A sharp fall in asset values across Latin America has created attractive opportunities to buy banks there, according to senior bankers from the region.
"Sophisticated, long-term investors are coming back and are doing very well," said Hernan Somerville, president of the Chilean Bankers Association and director of FINTEC, a financial congolomerate. "This is a unique opportunity for foreign banks."
Mr. Somerville's remarks - during last week's conference here organized by the Bankers Association for Foreign Trade - came amid a growing number of reports that foreign financial institutions and private investors are going bottom fishing in Latin America and other emerging markets.
"We're seeing some heavy discounting that does not correlate with market fundamentals," said Manuel Lasaga, president of Stratinfo, a Miami financial consulting firm. "It's a very good time to selectively buy assets in Latin America."
Among the U.S. and foreign banking companies either buying or considering purchases of Latin American institutions are Citigroup, BankBoston Corp., BankAmerica Corp., Spain's Banco Santander, and London- based HSBC Holdings.
Citigroup, for example, recently presented the Argentine central bank with a proposal to buy Banco Mayo and is also considering acquiring a Chilean financial group.
The U.S. company is also considering buying banks at rock-bottom prices in other emerging-market countries.
Mr. Somerville said Latin American banks are now selling for 1 to 1.5 times book value, compared with 2 or 2.5 times book until a few months ago.
Though overdue loans are increasing across Latin America, well- capitalized foreign banks that own local banks are likely to ride out the current economic slowdown and will probably emerge stronger and with bigger market shares, bankers said. Strong local banks, copying foreign banks, are also seeking to set up Pan-American banking networks.
In the latest expansion, Banco Santiago, Chile's largest, announced this week that it plans to invest $425 million to buy majority stakes in Argentina's Banco Tornquist, Paraguay's Banco de Asuncion, and Peru's Bancosur from O'Higgins CentralHispanoamericano.
"We're looking at buying institutions in Colombia, Ecuador, Paraguay, and Central America," Mr. Somerville said. "Some say prices haven't reached bottom, but I say now is the time to get in."
Corporate executives and analysts reiterated that refrain. They added that, despite the current economic slowdown and liquidity shortages stemming from a breakdown in financial markets in Asia and Russia, Latin America is unlikely to suffer the kind of debt crisis that shut off capital flows to the region in the 1980s.
"We are positive about the future of Latin America," said Karl Reinert, senior vice president for risk control and trade finance at Daimler Benz. "We plan to increase our investments."
