(Updates M&A data starting in eighth paragraph.)
Dec. 5 (Bloomberg) -- Banco Itau BBA SA has taken over the top rankings in Brazil for merger advice, equity underwriting and initial public offerings, supplanting foreign banks Citigroup Inc., Rothschild and Credit Suisse Group AG.
Itau BBA, whose parent is the biggest bank in Latin America, pushed Rothschild from the No. 1 spot among advisers on Brazilian mergers and acquisitions with 27 deals totaling $35.4 billion, according to data compiled by Bloomberg through today. Sao Paulo-based Itau BBA also replaced Citigroup as the top equity underwriter, and pushed Credit Suisse off the No. 1 spot among IPO managers.
Foreign firms are facing more competition from local rivals as they try to hold on to their share of the investment-banking market in Brazil, where an emerging middle class is propelling one of the world’s fastest-growing economies. Brazilian banks such as Itau BBA and Banco BTG Pactual SA boosted their capacity to finance deals and hired executives with the ability to provide services once offered only by larger global lenders.
“Our market position is the result of a long and consistent investment we have been making over the years,” Jean-Marc Etlin, chief executive officer of Itau BBA Investment Bank, said in an interview. “Our strategy was essentially centered on bringing Brazil and now also Latin America to global investors and corporations by building, over the years, a world- class distribution platform.”
For the first time, Brazilian banks including Itau BBA led an IPO for a Brazilian company, Magazine Luiza SA, without the help of an international bank, Etlin said.
“Our revenues will grow this year even in a shrinking-fee- pool market,” he said.
Itau BBA’s M&A team also participated in the biggest transaction of the year, Telemar Participacoes SA’s merger, via a share swap, of two of its units into one entity. The transaction had a total announced value of $17.3 billion, according to Bloomberg data.
BTG Pactual is the second-biggest equity underwriter this year in Brazil, up from seventh in 2010. The company rose to second in M&A from fourth, and jumped to 11th from 19th in international bond issuance. BTG’s investment-banking business expanded to 63 employees from 52, according to Guilherme Paes, head of the unit.
“We had a lot of bigger transactions last year, but with a very small fee,” Paes said, adding that this year the bank doubled its fee revenue compared with 2010.
Overall fees for investment banks in Brazil fell this year, to $782.7 million through November from $1.16 billion in 2010, according to Dealogic, which took into consideration bonds, equity, syndicated loans and M&A advisory work.
The volume of announced M&A deals involving Brazilian companies tumbled to $91.7 billion this year from $161 billion in 2010, Bloomberg data show. Equity offerings decreased 72 percent amid Europe’s debt crisis, to $12.1 billion from $42.5 billion for last year, the data show.
Itau BBA had more investment-banking revenue this year than Zurich-based Credit Suisse for the first time since the boom in that industry started in Brazil in 2007, according to Dealogic. The Brazilian bank was also first in distribution of fixed- income products in the domestic market, according to Anbima, the local investment-bank and capital-markets association.
In the international bond market, Itau BBA ranked fourth, according to Bloomberg data.
“Financial players are keeping the M&A market quite active,” Paes said.
BTG Pactual is helping STP - Servicos & Tecnologia de Pagamentos SA, a Brazilian electronic-toll-collection company, sell a controlling stake, two people familiar with the negotiations said last month.
“A lot of international banks have invested in Brazil, but the most important competitors we have are still the usual suspects,” said Jose Olympio Pereira, co-head of the investment bank at Credit Suisse, referring to local banks.
Credit Suisse is the third-largest merger adviser in Brazil this year, and fourth in equity underwriting, with 14 percent of the market. Last year, the bank was eighth in equity underwriting, with 7 percent. It fell to second place this year on IPOs, with an 18 percent market share.
“The IPO market could take a bit of time to open again as the European crisis is still cloudy and unresolved,” Pereira said. “We have a lot of liquidity in the U.S. markets, and Brazil is very well-positioned to go through this process, so the country continues to be an option for long-term investors.”
Pereira pointed to the purchase of a 31.8 percent stake in Camil Alimentos SA, a food company in Brazil, by JPMorgan Chase & Co.’s Gavea Investimentos Ltda., a private-equity and hedge fund led by former Brazilian central banker Arminio Fraga.
“Although the market is rough, we will have profits in Brazil this year,” Pereira said, without providing a forecast.
Rothschild, which ranked fifth in M&A this year, is “having a good year” and is “still very well-positioned,” Luiz Muniz, head of the company’s Brazil business, said in an interview. The European crisis transformed the M&A market into a more complicated one, with transactions taking longer to close, he said, “but our market share with our clients is growing.”
An official at Citigroup, which didn’t underwrite any Brazilian equity deals in 2011 after taking the top rank in that business last year, declined to comment on the New York-based bank’s rankings.
--Editors: Steve Dickson, Dan Kraut
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