BankAmerica Corp. is making a cautious but steady comeback in Latin America, vaulting to the head of the syndicated lending pack there.
Through Oct. 22, the San Francisco-based banking company had arranged more than $2 billion in syndicated loans to Latin borrowers - more than twice as much as its nearest rival, according to Capital Data Loanware, London.
For BankAmerica, the strong showing is a vindication of its new approach to the Latin American market. Humbled by losses during the Latin debt crisis of the 1980s, the bank has turned its back on making large, long- term loans and holding them on its books.
Instead, BankAmerica is concentrating on shorter-term credits that it can syndicate to reduce its risk exposure. It also has expanded off- balance-sheet financings, such as commercial paper underwriting.
Barbara Z. Otto, BankAmerica's group executive vice president for Latin America and Canada, said the company is building on its "long-standing presence in the region and strong relationships with multinational corporations."
Like many other banks that retreated from Latin America in the late 1980s, BankAmerica has been drawn back by some powerful market forces. "Latin America is one of the fastest-growing regions in the world, has ongoing deregulation and privatizations, and is experiencing (a wave of) corporate restructuring," Ms. Otto said.
Its 1994 acquisition of Chicago-based Continental Bank Corp. also gave BankAmerica a big lift. Previously best known in Latin America as correspondent bank and supplier of trade finance, BankAmerica suddenly found itself running a full-fledged wholesale banking operation, complete with trading and corporate finance capabilities.
Last year's Mexican peso crisis did prompt BankAmerica to curtail its Latin lending - but only briefly. Now its involvement in syndicated finance is growing at the expense of some of its big rivals. In 1995, it trailed Chase Manhattan, Citicorp, and J.P. Morgan in the region.
This year, the company's syndicated loan volume puts it streaks ahead of second- and third-place West LB Group of Germany and ABN Amro Bank of the Netherlands. They were neck-and-neck with $863 million and $862 million in syndications, respectively.
Two U.S. banks with sizable Latin American operations rounded out the top five: Chase Manhattan Corp., with $846 million, and J.P. Morgan & Co., with $707 million.
Unlike Citicorp and Bank of Boston Corp., which run extensive commercial and retail banking operations in Latin America, BankAmerica is focusing solidly on wholesale banking with a strong capital markets link.
BankAmerica executives also stressed they are sticking with some 250 Latin companies with whom they can develop broad relationships. That includes not only lending, but cash management, advisory services, capital markets, trade finance, and structured finance transactions.
"We're very careful with respect to whom we choose to do business with," Ms. Otto said. "We don't do transactions on a one-shot basis."
About 80% of the bank's business in Latin America is with what executives call "top tier names" - government entities, local corporations, multinational corporations, and local financial institutions.
This largely involves U.S. commercial paper programs arranged on behalf of well-known Latin corporate names such as Bradesco, the Brazilian bank; Cemex, the Mexican cement conglomerate; and Petroleos Mexicanos, the Mexican state oil company.
Executives estimated that nearly three-fourths of the total financing BankAmerica arranges for Latin America corporations comes in the form of commercial paper programs. Most of the commercial paper, if not all, is usually sold off into the market, leaving BankAmerica with little risk on its own books.
Similarly, other types of syndicated transactions - such as a $100 million syndicated trade note for Petrobras, the Brazilian government oil company, and a $300 million, six-month bridge loan to Avantel, the Mexican telecom company, - also pose little risk. Like commercial paper, most of these credits are sold to other institutions as participants.
Bruce R. Magid, BankAmerica's director of Latin American corporate finance, acknowledges that so far, the bank has kept a fairly low profile in the region, if only because it is still building its operations.
"We didn't want to over-promise and under-deliver," he explained.
But as the program gets under way, he added, BankAmerica is looking farther afield for new customers, expanding into areas like project finance, and gradually extending maturities on its loans, from less than one year to between two and three years. The bank also hopes to develop public debt and equity underwritings, especially for dollar denominated, or "Yankee" bonds which are sold into the U.S. market.
Still, BankAmerica is something of a latecomer to the Latin corporate finance arena, where banks like Citicorp, J.P. Morgan & Co., Chase Manhattan Corp., Bank of Boston Corp., and Bankers Trust New York Corp. have long been chasing after business.
The bank had only $5 billion in assets in Latin America at yearend, compared with more than $30 billion for Citicorp and nearly $11 billion for Bank of Boston. Latin America also has lagged behind BankAmerica's own rapid expansion in Asia, where the bank's assets have been growing rapidly and reached more than $23 billion in assets at yearend.
Profits, however, are high. Last year, for example, BankAmerica earned $111 million on its Latin American operations, or 2.3% return on assets, compared with only $94 million in Asia, or an ROA of 0.4%. Peter Magnani, head of institutional relations at the bank, said the relatively lower return in Asia stemmed mainly from higher expenses due to large investments.
Its renewed interest in Latin America also fits in well with BankAmerica's declared ambition of focusing mainly on capital markets, global payments, and wholesale finance outside the United States, all areas in which it can leverage its U.S. connections.
But it also comes as BankAmerica is putting many of its domestic operations, as well as its operations in Europe, Africa and the Middle East, under scrutiny to see if they meet the bank's internal guidelines for risk adjusted return on capital. Analysts predict that while many international operations, especially in Europe, will be shut down, Asia and Latin America, which have better potential, will be kept up and running.
Others say BankAmerica is only doing what it believes is logical.
"They're in business to help raise money. The biggest capital market is in the United States, and BankAmerica is in the United States," remarked Kai Nargolwala, former head of Asian corporate finance for the bank. "What they're doing is playing their existing customer base overseas into the U.S."