Jan. 8 (Bloomberg) -- Brazilian equity sales are poised to double this year as falling interest rates and optimism the global economy will rebound spur demand for shares, said Grupo BTG Pactual and Bank of America Corp., the nation’s two top stock underwriters.
Companies may sell as much as $16 billion in shares in 2013, said BTG Pactual, which took the No. 1 spot last year from 2011’s leader, Banco Itau BBA SA. Equity sales in Brazil tumbled 32 percent in 2012 to a seven-year low of $8.21 billion, data compiled by Bloomberg show.
Enthusiasm for Brazilian shares may rise as Europe’s sovereign-debt crisis recedes and slowdowns in China and Brazil ease, said Fabio Nazari, head of equity capital markets and a partner at BTG Pactual. Brazil’s central bank cut benchmark borrowing costs 5.25 percentage points since August 2011, which may also make stocks a more attractive investment than bonds.
“We have a lot of big initial public equity offerings in the pipeline, and international investors are full of short-term cash to invest right now,” Nazari said in an interview yesterday at BTG’s headquarters in Sao Paulo.
Brazil’s equity issuance shrank last year even as global share sales rose 7.5 percent to $478.4 billion, the data show.
“The end of 2012 was a turning point in the stock markets as a lot of uncertainties have gone away and the U.S. budget impasse is getting close to being resolved,” Hans Lin, co-head of investment banking at Bank of America Merrill Lynch in Brazil, said in an interview in Sao Paulo. “Falling interest rates in Brazil will also help since they will make local investors seek higher returns buying shares.”
BTG handled $1.32 billion in 22 transactions, not including its own $1.47 billion initial offering in April. The bank also ranked first by the number of transactions, data compiled by Bloomberg show.
“The consumer, retail and infrastructure sectors will be among the most active and we can start to see stock sales as early as this month,” Nazari said.
Charlotte, North Carolina-based Bank of America became the second-biggest equity underwriter with $1.29 billion handled in 12 transactions, including the $432.4 million deal by health-insurance broker Qualicorp SA in November. Sao Paulo-based Itau BBA, the wholesale arm of Itau Unibanco Holding SA, fell to fourth place, underwriting $873.4 million in 13 transactions.
Itau declined to comment on its stock-underwriting business, according to an official who asked not to be named in keeping with company policy.
The shrinking market reduced fees for banks, which earned $149 million from equity capital markets underwriting in 2012, half the previous year’s total, according to Dealogic, the London-based information and consulting service.
“Fees will slowly grow to a normal level of about $500 million a year,” Lin said.
Bank of America earned $25 million in equity underwriting fees in 2012, up from $23 million in 2011. It rose to second place in Dealogic’s fee ranking, from fourth in 2011. BTG earned the most fees for the year, at $35 million.
Bank of America rose to second from sixth in Bloomberg’s underwriting rankings after naming Lin and Roberto Correa Barbuti co-heads of the investment-banking unit in Brazil in November 2011. Barbuti, who was hired by Bank of America in August 2011, was previously head of Banco Santander Brasil SA’s brokerage. Additional hiring came in August 2012, when Bank of America picked up four bankers from Morgan Stanley.
Economic growth in Brazil, the world’s largest emerging market after China, probably decreased to 0.98 percent last year from 2.7 percent in 2011 and 7.5 percent in 2010, according to the median estimate in a Jan. 7 central bank survey of about 100 analysts. This year it will grow 3.26 percent, the analysts said.
Six Brazil companies withdrew or postponed IPOs last year, data compiled by Bloomberg show. Brazilian companies including CPFL Energias Renovaveis SA and Seabras Servicos de Petroleo SA postponed or canceled share sales last year as economic growth slowed and concern increased that government regulations and intervention in the economy would contribute to losses on Brazil investments.
Two offerings completed in Brazil last year -- from car-rental company Cia. de Locacao das Americas and furniture-maker Unicasa Industria de Moveis SA -- were priced below the lower end of the companies’ targets. Locamerica, as Cia. De Locacao is known, fell as much as 28 percent in the two months after the IPO, and has gained 19 percent since then.
Brazil’s benchmark Bovespa stock index entered a bull market on Jan. 3 after rising 21 percent from last year’s low on June 5. Stocks got a boost from borrowing costs at a record low in Brazil and central-bank stimulus around the world, which eased concern that growth might be below economists’ forecasts.
“The top challenge for Brazil in 2013 will be how to attract the attention of the international investor with a still tiny growth of 3 percent in a world in which the United States will have a better economic performance,” said Ricardo Lacerda, chief executive officer of BR Partners, the Brazilian investment bank founded by former Goldman Sachs Group Inc. executives. “New equity issuance in the country is very dependent on foreign investor demand,” he said in a telephone interview.
That demand will be tested this year by Banco do Brasil SA, the state-controlled lender that’s planning what would be the largest IPO in Brazil in three years, a 5 billion-reais deal for its pension and insurance unit. The bank expects the offering sometime in the first half of 2013, Alexandre Abreu, vice president of the bank’s retail business, said in a telephone interview on Nov. 26.
Tupy SA, the largest foundry in Latin America, is preparing an equity offering of 1 billion reais for this year, three people with direct knowledge of the matter said last month.
Votorantim Cimentos SA, the biggest cement producer in Brazil, is preparing an IPO of at least $3 billion, according to three people with direct knowledge of the matter.
Votorantim hired Banco Itau BBA and JPMorgan Chase & Co. to manage the deal and will include additional banks, said the people, who asked not to be identified because the plan hasn’t been made public. The IPO will take place sometime this year, they said.
“Such a move is not Votorantim’s actual plan,” the company said in an e-mailed statement on Dec. 19. Tupy and Banco do Brasil declined to comment on sale plans.
A total of 13 share offerings totaling 623 million reais are being reviewed by the Brazilian securities regulator, known as CVM, which has to approve the deals.
“The Brazilian equity markets will have a better year during 2013 because the government is still giving signs it will retreat from its intervention in many sectors like banks,” BR Partners’ Lacerda said.
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