latin America by assets, after a 35 percent surge in 2009. The lender is building on market share gained during the global financial crisis as it played an “anti-cyclical role” to shore up the economy as private banks pulled back, said Peter Shaw, a managing director at Fitch Ratings.

“They’ve been more aggressive across the board,” Shaw said in a telephone interview. “They’ve made no bones about wanting to not only defend the market share gains but to, where it makes sense, where they can, build them.”

Banco do Brasil, which was founded in the 19th century, climbed the underwriting rankings as local corporate debt sales jumped 66 percent from the year-earlier period, according to Anbima, as the Sao Paulo-based capital markets association is known.

‘More Aggressive’

Bradesco, Brazil’s second-biggest bank by market value, managed 4.48 billion reais of sales in the first half, dropping one spot from the year-ago period to second place. Itau, the country’s largest bank by value, underwrote 4.39 billion reais of debt, leaving it in third place, Anbima data show.

Alexandre Aoude, the executive director for capital markets at Itau, said Banco do Brasil’s purchase last year of a 50 percent stake in Sao Paulo-based Banco Votorantim SA helped the government-run bank overtake it.

The purchase “brought over a lot of debt origination, which helped a lot,” Aoude said in a telephone interview from Sao Paulo. “Banco do Brasil is doing a great job. They’re a tough competitor to beat.”

Aoude pledged to be “more aggressive” to regain the No. 1 spot that Itau had locked up by the end of last year.

“We have the tools to be on top,” he said.

International Sales

Omar Barreto, the head press officer for Banco do Brasil in Brasilia, declined to comment on the underwriting rankings. An official at Osasco-based Bradesco declined to comment.

Itau is the top-ranked Brazilian bank in managing the country’s international bond sales. It’s in third place overall this year, trailing only London-based HSBC Holdings Plc and Madrid-based Banco Santander SA, according to data compiled by Bloomberg. Banco do Brasil, which is more than 60 percent owned by the government, climbed to seventh from 11th in 2009. Bradesco ranks eighth.

Brazil sold $750 million of bonds due in 2021 in international markets yesterday after its benchmark overseas borrowing costs fell to a record low. The government issued the bonds to yield 4.55 percent, down from 5 percent in an initial offering in April, according to data compiled by Bloomberg. Deutsche Bank AG and Bank of America Corp. arranged the sale.

Default Swaps

The extra yield investors demand to hold Brazilian government dollar bonds instead of U.S. Treasuries fell two basis points, or 0.02 percentage point, yesterday to 202, the lowest level since May 13, according to JPMorgan Chase & Co.’s EMBI+ index. The country’s average dollar bond yield rose two basis points to 5.34 percent after falling to 5.32 percent on July 26, the lowest on record, according to JPMorgan.

The cost of protecting Brazilian debt against non-payment for five years with credit-default swaps rose one basis point to 117 yesterday, according to data compiled by CMA DataVision. Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a government or company fail to adhere to its debt agreements.

Yields on Brazil’s interest-rate futures contract due in January fell five basis points to 10.84 percent. The real weakened 0.3 percent to 1.7672 per dollar.

Sabesp, Cemig

Two transactions helped cinch Banco do Brasil’s rise in the rankings. In April, it helped manage a 1.2 billion real offering from Cia. De Saneamento Basico do Estado de Sao Paulo, known as Sabesp, Brazil’s biggest water utility. A month earlier, it helped arrange a 2.7 billion real issue by Cia. Energetica de Minas Gerais, Brazil’s second largest electricity generator and distributor.

“To see them rising up the underwriting tables reflects the aggressiveness they’ve shown in most of their other businesses also,” Shaw said.

The bank’s loan growth, part of President Luiz Inacio Lula da Silva’s plan to help Brazil weather the global recession, helped it win investment banking business, said Jansen Moura, a corporate bond analyst with BCP Securities in Rio de Janeiro.

Banco do Brasil’s underwriting tripled in the first half from 1.8 billion reais in the same period last year, according to Anbima. Itau’s climbed 11 percent and Bradesco’s fell seven percent.

“It’s a race between three cars,” Itau’s Aoude said. “There will be changes in the leader.”

Source

Related posts:

  1. Itau Surpasses Goldman Sachs in Brazilian Bond Underwriting
  2. Banco do Brasil to Buy Stake in Banco Patagonia, Expand Abroad
  3. Bradesco and Banco Do Brasil announce VisaNet results
  4. Banco Votorantim Plans to Sell 10-Year Bonds Today
  5. Banco do Brasil raises $5.4 bln in share offer

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Vale, BHP End Annual Ore Talks; Vale Wins 90% Jump

March 30 (Bloomberg) — Vale SA, the world’s largest iron ore producer, and BHP Billiton Ltd. ended a 40-year system of setting annual prices by signing short-term contracts with Asian mills, with the Brazilian company winning a 90 percent increase.Sumitomo Metal Industries Co., Japan’s third-biggest steelmaker, agreed to pay Vale $100 to $110 a metric ton for the quarter starting April 1, spokesman Toshifumi Matsui said. BHP, the largest mining company, today said it will sell the majority of its production to Asian steel mills on shorter-term contracts without giving pricing.

A Shanghai judge yesterday blamed the collapse of annual price talks last year on Rio Tinto Group executive Stern Hu and three colleagues for obtaining commercial secrets, sentencing them to between 7 years and 14 years in prison for that charge and bribery. Moving to quarterly pricing will help producers benefit from surging spot prices for iron ore, which are trading at more than double the annual-contract price.

“This represents a significant win for BHP Billiton over Asian steel mills who have long resisted the move away from annual contract pricing,” said Ben Potter, an analyst at IG Markets Ltd. in Melbourne.

Nippon Steel Corp., Japan’s largest steelmaker, also reached a “tentative” price agreement for the April quarter, President Shoji Muneoka said today in Tokyo without providing pricing details. The Sumitomo Metal pact with Vale is a tentative agreement, spokesman Matsui said.

BHP, based in Melbourne, rose 2.4 percent to A$44.41 at the 4:10 p.m. close in Sydney. Rio climbed 1.1 percent to A$79.25.

Break With Tradition

“This is not a traditional benchmark outcome,” Amanda Buckley, a spokeswoman for BHP, said. “Details of the agreements with our customers are subject to confidentiality agreements,” she said, declining to comment on the price agreed or name customers.

Vale wants a new pricing system to improve pricing flexibility, predictability and transparency, Pedro Gutemberg, director for marketing and research at Vale, said today at a conference in Beijing. He didn’t confirm the price agreement with Sumitomo Metal.

“For us, the benchmark system is old, so we decided to go this route,” Gutemberg said.

Japanese steelmakers will get in touch with their domestic customers about the change in pricing iron ore quarterly, said Muneoka, who was at a media briefing held by the Japan Iron and Steel Federation, which he chairs.

“Considering the industry stability and the impact on our customers, we still believe that annual benchmark prices are desirable,” Muneoka said.

Prices Double

Cash prices have more than doubled in the past year, and BHP, Rio and Fortescue Metals Group Ltd. may be missing out on about $20 billion of sales a year by selling at contract prices instead of spot prices, Goldman Sachs JBWere Pty said March 1.

Baosteel Group Corp., representing China in iron ore price talks, last week said the contract pricing system needs improvement and it’s reasonable to expect “adjustments” to the way the products are priced. The breaking with tradition and a shortage of iron ore have led to tensions between producers and steelmakers, Baosteel Chairman Xu Lejiang said in a March 25 interview in Shanghai.

China, the largest buyer of iron ore, is still in price talks with the three biggest producers, Luo Bingsheng, vice chairman of the China Iron & Steel Association, said today over the phone. Chinese mills oppose a demand to increase prices by 90 percent, the group said March 16.

Some Chinese steelmakers have privately reached deals with the suppliers though official talks are ongoing, Deng Qilin, general manager of Wuhan Iron & Steel Group, said this month.

Commercial Secrets

The four Rio Tinto employees convicted yesterday obtained secrets regarding steelmakers’ output and meetings of the China Iron & Steel Association from companies including Shougang Corp. and Laiwu Group, Chief Judge Liu Xin said. That led to the failure of iron ore price talks last year, the judge said.

Steelmakers in China should pay a premium to other Asian mills because of the risks of doing business there and their need to secure supply, according to Michelle Applebaum Research Inc. The conviction of the Rio workers highlighted the risk, it said in an e-mailed report.

“The agreements reached represent the majority of BHP Billiton’s iron ore sales volume,” BHP said today.

Prices were traditionally set each year from April 1. This year, Vale wants to set prices quarterly and BHP pushed to price its products based on an index, Baosteel’s Xu said. Rio, the second-largest iron ore supplier, said March 24 customers may settle prices on a quarterly basis.

Market Mechanism

“If the industry moves to a quarterly pricing, that will in fact be a true market mechanism, not driven by anyone in particular but driven very much by market forces,” Sam Walsh, the head of Rio Tinto’s iron ore operations, said March 24.

Rio Tinto’s Melbourne-based spokesman David Luff declined to comment on its talks, citing the company’s policy of not commenting on price negotiations.

Chinese steelmakers decided to buy more iron ore on the cash markets after prices plunged 68 percent between February and October 2008 during the global recession. Prices have more than doubled since, according to Metal Bulletin, an industry publication.

Rio’s Hu, an Australian citizen who led Rio’s China iron ore operations, was sentenced to 10 years in prison. His colleagues Liu Caikui, Ge Minqiang and Wang Yong were given prison terms of 7 years, 8 years and 14 years respectively.

Read the original article.

To contact the reporters on this story: Masumi Suga in Tokyo at msuga@bloomberg.net; Yasumasa Song in Tokyo at ysong9@bloomberg.net