Banco ABC Brasil SA is looking to expand its investment banking activities with a focus on providing financial advisory services for mergers and acquisitions, Valor Econômico reported, citing bank executives.
Although loans and financing will continue to be Banco ABC's main revenue source, investment banking operations will help complement profitability amid tight margins on corporate credit, said José Eduardo Cintra Laloni, the company's vice president responsible for investment banking.
Laloni expects the planned growth in investment banking operations to result in an increase of at least 1 percentage point in the bank's return on equity, which stood at 13.3% on an annualized basis in the third quarter of 2018.
"Investors are looking for higher yields, so deadlines are lengthening and there is room for new issuers and structured transactions," Valor quoted Ricardo Rocha, the bank's distribution director, as saying.
However, Banco ABC will look to avoid direct competition with major banks as it expands in investment banking, and will instead target business with new market issuers that already have a credit relationship with the bank.
The company sees the market for M&A warming up as Brazil's economy continues to improve. The bank will be "selective" in this segment and aims to advise on about 10 deals per year, according to David Panico, the bank's head of M&A.
In the first nine months of 2018, the bank's revenue from capital markets and M&A reportedly increased 72.8% year over year to reach 62.3 million Brazilian reais.
Separately, the bank said it is in private negotiations with investors for the issuance of perpetual subordinated notes. Anonymous sources told Valor that the lender is eyeing a 100 million reais offering.
As of Jan. 14, US$1 was equivalent to 3.71 Brazilian reais.