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News through April 29

Banking Essentials Newsletter - November Edition

University Essentials | COVID-19 Economic Outlook in Banking: Rates and Long-Term Expectations: Q&A with the Experts

Estimating Credit Losses Under COVID-19 and the Post-Crisis Recovery

StreetTalk – Episode 70: Banks' Liquidity Conundrum Could Fuel M&A Activity


News through April 29

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

Ownership pains

* Argentina's government is considering submitting a bill toCongress that would allow the state pension fund manager Anses to up to $5 billion worth of shares inpublicly traded companies, including several banks. Argentina would likely use theproceeds to pay pensioners who have launched lawsuits against the fund manager overthe lack of increases in their pensions following the country's default in 2001.

* Banco GeradorSA is reportedly preparingto submit a proposal to Banco Centraldo Brasil for its sale to another financial institution. The proposalincludes a corporate and operational restructuring for the struggling bank, whichhas had an inadequate solvency ratio for the last two years.

* The Brazilian parliament commission in charge of a nationaltax-fraud investigation voted in favor of calling banker Joseph Safra to testifyon allegations that hisorganization bribed government tax officials in order to lower corporate tax debts.Safra and his family control São Paulo-based Safra Group, which includes Swiss-basedBank J. Safra Sarasin AG,Safra National Bank of New Yorkand Banco Safra (Cayman Islands) Ltd.

Strategic ventures

* Banco Santander(Brasil) SA and unit AymoréCrédito entered into an agreement with Hyundai Motor Brasil Montadorade Automóveis Ltda. and Hyundai CapitalServices Inc. to create a jointventure. The companies will establish Banco Hyundai Capital Brasil SAand an insurance brokerage firm to provide auto finance and insurance brokerageservices to consumers and Hyundai dealerships in Brazil.

* Santander Brasil and BancoBonsucesso SA plan to obtain10% of the national payroll market over the next five years through their jointventure Olé Consignado, formerly known as BancoBonsucesso Consignado SA. Currently, Olé Consignado has a payroll loanportfolio of 5 billion Brazilian reais, equivalent to 1.8% of the market, and 1.4million customers.

* Banco de SabadellSA plans to launchpersonal banking services in Mexico by year-end. The Spanish bank also aims to landmore than 200 corporate banking customers in 2016 through $105 million in creditofferings to the corporate sector.

* Credicorp Ltd.said it sold 50% of itsshares in Banco de Credito e InversionesSA, or Bci, for proceeds of about 61.85 billion Chilean pesos. The salewas part of a capital increase completed by Bci that was designed to partially financethe Chilean bank's purchase of CityNational Bank of Florida.

Profit lines

* Spain's BancoBilbao Vizcaya Argentaria SA posted a first-quarter 2016 net attributableprofit from its SouthAmerican operations of €182 million, up 8.7% from a year earlier at constant exchangerates. The bank's South American units booked a 0.8% increase in gross lending inthe first quarter compared to December 2015, mainly due to the private individualsegment with "significant growth" in Argentina, Colombia and Uruguay.

* The Chilean banking sector's net profit 2.57% in the first quarter of 2016 to475.78 billion pesos compared to the same period a year ago. Higher spending onloan provisions was the main reason for the decline, as the ratio of provisionsto total loans rose to 2.51% in March from 2.39% a year ago.

* Banco de Chileshowed first-quarter net incomeof 132.53 billion Chilean pesos, up from 116.72 billion pesos earned in the year-agoperiod. Net fees and commission grew 7.4% year over year to 77.41 billion pesos.Customer loans increased 12.0% to reach 24.499 trillion pesos.

* Banco SantanderChile posted first-quarter net income attributable to shareholders ofabout 125.44 billion pesos, or 67 centavos per share, up 31.4% from the year-agoperiod and 49.7% higher than the fourth quarter of 2015. The bank, a unit of Spain'sBanco Santander SA, the year-over-year growthto higher net interest income because of loan growth, an improved funding mix andhigher inflation rates. CEO Claudio Melandri said the bank anticipates its loan portfolio, which totaled about $37.9billion at the end of 2015, growing by $2.8 billion in 2016.

* Santander's Argentine operations, which include , booked anattributable profit of€66.8 billion in the first quarter of 2016, up 36.6% from a year earlier. The companyattributed the results to strong interest income and net fees growth.

* Meanwhile, Santander's Brazil operations reported a 24.8% year-over-yeardecrease in first-quarterattributable profit to €359 million. Difficulties faced by the Brazil operationsare down to currency fluctuations and do not reflect a drop in Brazilian real-denominatedearnings, which are expected to remain stable or even improve in 2017, accordingto top executives.

* Separately, BancoSantander (Brasil) SA posted a first-quarter managerial of about 1.66 billion reais, up1.7% compared in the year-ago period. CEO Sergio Rial attributed the bank's 9.3%growth in revenue fromcommissions and fees in the first quarter to customer loyalty rather than highercommissions. However, Rial expects it will be difficult for the bank to maintainthe same growth in the next few quarters.

* In Mexico, GrupoFinanciero Santander Mexico SAB de CV posted a 10.1% rise in quarterly profit, reaching 3.54 billionMexican pesos, as stronger net interest income offset higher provisions expenses.Net interest income grew 17.9% year over year to 11.70 billion pesos. Meanwhile,provisions for loan losses soared 27.9% to 4.71 billion pesos from 3.68 billionpesos a year earlier.

* Grupo FinancieroInbursa SAB de CV posted a netprofit of about 2.11 billion Mexican pesos for the first quarter of2016, down 47.5% from 4.01 billion pesos earned in the first quarter of 2015. Thecompany noted that in the year-ago period, Banco Inbursa SA released about 3.49billion pesos of excess credit reserves coming from a regulatory change in methodology.

* Grupo FinancieroInteracciones SA de CV posted a 24.21% rise in quarterly profit with net income of 508 million pesosfor the first quarter of 2016. The bank expects its portfolio of loans to smalland medium-sized businesses to growby 30% in 2016, mainly on strong demand in the country's central and northern states.

* Grupo ElektraSAB de CV reportedfirst-quarter net income of 1.16 billion pesos, swinging from a net loss of 3.28billion pesos in the year-ago period. The consolidated gross portfolio of the company'ssubsidiaries, including Banco AztecaSA Institución de Banca Múltiple among others, reached 63.71 billionpesos as of March 31, down from 69.82 billion pesos from the previous year.

* Banregio GrupoFinanciero SAB de CV posted a 16% rise in first-quarter profit, totaling501 million pesos, as the bank saw strongerincome from its financial margin and net commission and fees. Banregio's financialmargin was 1.24 billion pesos, up 13% from 1.09 billion pesos a year ago, contributingto a 17.3% rise in total operating income.

* Banco BradescoSA posteda 2.9% drop in net profit for the first quarter of 2016, as the bank saw a 52.2%jump in loan loss provisions and higher administrative and personnel expenses. Thebank showed book net income of 4.12 billion reais for the quarter, down from 4.24billion reais a year earlier. It also booked 836 million Brazilian reais in provisionsrelated to troubled oilrig producer Sete Brasil Participacoes SA.

Capital in motion

* Banco Financierodel Peru said it completed the placementof $3 million in 10-year subordinated bullet bonds.

* Banco de Galiciay Buenos Aires SA's shareholders approved a proposal to increase the amount of notes the bankcan issue under a global bond program to $600 million from $500 million, or itsequivalent in other currencies.

* Banco Latinoamericanode Comercio Exterior SA issued 1.5 billion Mexican pesos worth of "certificadosbursátiles" in Mexico's capital markets for the third time.

* Shareholders of GrupoFinanciero Banorte SAB de CV approved the purchase of the company's shares of up to 3.95 billion Mexicanpesos, or equivalent to 1.5% of the group's market capitalization value as of December2015.

* Banco de Créditodel Perú pushed through with its planned issuance of three-year bonds.

* Nacional FinancieraSNC issued 6 billion Mexican pesos of bonds in a syndicated auction.

As they say

* Continuing weak economic activity in most Latin American countries,including lower credit growth and higher sovereign spreads, could banks' funding costs and reduce theirprofitability, the International Monetary Fund warned. Importantly for banks, realyear-over-year credit growth to the private sector, adjusted in line with inflation,has fallen in 2016 in most countries in the region including Brazil, Chile, Colombia,Peru and Uruguay, according to IMF data cited in the report.

* Venezuela's recent restructuring of its exchange rate regimeis unlikely to have a large impact on bank profitability or capital, according toFitch Ratings, which believes the policy change is neutral for bank ratings.

* Brazilian banks are likely to issue fewer mortgage loans in 2016 and see rising default ratesamid the country's deep recession, Moody's said. "As the ongoing recessionleads to rising unemployment, Moody's expects payment delays and defaults on mortgagedebt to increase in coming years, despite delinquencies having remained stable ataround 2% over the last five years," the rating agency noted.

In other news

* Latin American development bank Banco De Desarrollo De América Latina is expected to in the coming days the creationof investment funds totaling up to $500 million focused on Argentina's private sector.

* Brazil's biggest listed banks are reportedly receiving a floodof requests from companies to renegotiatethe terms of at least 100 billion reais in troubled loans. Amid the country's deeprecession, banks are looking to contain defaults by reducing borrowing costs andextending maturities for small and large corporate clients.

* Loan defaults in Uruguay's banking system are expected to in the next few years due tothe country's economic slowdown, the head of Banco de la República Oriental del Uruguay, Julio César Porteiro,reportedly said. The delinquency rate in the financial system was around 2% in 2015,but this will likely rise to above 3% in 2016, the executive said.

* Peruvian banks have started competing for deposits they expect could be released followingnew legislation that allows senior citizens to withdraw most of their pension savings,following the approval of a bill that allows pensioners to withdraw up to 95.5%of their savings when they reach the age of 65.

Featured this week onS&P Global Market Intelligence

* Top 50 LatinAmerican, Caribbean banks by assets: Regional heavyweight Brazil continuedto dominate SNL Financial's ranking of the largest banks in Latin America and theCaribbean by assets, taking home all five of the top spots and 10 of the top 50.

* What a Sete Brasilbankruptcy could mean for Brazil's banks: Less than a year ago, SeteBrasil touted itself as being "sponsored by equity investments provided bythe largest private and government-owned financial institutions in Brazil."Now the company has become a massive liability for those financial institutions.

* Best of the Web:Chile offers a less volatile LatAm investment alternative.

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

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