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Shock primary result roils Argentine markets; Banco Pan readies follow-on offer

S&P Global Market Intelligence presents the week's latest news and trends in Latin American banking.

Argentina in turmoil

* Argentine bank stocks plummeted alongside the broader market as odds of the country returning to Peronist rule dramatically rose following primary elections. Alberto Fernández, the main opponent to incumbent Mauricio Macri in Argentina's October presidential election, held a 15.5-point advantage in an Aug. 11 primary vote, far stronger than what polling had suggested.

* The benchmark MERVAL stock index sank nearly 38% in Aug. 12 trading, while shares of several major Argentine banks lost more than half their value.

* Banco Central de la República Argentina raised interest rates in daily auctions to 74% in a bid to contain a run on the peso following Fernández's surprise triumph in the primaries.

* Macri also announced measures, including tax cuts and a freeze on fuel prices, to soothe the severe economic volatility seen this week. However, analysts described the measures as "too little, too late," casting doubts on the measure's economic impact.

* The market reaction to Fernández's victory in the primary elections is credit negative for Argentina's banks, Moody's said. However, the country's financial system is also well prepared to face a potential run on deposits, the rating agency noted.

Divesting season

* Brazil's Banco Pan SA reportedly began preparations for a September follow-on public offer of shares worth about 2 billion reais. The share sale will likely be divided into a primary issue to raise resources and a secondary issue that will allow a partial exit by Caixa Econômica Federal, which owns a 41.7% stake in Banco Pan.

* Banco do Estado do Rio Grande do Sul SA will discontinue its guidance disclosures due to a possible public offering of its shares by the Brazilian state of Rio Grande do Sul, its controlling shareholder.

Strategizing

* Banco do Brasil SA's board voted to resume the search for international partners for its investment banking unit, BB-Banco de Investimento SA. Banco do Brasil is hoping to convert the unit into an independent investment bank with a greater weighting in the group's state business.

* Brazil's Itaú Unibanco Holding SA is redirecting the focus of its card processing unit Redecard SA away from the large retailer segment as that part of the business faces increasing competition, according to Redecard CEO Marcos Magalhaes. After incurring losses from the larger retail segment, Redecard will focus on serving smaller clients, where it continued to be profitable, Magalhaes said.

Earnings frenzy

* In Argentina, Banco Santander Río SA, Grupo Financiero Galicia SA and BBVA Banco Francés SA all booked significant yearly increases in their net income for the second quarter of 2019.

* Elsewhere, Colombia's Banco Davivienda SA booked a 28.8% increase in its second-quarter profit, while net income of Brazil's Banco BTG Pactual SA rose about 50%. Peru's Intercorp Financial Services Inc. also posted a 71.3% jump in its second-quarter net profit.

In other news

* Chile's financial market commission CMF published for public consultation a methodology on defining systemically important banks, as it gears up for the implementation of new Basel III capital standards in the country. The agency will determine systemically important banks based on factors that reflect the local impact of the institutions' financial deterioration or eventual insolvency.

* Consumer credit demand in Brazil rose 7.8% year over year in the first half of 2019, slower than the 11.1% growth recorded in the year-ago period, according to credit research company Serasa Experian.

* Industrial & Commercial Bank of China Ltd.'s purchase of the remaining 20% stake in Industrial & Commercial Bank of China (Argentina) SA that it does not own is credit positive for the bank's Argentina unit, Moody's said. The sale reinforces ICBC's commitment to its Argentine operation amid the country's macroeconomic crisis, the rating agency said.

* Bitcoin Banco Cryptocurrency is facing mounting judicial pressure after having blocked its customers from their accounts for more than two months in the wake of an alleged fraud.

* Brazilian technology company BTX Digital will soon launch a digital bank to be called Caras Bank, Valor Econômico reported, citing BTX president Fernando Oliveira. The new financial entity will have an initial investment of 100 million reais for the purchase of point-of-sale machines and another 250 million reais for marketing and advertising.

Featured this week on S&P Global Market Intelligence

* Argentine bond restructuring seems 'inevitable' as a primary vote roils markets: Shortly after primary election results catapulted Peronist presidential candidate Alberto Fernández to front-runner status, he promised bondholders that his government would not default on its debt, unlike prior administrations in his party.

* Hires and Fires: A weekly rundown of executive management, board and other personnel moves at Latin American financial institutions.

* Ratings Roundup: A summary of various ratings actions on Latin American financial institutions and economies.

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