Winner: Santander CIB
The past year-and-a-half of the pandemic has presented unprecedented challenges for banks in Mexico, a country whose economy was already under pressure even before the arrival of the novel coronavirus.
But business has picked up modestly so far this year, as companies looking back towards capital markets to raise money to fund an expected period of recovery.
“At first, it was a period of adjustment. Everybody wanted to see what would come next,” says Felipe García Ascencio, the head of Corporate and Investment Banking at Santander CIB, the winner of the Investment Bank of the Year in Mexico award.
The muted character of the market is reflected in the numbers. In 2019, there were 79 deals where Mexican non-financial corporations placed long-term debt in the market, according to BBVA Research. In 2020, that number was 56.
Companies’ priorities changed at the time. Rather than expanding operations, the priority shifted to short-term survival.
“Initially, most of our clients drew money from the lines that we had committed to clients to build a war chest and make sure that they would be able to navigate the economic adjustments to their supply chains, to consumer demand and to economic activity in general,” García says. “They kept the money for quite some time, but in the second half of last year, they started either to repay some of those lines or to go to capital markets to issue some notes.”
“This year, we have seen government entities, companies and financial institutions come to the market to try and term out debt,” he adds.
Santander CIB has participated in 2021 in some of the most significant debt placements by companies like CEMEX (worth 1.75 billion), Credito Real ($500 million) and Unifin ($400 million), as well as more than $2 billion worth of issuances by the Mexican government. On the equity side, it played a key role in the $173 million follow-up offer by airline Volaris in the US, as well as the $329 million IPO by Fibra SOMA, a REIT.
García noted that a good level of activity is returning to sectors like infrastructure and even in energy, with a number of M&A and refinancing deals. Boosted by the pull of a rebounding US economy, many companies are already working on how to expand their production to meet growing demand.
“On the one hand we have clients with a lot of cash in their hands, and as rates in dollar have become negative worldwide, it has been difficult for some of them to find where to invest it. On the other, we negotiated with other clients to extend their debts and give them more room to come out of this stronger,” he says. “We believe the environment will continue to be quite positive for investment banking.”