FINANCIAL SERVICES ADVISOR a PUBLICATION of the DIALOGUE November 7-20, 2019
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LATIN AMERICA ADVISOR FINANCIAL SERVICES ADVISOR A PUBLICATION OF THE DIALOGUE www.thedialogue.org November 7-20, 2019 BOARD OF ADVISORS FEATURED Q&A TOP NEWS Ernesto Armenteros Vice Chairman of the Board, BANKING Banco de Ahorro y Crédito Unión What Will the Next Venezuela Doubles Pablo Barahona President & COO, Amount of Euros Global Retail Markets West, Liberty Mutual Group Argentine Gov’t it Provides Banks Felipe Carvallo Venezuela’s central bank has Vice President - Analyst doubled the amount of euros that Latin America Banking Mean for Banks? Moody’s Investors Service it provides to local banks. The country’s hyperinflation, along Richard Child with U.S. sanctions, have led to a CEO, Mattrix Group surge in the use of the European currency. Michael Diaz Jr. Page 2 Partner, Diaz, Reus & Targ Ernesto Fernández Holmann INSURANCE Chairman of the Board, Ayucus Mutua Madrileña Rich Fogarty Buys 45 Percent of Managing Director, Alvarez and Marsal Seguros del Estado Desiree Green Spain-based insurance company Vice President, Peronist Alberto Fernández takes office as Argentina’s president on Dec. 10. The country’s Mutua Madrileña has bought a banks are watching for policies that could affect the sector. // File Photo: Fernández Cam- International Government Affairs, stake in Colombia’s Seguros del Prudential Financial paign. Estado. The transaction is expect- The rise of Peronist Alberto Fernández, who won Argentina’s Earl Jarrett ed to close, pending regulatory Chief Executive Officer, presidential election on Oct. 27, led to a plunge in investor approvals, early next year. The Jamaica National Group confidence in the South American country, with stocks, Page 2 Thomas Morante Chair, Insurance Regulatory & Q bonds and the peso falling since he won the primary election Transactional Practice Group in August. Bank deposits in Argentina fell to $31.55 billion in late BANKING Kaufman, Dolowich & Voluck August, as compared to $35.24 billion before the election, as Argentines Manuel Orozco Citi Taps Romo to Director, withdrew money following new capital controls restricting the purchase Head Citibanamex Migration, Remittances & Development, Inter-American Dialogue of dollars. Will Fernández’s presidency make things harder for Argen- Citigroup has named Manuel Adalberto Palma-Gomez tina’s financial services sector, and what kinds of policy changes can Romo to head its Citibanamex unit Senior Partner, banks and other financial services providers expect during his term? Will in Mexico. Romo was executive di- Proxy, Gobernanza Corporativa rector for credit cards at Citibana- customers continue withdrawing large amounts of cash from Argentine Rodolfo Pittaluga mex before moving to Banorte. He Adjunct Professor, banks? What can the country’s banks do to prepare for the period ahead? returned to Citibanamex earlier Florida International University this year. College of Law Page 2 Fabian Saide Alejandro Garcia, managing director and regional group head Founder, CEO and President, for Latin American financial institutions at Fitch Ratings: “It Paykii is too early to tell how more negative the environment could Jan Smith Partner, become for Argentine banks under the upcoming administra- KoreFusion A tion, but clearly downside risk is ample. In addition to the existing chal- Roberto Teixeira da Costa Founder & Board Member Emeritus lenges of economic recession and very high inflation, banks could suffer CEBRI in the scenario of a potential sovereign credit event, given the impact that Mario Trujillo this would have on market confidence and stability in the local payment CEO, DolEx Dollar Express system. Unlike the 2001 crisis, Argentine banks now have fairly limited di- rect exposure to sovereign debt, but they have sizable assets in the form of deposits and securities with the central bank, which in turn is a large creditor of the federal government. Therefore, any major negative shift on economic and monetary policy could materially affect local banks. The Romo // File Photo: Banorte. Continued on page 3 COPYRIGHT © 2019, INTER-AMERICAN DIALOGUE PAGE 1 FINANCIAL SERVICES ADVISOR November 7-20, 2019 BANKING NEWS NEWS BRIEFS CIBC to Sell Venezuela Doubles Majority Stake in Citi Taps Romo as Head of Citibanamex Unit Amount of Euros it FirstCaribbean Unit Citigroup has named Manuel Romo as the head of its Citibanamex unit in Mexico, the unit Distributes to Banks The Canadian Imperial Bank of Commerce, said Nov. 15 in a statement, Reuters reported. or CIBC, has reached a deal to sell a majority Romo, who worked for the bank from 1991 to Venezuela’s central bank has doubled the stake in its Caribbean unit to a Colombian 2008, returned to Citibanamex last April after amount of euros in cash that it provides to lo- billionaire and his financial firm for $797 working for rival Grupo Financiero Banorte. As cal banks as hyperinflation and U.S. sanctions million, the Canadian bank said Nov. 8, the CEO of Citibanamex, Romo will replace Ernesto have resulted in a surge in the use of the Euro- Calgary Herald reported. GNB Financial Group, Torres Cantú, who was named last month as pean currency, Reuters reported Nov. 15, citing owned by Colombian billionaire Jaime Gilinski, the head of Citi’s Latin America operations. four sources familiar with central bank activ- will acquire 66.7 percent of CIBC FirstCarib- ities. Euros are increasingly being used since bean shares, leaving CIBC with a nearly 25 the bank started distributing them to financial percent stake in the Barbados-based bank. The institutions in February, following the Trump sale values FirstCaribbean at approximately Brazil’s Caixa Reports administration’s tough sanctions, which were $1.2 billion, lower than the $2.9 billion when 66.7% Increase in CIBC took over most of the business in 2006, Bloomberg News reported. “The Caribbean is a Net Income for Q3 Hyperinflation and U.S. low-growth market that presents idiosyncratic Brazilian state run bank Caixa Econômica Fed- sanctions have led to a risks to the banks, (e.g., hurricanes),” Gabriel eral on Nov. 12 reported a 66.7 percent rise in surge in the use of the Dechaine, an analyst at National Bank Finan- net income for the third quarter, as compared to the same period last year. In a statement, euro in Venezuela. cial, said in a note to clients, Bloomberg News reported. He said the transaction was a “pos- the bank said it had 8 billion reais in profit itive” one from a risk standpoint. “At the risk ($1.92 billion) for the quarter. Recurring net of being flippant, the only time we hear about income for the three-month period amounted to also imposed that month. Local companies use the Caribbean is when there’s a problem,” he 4.2 billion reais. euros in cash to pay for imports or employee added. The deal is expected to close next year, bonuses, easing pressure on the depreciat- pending certain approvals, the Calgary Herald ed local bolivar currency. According to the reported. The sale is expected to boost CIBC’s Mutua Madrileña Buys sources, Venezuela’s central bank began giving common equity tier 1 capital ratio by more than around 1 million euros ($1.10 million) per week 40 points, the bank said in the statement. 45% of Colombia’s to the country’s main private banks, as well as Seguros del Estado nearly 500,000 euros to smaller banks, double the previous amounts. If that rate continues, BBVA Argentina Spanish insurance company Mutua Madrileña euros could surpass within months the value has purchased 45 percent of private Colom- of bolivars in circulation, which currently totals Reports 63.8% Rise in bian insurance provider Seguros del Estado, about $59 million, according to Venezuelan au- Net Income for Q3 Finance Colombia reported Nov. 18. In the deal, thorities, Reuters reported. Venezuela’s econ- the Spanish company also acquired an option omy has also become increasingly dollarized, to take control of Seguros del Estado in four BBVA Argentina on Nov. 7 reported $11.1 a recent study by Caracas-based research firm years. Mutua Madrileña previously purchased billion in net income for the third quarter, a Ecoanalítica shows, Bloomberg News reported. Chile-based BCI Seguros. Seguros del Estado 63.8 percent rise as compared to the second According to its survey, more than half of retail is Colombia’s second-largest property and ca- quarter and an increase of 264.6 percent as transactions in the South American country in sualty insurer, Finance Colombia reported. The compared to the third quarter of last year. For October were in dollars. In Maracaibo, Vene- boards of both companies have approved the this year’s third quarter, BBVA Argentina posted zuela’s second-largest city, some 86 percent deal, and the transaction is expected to close an average return on assets of 11 percent and of all transactions were in dollars, the study early in 2020, following regulatory approvals. an average return on equity of 81.3 percent. said. [Editor’s note: See related Q&A in the Feb. Seguros del Estado president Jorge Mora will The bank said its consolidated financing to 28-March 13 issue of the Financial Services maintain his position, and Mutua Madrileña will the private sector amounted to $211.8 billion, Advisor.] have the company’s vice presidency and will an increase of $27.1 billion, or 14.7 percent, also appoint two of its five directors. COPYRIGHT © 2019, INTER-AMERICAN DIALOGUE PAGE 2 FINANCIAL SERVICES ADVISOR November 7-20, 2019 as compared to the second quarter and an FEATURED Q&A / Continued from page 1 increase of $38.9 billion, or 22.5 percent, as compared to the third quarter of 2018. country will face ample U.S. dollar needs in and exchange rates), which will strengthen 2020, so foreign exchange rate volatility will the banking system.