As international market turmoil sends bank stocks into a tailspin, Brian D. O'Neill, Chase Manhattan Corp.'s top executive for Latin America, remains unruffled.
If there is one thing Mr. O'Neill, a 45-year-old managing director, has learned during two decades of riding the roller coaster of Latin American banking, it's how to reap opportunities from the bad times as well as the good.
As a result he is taking recent news of stock and commodity market declines throughout the region in stride.
"When these markets turn south, we just move from offense to defense," he said.
For Chase, playing defense means offsetting an anticipated drop in revenues in Latin America in areas such as syndicated lending and bond underwriting with increased revenues from activities such as advising companies on mergers and acquisitions, investing in low-priced equities for its own accounts, and even helping companies buy back their own debt.
"If a Latin company's debt is trading at 63 cents on the dollar, markets are virtually inviting them to buy their debt back," Mr. O'Neill said.
Chase, he added, is already helping several Latin companies buy back their debt paper. More companies will soon follow suit, Mr. O'Neill predicted.
"It's like a stock buyback," he said. "If you don't like the value of your stock, if you think it's cheap, you buy it back."
Similarly, as equity prices decline across Latin America, companies in the region look increasingly attractive as takeover targets. Increased mergers and acquisitions, he adds, offer Chase another opportunity to build up its activities.
Mr. O'Neill is well placed to assess the opportunities for Chase in Latin America. A native of Coronado, California-a San Diego suburb about 15 miles north of the Mexican border-Mr. O'Neill has spent much of his 21 years at Chase in various Latin American positions.
He spent four years in Chile, five in Argentina, and three in Brazil, helping arrange the massive Latin debt restructurings of the 1980s.
In 1991, Mr. O'Neill returned to New York from Sao Paulo to take over as corporate finance executive for Latin America. In 1994 he became executive managing director for all Latin America business.
After more than two decades as a Latin America hand, he is confident in proclaiming that its economic and political climate in the region is as strong as he's ever seen it.
"People often characterize debt restructuring of the 1980s as 'the lost decade' but what did Latin Americans lose?" he said. "They lost military dictatorships, state-owned companies, central planning ... and xenophobia."
With only few exceptions, he added, Latin Americans now have democratic government, free markets, free capital flows, and "positive relationships with foreign multinationals."
The upheaval also triggered a sharp change in Chase's own thinking.
While other banks active in Latin America, such as Citicorp, BankBoston Corp., and Spain's Banco Santander, have focused on building local commercial and retail banking operations, Chase has opted to build a more globally focused operation.
That means arranging loan packages and bond issues for Latin American borrowers on international markets, putting together complex billion-dollar project finance deals, and providing international private banking services for wealthy Latin American entrepreneurs. The bank has also expanded foreign exchange and securities trading operations.
Last year Chase was the top-ranked bank in arranging financing for Latin American borrowers, underwriting a combined $16 billion worth of bonds and loans last year.
Chase does most of its business with about 500 companies in Latin America, of which some 160 are subsidiaries of multinationals and large local Latin companies. Almost half of those companies are based in Brazil, the region's largest economy.
"We are not looking for indigenous retail middle-market business or seeking to acquire local banks ," Mr. O'Neill said.
When it comes to possible acquisitions, he says he is keeping an eye out for an asset management company or corporate finance boutique that Chase could easily integrate into its global operations.
It takes an optimist like Mr. O'Neill to see the silver lining in the clouds hovering over Latin America as stock markets across the region plummet and risk-related spreads widen on loans and bonds.
Over the last three years net earnings from Chase's Latin American operations have fallen to $56 million in 1997, from $107 million in 1996 and $232 million in 1995. Last year's earnings in Latin America were also a mere drop in the bucket compared with the $645 million Chase earned in Europe and $324 million in Asia, and just a tad above the $53 million it earned in the Middle East.
According to Chase, much of the decline results from a revenue falloff following the bank's decision to reduce speculative positions in the region, in line with more conservative risk-management policies.
The figures are also somewhat misleading, because they don't include earnings from Latin America that might be booked in London or New York, or profits on trading Latin American securities or foreign exchange out of New York.
But even trading can suffer significant quarterly setbacks, as Chase found out at the end of last year when it suffered a pretax $160 million loss, much of it related to Latin securities.
Analysts express little concern over the fluctuations, however.
"If they don't make money in any one particular year, that doesn't mean that the strategy is flawed," said David Berry, a banking analyst with Keefe, Bruyette & Woods.
"Chase's long-term strategy is to be a global wholesale financial intermediary, and Latin America is an important part of that strategy."
Still, Mr. O'Neill acknowledges, low commodity prices, falling stock markets, and increases in borrowing costs could mean Latin America is in for a rough ride.
"What's going on in Russia and Asia will have a profound effect on Latin America," he says.
Over the first six months this year, he adds, syndicated loan and bond volumes for Latin America have been virtually flat.
"Will they be down in the second half?" he asks. "I think yes, almost certainly so."
But he also remains firmly convinced that Latin America is now in a far better position to withstand market volatility than it was even a decade ago.
"The social and economic reforms most Latin American countries undertook in the late '80s and early '90s means they are better positioned to withstand a possible lower rate of real growth," he says.
Over the longer haul, he predicts, profits from banking in Latin America will continue to bolster Chase's bottom line.
"If you look at the average over 10 years, Latin America has made a significant contribution to earnings, despite the ups and downs," Mr. O'Neill notes.
And despite the current downturn, he adds,"the bigger and better projects will still be able to get financing, albeit with more scrutiny and higher standards."
"What won't get done any more," he says, "are the marginal deals."