Interconnected in LatAm: Changing role of the banking partner
December 6, 2019Interconnected in LatAm: Changing role of the banking partner
Jabar Singh, Vice President and Head of Wholesale Banking at Scotiabank Colpatria S.A., discusses how Colombia stands out as a market with opportunities for investors, and the benefits of Scotiabank’s global-local platform for its corporate, commercial and capital markets clients.
Colombia: A bright future for growth and investment
After 100 years of macroeconomic stability – and the recent Peace Accord that leaves half a century of unrest behind – Colombia and its resilient economy is now earning international investor attention. The nation’s economic strength is evident from the current flurry of business, trade and investment flowing in and out of Colombia. Jabar Singh, Vice President and Head of Wholesale Banking at Scotiabank Colpatria S.A., discusses how Colombia stands out as a market with opportunities for investors and the benefits of Scotiabank’s global-local platform for its corporate, commercial and capital markets clients.
“Today the social and economic fabric in Colombia is on solid ground due to robust GDP growth, historically low interest rates and inflation, the floating exchange rate framework and the 2016 Peace Accord, which is generally viewed as market friendly,” Singh observes. “That’s the perfect scenario for further economic growth in 2020, making it a very attractive market for investors.”
Singh’s ‘on-the-ground’ views reflect his team’s interactions with clients in Latin America’s second largest investment grade economy, backed by Scotiabank’s nine years of experience in the country. Having entered Colombia’s corporate lending and capital markets business in 2010, Scotiabank expanded into full-service personal and commercial banking in 2012 with the acquisition of a majority stake in the well-established Banco Colpatria. Scotiabank Colpatria S.A. is currently the fifth largest banking group in terms of assets and market share. Having a strong position in the Consumer Banking space, Scotiabank is now a leading player in the Wholesale Banking space, supporting a wide range of Colombian commercial, corporate, institutional and multi-national clients.
Echoing Singh’s constructive views of the country, Scotiabank Global Economics (SBGE) recently reported that Colombia’s GDP growth forecast stands at 3.2% year-over-year in 2019 and is expected to grow to 3.6% between 2020-2021. SBGE highlighted Colombia’s “resilient economic activity,” in light of robust domestic demand, high capital imports that have boosted investment, and the beneficial impact of tax reform and investments in infrastructure.
Diverse industries spin growth
Noting how Colombia stands out in Latin America as a market with opportunities for investors, Singh points out that Scotiabank has witnessed increasing foreign capital inflows and acquisitions, in many industries, from power and tourism, to telecom and agriculture: “In the Energy sector, we see M&A and foreign investment in oil & gas as well as power generation, transmission and distribution. We have observed interest in renewables, which is a positive shift towards a more sustainable power generation matrix for the country.”
He also highlights the emerging hospitality sector, as Colombia becomes a destination for business and leisure travel, which is a catalyst for other industries, including construction, food & beverage and services.
While Singh praises the active investment in technological infrastructure and tech-based companies, he also notes the manner in which Colombia’s traditional agricultural sector is growing: “We see agriculture in very favorable terms, since the Peace Accord is expected to promote new investment, which will leverage Colombia’s production potential and strategic location for exports through ports on the Atlantic and Pacific coasts.”
Although Colombia has suffered past political instability and it is not immune to unrest, as covered by the World Bank1 – including a recent national strike and continued rallies against economic plans by the national government – Colombia has enjoyed a steadily improving profile among global investors.
Singh adds that the Pacific Alliance trading bloc (PAC) is also driving sizable regional investment, from both Colombian corporates expanding operations into Chile, Mexico and Peru, as well as corporate groups from other partner countries investing in Colombia. The PAC accounts for more than one third of foreign direct investment (FDI) in the Latin American and Caribbean countries, and more than half of merchandise trade. Scotiabank distinguishes itself as the only full-service Bank present in each of these four countries.
Connectivity in the Americas’ enables growth
Clients are demanding more sophisticated and seamless services across borders, “They want their Bank to support their businesses on all fronts, from complex M&A advisory, to raising equity or debt capital wherever they operate, as well as day-to-day cash management, working capital loans, payroll and FX requirements,” explains Singh. “Our purpose is to provide regional customers with a one-stop-shop solution and homogenous quality of service across all countries where Scotiabank operates. We established this connectivity in our lending services, with multi-currency & multi-jurisdictional facilities and we have now introduced regional solutions across other key product/service offerings, such as cash management and capital markets products.”
“Customers appreciate Scotiabank’s deliberate focus on ‘Americas’ connectivity,’ not as a thesis, but something that is actually working day in and day out,” emphasizes Singh, who offers client success stories to prove the point.
For instance, Scotiabank played a leading role in providing liability management solutions to Empresas Públicas de Medellín (EPM), the largest utility company in Colombia, including credit facilities in three jurisdictions for a total of US$1.27 billion, followed by a US$1.36 billion dual-tranche international bond issuance, the largest in the company’s history. Scotiabank’s support in Colombia, Chile and Panama improved the Company’s debt structure and profile and positioned the Bank as a top 3 lender for the group on a consolidated basis.
Scotiabank also supported Brookfield Asset Management Inc. (TSX: BAM) in acquiring several marquee assets in Colombia: the acquisition of Isagen in 2016, Colombia’s third largest power generation company in terms of installed capacity (3,032MW), by leading a multi-tranche/jurisdiction syndicated acquisition finance loan -awarded as Latin America Loan of the year by Thomson Reuters-; and a utilities Company in 2018.
On the M&A front, Scotiabank recently acted as exclusive financial advisor and provided financing to the investment firm, The Carlyle Group (NASDAQ: CG), for the acquisition of 100% of Atracciones Coney Island S.A.C. and its subsidiaries, Divertrónica Medellín S.A.S. and Yukids SpA, from Peruvian conglomerate, Grupo El Comercio.
“These transactions speak to our strong relationships and capabilities across the Americas along with our unique position as both a global and local bank,” says Singh. “We provide clients with tailored solutions to meet their needs, from global capital markets transactions to local products and services.”
Such success stories have helped Scotiabank outperform the market: it is the #1 underwriter for Corporate international Issuances (non-sovereign) in Colombia, having led four of six transactions this year as of October 31, 20192; the Bank ranked as #1 bookrunner in Colombian loan syndications during 2018 according to Bloomberg3 with US$1.27 billion in successfully closed transactions (36% of total); for the past four years, the Colombian Stock Exchange has recognized Scotiabank as the #1 institutional desk for fixed income volumes traded4, it’s ranked #2 as primary market maker and #3 overall as of October 20195.
It holds an enviable position for a bank that is bullish on Colombia’s trajectory, “Colombia is consolidating a recovery cycle, as demonstrated by this year’s GDP growth and outlook for the near/mid-term future, which should sustain and promote local and foreign investment across multiple sectors. Scotiabank continues to make significant investments in the country by pursuing our growth plans and market share goals, while aiming to provide ‘best in class’ service to our customers,” Singh sums up.
For more information about Scotiabank’s Wholesale Banking solutions and opportunities in Colombia, please contact:
Vice President and Head of Wholesale Banking, Scotiabank Colpatria S.A.
57-1-745-6300 ext 0,4686
1. World Bank, Worldwide Governance Indicators - Colombia (https://info.worldbank.org/governance/wgi/Home/Reports).
2. Bloomberg League Tables, January 1, 2019 to October 31, 2019.
3. Bloomberg League Tables, January 1, 2018 to December 31, 2018.
4. Bolsa de Valores de Colombia – BVC (Colombian Stock Exchange), 2016-2018.
5. MOF, as of January 1, 2019 to October 31, 2019.