Investment Banking in Brazil

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21 Aug, 2024

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Investment Banking in Brazil Overview

Investment Banking in Brazil is one of the dominant sectors in the nation with bank which not only act the intermediary between companies and investors helping the latter invest in stock s or bonds whenever the former issues them, but also offers a boost to the employment rate by keeping employment opportunities for individuals in the country.

Investment banking in Brazil is only second to the United States with respect to the revenue it is expected to generate in 2024. As the investment banking industry has strong emphasis on sustainability of a nation, Brazil seems to have a positive impact of the growth that has been witnessed in the investment banking sector so far and also expected to be seen in the coming years.

Investment Banking in Brazil Overview

Investment Banking in Brazil Explained

Investment Banking in Brazil is a service offered through investment banks, which guide clients or investors towards cracking best investment deals offered by companies in addition to being the best employment opportunity providers. Brazilians have been into making savings into savings account or investing into the fixed-income schemes. However, with time, they started looking for better yields and this is where investment banking entered the scenario.

Investment banks offers investment plans to clients based on when and how much they can invest in a deal. These entities allow investors to maintain a diversified portfolio to keep their risk-reward ratio balanced. Connecting with investment banking units help investors be prepared for fluctuations in the market and be adaptive of the dynamic market scenarios.

Source: gulf-times.com

The investment entities in Brazil have been seen holding 10% of clients’ assets, which is now expected to reach up to 25% in 2024. This expansion will thereby allow these investment banking players to perform in the adjacent markets as well, including insurance, payments and credit niches, developing their client base and making it stronger than ever before.

The investment banking market in Brazil is likely to reach a revenue figure worth $29.28 billion in 2024 with an expected annual growth rate of 1.69%, amounting to $31.31 billion by 2028.

Characteristics

Brazil is one of the most popular emerging markets in investment banking. A few things about Brazil make it a unique place for investment bankers. Let us look at the features below to understand every aspect of the investment banking sector and explore how it works.

The investment banking market in Brazil has grown so much over the years. And one would find both bulge-bracket international banks and local investment banks to handle and close deals.
Brazil’s domestic banks win a lot of major deals, and the international banks advise on larger deals.
Most of the companies in Brazil are family-owned. And naturally, they prefer domestic banks to handle major financing & other opportunities. But at the same time, these family-owned companies can’t let go of the experience bulge-bracket banks have in this regard. So, they recruit both – domestic banks and international bulge-bracket banks for larger and complex deals.
There are usually two kinds of deals that are being executed. The first kind is M&A deals handled by bulge-bracket and domestic banks. And the second kind is restructuring deals that are being dealt with by boutique investment banks in Brazil.
Among all M&A deals, 99% of the deals are of M&A – sell-side.
In Brazil, most of the companies are not audited. As a result, the analysts and associates have to spend a lot of time browsing historical information to prepare the reports. And they also spend a lot of time preparing lists of potential buyers
The team in every investment bank is pretty small. Only 20-25 people work in one team. As a result, they all need to work harder, and there’s almost no social life.

Services

As already mentioned, investment banks in Brazil mainly deal with two kinds of deals – restructuring and M&A deals. But other than that, they also execute deals that revolve around the capital and debt market.

Let’s have a look at the services offered by the Brazilian investment banks –

M&A Advisory: As mentioned before, this is the biggest service most investment banks in Brazil offer. From strategizing to structuring, every move is being executed by local investment banks and follows the advisory of bulge-bracket banks in the area.
Capital Markets: Investment banks in Brazil always work on capital market deals. The deals they handle are both from equity capital markets and debt capital markets. These deals include IPO financing, debt financing, underwriting, restructuring, issuing stock, bonds, etc.
Corporate Lending: Investment banks in Brazil also offer corporate lending. Many family owned businesses want to expand their businesses, and for that, they need a commercial loan which they can use for large-scale expenditure. And for that, they go to local investment banks and ask for a commercial loan. And after doing their due diligence, these investment banks offer corporate lending to these family-owned businesses.
Sales & Trading: This is a very common service of every investment bank in any country. In Brazil, sales & trading are some of the most important services where investment banks offer services to their clients. These services include brokerage, research, and market-making.
Energy Trading: In Brazil, energy trading is one of the unique services investment banks offer. They offer competitive energy and renewable energy services to independent producers, self-producers, free energy consumers, special consumers, public organizations, and agro-industry.

Now, let’s look at the list of top banks in Brazil.

List of Top Investment Banks in Brazil

We have two data points to look at the top investment banks in Brazil. First, we will look at the data of 2012 as per Global Banking & Finance Review, and then according to the Leaders' League, we will glance through the best investment banks in M&A deals for the year 2016.

#1 - Global Banking & Finance Review

According to Global Banking & Finance Review, here’s a list of investment banks that stand out in the crowd in the year 2012 –

ABC Brasil
Banco Bradesco
Banco Cruzeiro do Sul
Banco de Brasilia
Banco do Brasil
Banco do Nordeste
Banco Safra
Banco Votorantim
Banestes
Banrisul
BicBanco
Brazilian Development Bank
BTG Pactual
Caixa Economica Federal
Central Bank of Brazil
Daycoval
HSBC Bank
Itau Unibanco
PanAmericano
Parana Banco
Santander Brasil

#2 - Leader's League

We will now look at the 2016 rankings in M&A deals given by the Leaders’ League. They divided the top investment banks again into four labels – leading, excellent, highly recommended, and recommended –

Leading: Under “leading”, here are the top investment banks in Brazil –

Bradesco
BTG Pactual
ITAU BBA

Excellent: Under "excellent," the top investment banks are –

Bank of America Merrill Lynch
Goldman Sachs
JP Morgan
Rotschild & CIE
Santander

Highly recommended: Under "highly recommended," the top banks are –

Banco Votorantim
Barclays Capital
Citibank International
Credit Suisse
Deutsche Bank
IGC Partners
Lazard
UBS Investment Bank

Recommended: Under "recommended," these are the banks that made their mark –

Albatros
Banco Safra
BNP Paribas
BR Partners
Brasilpar
Credit Agricole CIB
EP Capital
G5 Evercore
Greenhill & Co
Lincoln International
Pangea Partners
Xingu Capital

Recruitment Process

Even if it seems that Brazil could be easy to get into investment banking, the truth is something else. It’s quite tough to get into investment banking in Brazil. If one likes to build a career in the investment banking in Brazil, the following pointers will help them leap –

Networking: Like any other place in the world, in Brazil, you need to put in a lot of networking effort to get started. You need to call everyone you know, you need to send a cold email to anyone you know who has a background in investment banking, and if needed, you have to meet them in person. You may get a lead or two through networking, and maybe some gates will open for you. Yes, no one would hand you an investment banking job in Brazil and say – "Go, have a great career"!
Internships: Networking will take you far, but not as far as internships will. You need to do a couple of internships in investment banking (or at least in the finance domain) to be ahead of the crowd. Many people apply for full-time investment banking jobs in Brazil, and only a few are selected. And in Brazil, quite often, interns are being hired as full-time employees. So, without internships, you would have almost no opportunity to succeed. Also, check out - How to get an Investment Banking Internship
Interviews: In Brazil, there is one unique thing about the interview process in investment banking. It is given that you have a great network, you have already graduated from a top-notch university with a finance or relevant field, and you have at least a couple of internships under your belt. The first test you need to go through to qualify for the interview process is a test like GMAT. Once you’re through that test, the rest of the interview process is similar to the recruitment process of New York. After the test, you first need to face HR. If you’re through, you will have one-on-one interviews with analysts and then with associates. Then it would be best if you sat with VPs, EDs, and finally, MDs who will take the final call.
Language & Entry Barriers: Let’s say you work in another country and you would like to work in investment banking in Brazil. What would be your chances? In an ideal situation, your chances are bleak. You need to know the local language (Portuguese), and you need to stay in Brazil for some time to become a local person. Even when you have the skills, it would be difficult for a foreigner to get through as domestic investment banks only prefer local people.

Culture

As the team is smaller in small investment banks in Brazil, deals per person are also bigger. Every analyst/associate normally handles 5-6 deals at a time which is too much. As a result, no one could focus on one big deal properly.

In large investment banks in Brazil, things are much more difficult to handle. During a certain period, every analyst/associate handles 8-9 deals simultaneously.

So, you may think that the work hours would be huge. But in small investment banks, as an associate/analyst, you need to work around 55-60 hours per week. And in larger firms, as an associate/analyst, you would be working around 70 hours per week.

The work culture is quite hectic, and you would always be running for deals, reports, sourcing, presentations, and LOIs. And as the team is smaller, work pressure is much more. That means you can go to anyone (MDs, EDs, VPs), asking for anything. And at the same time, you need to take personal responsibility to close the deals. There’s almost no social life due to work pressure.

Also, have a look at Investment Banking Lifestyle

Salaries

The investment banking salaries in Brazil are not exciting. If you consider the exchange rate of Brazilian Real with United States Dollars, you would see that 1 Real means only 0.30 USD.

Now, let’s look at Brazil's average investment banking salaries first, and then we will discuss further.

source: glassdoor.co.in

You can now see the average salary of investment banking professionals. Let’s take the salary of the investment banking analyst at Citi. The average salary for this individual is around R$175,000 per annum, which means in USD, it is less than US$60,000 per annum.

When investment bankers worldwide earn at least six figures, salaries in Investment Banking in Brazil look dim. However, for local candidates, maybe this is a great compensation.

Exit Opportunities

People in Brazil don’t look for exit opportunities most of the time. Because it’s hard to get into investment banking and private equity, there are fewer chances of career growth.

In private equity in Brazil, people get hired directly out of college and get paid pretty little. So, you can understand why investment bankers don’t like to go into private equity.

But suppose you would like to quit investment banking and go for private equity. In that case, you can go for international funds because these international funds hire investment bankers with 2-3 years of experience.