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(Bloomberg) -- A surge in private-credit funds and record local bond sales are helping Brazil’s biggest lenders snag investment-banking market share from US competitors.
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Bank of America Corp.’s ranking for the business slipped to third this year from second in 2023, as the bank ceded ground to local heavyweights Itau Unibanco Holding SA and Banco BTG Pactual SA, according to Dealogic data through Oct. 31. JPMorgan Chase & Co., the biggest US bank, also lost market share.
The success of local banks stems partly from their relationships with the nation’s retail clients, who have been buying more local Brazilian bonds because of their higher interest rates and, in some cases, their tax-exempt status. US banks don’t have a retail presence in Brazil.
“The Brazilian banks, which have a stronger local balance sheet, have more appetite to buy local bonds and keep them on their books if needed, selling them in the future,” said Felipe Thut, head of fixed income and structured products at Osasco-based Banco Bradesco BBI, whose market share rose to 7.1% this year from 5.6% in 2023. “So they can provide companies full underwriting, a practice that has been gaining importance in Brazil since 2018.”
Still, the total investment-banking fee pool fell to $591 million this year through Oct. 31, down 6.1% from the same period last year, according to Dealogic. A weaker year for equity issuance was to blame, as volume dropped 18% from the same period last year, to 30.8 billion reais, according to data compiled by Bloomberg.
Itau’s revenue from brokerage fees and financial and economic advisory work surged 51% in the first nine months of 2024, according to its earning statements, while BTG said its investment-banking revenue more than doubled in the first half.
Demand for private credit has been growing as Brazil’s monetary policy diverges from much of the rest of the world, with benchmark interest rates rising in the nation as they fall in many other major economies. Tax changes and the poor performance of hedge and equity funds also encouraged investors to shift into fixed-income alternatives.
Local corporate bond issuance increased 88% to a record 378.7 billion reais ($66.7 billion) this year through Nov. 7, according to data compiled by Bloomberg.
Companies are taking the opportunity to sell debt with credit spreads at record lows, according to Cristiano Guimaraes, head of corporate and investment banking at Itau, the No. 1 local bond underwriter, the data show. The lender’s share of Brazil’s total investment-banking pool rose to 14.7% from 12.4%, according to Dealogic, putting it at the top of the ranking.