JPMorgan took a leadership position across asset classes in 2010-2011, showing it had the geographic and product reach to service a whole gamut of clients and profit in a region that looks increasingly set to be a true money-spinner going forward.

The US bank may not have held the number one position on every league table for the September 30, 2010-September 30, 2011 period covered by the awards, but few can claim to have been among the leading institutions across such a broad spectrum of asset classes during this period.

The bank had a sizable presence in DCM, ECM, as well as M&A, and it even revived its syndicated loan book as that market re-emerged in force during the first half of 2011. In what remained a volatile environment globally, JPMorgan held its own well in Latin America, finding the right balance to excel in more active businesses, while others slowed.

Coming off a strong first half, investment bankers covering Latin America are no doubt disappointed by the anticlimactic finish to 2011 after Europe’s sovereign debt crisis had spoiled what looked to be a promising year for the region by dampening capital markets activity and putting pressure on balance sheets.

The overhang from Europe continued to pervade sentiment going into 2012 and has resulted in the retreat of several smaller players. Arguably, JPMorgan benefited from such trends. It is, after all, one of the stronger banks in what proved to be a tough year for many of its European competitors.

While acknowledging the environment in LatAm over the next several months will be very much geared toward events in the eurozone, JP Morgan’s Latin America CEO Nicolas Aguzin remains particularly sanguine about the region’s long-term prospects.

Whether it is the string of unlisted LatAm companies yet to tap the public markets, or the large amounts of investable capital sitting on the sidelines, Aguzin has any number of ways to measuring the region’s potential. .

He points to the low level of foreign pension fund money dedicated to Latin America, arguing that even if managers increased that amount to 2-3%, another several hundred billion dollars would likely flow to the region. This makes sense in the context of Latin America’s relatively high growth rates and a world that is becoming increasingly globalized, he says.

“Sovereign wealth funds also invest very little in the region today, and they are going to be redirecting their investments,” he adds.

A similar story is expected to unfold on the product side, as Latin American financial assets as a percentage of GDP catch up with levels in the US and other developed markets.

“If you look at financial assets in Latin America, including equities, bonds and loans, there are just over $7 trillion, which is only 140% of total GDP compared to 400% to 500% in developed economies,” says Aguzin. “We think total financial assets in Latin America will grow to more than $15 trillion in the next five to seven years. This will be a huge development. I am very optimistic on the outlook for the next four to five years in LatAm”.

Digging DCM

Over the last year, banks have certainly benefited from the surge in corporate bond issuance and sub-asset classes within this universe as both blue-chips and newcomers looked to raise capital to grow and for projects.

On the DCM front, JPMorgan clearly took a leading role on the vast majority of benchmark bond transactions over this period. These included deals from blue chip issuers such as Brazilian oil firm Petrobras’s $6 billion multi-tranche transaction and Mexican telecom América Móvil’s $2.75 billion dual tranche bond.

But perhaps more importantly, it also helped a total of 12 borrowers bring debut offerings from a broad array of countries, including Brazilian business magnate Eike Batista’s E&P company OGX’s splashy $2.75billion offering and Chilean mass transit operator Alsacia.

“We have had a great run,” says Roberto D’Avola, head of LatAm DCM at JPMorgan. “On the debt side the market has been robust and investors have seen value [in LatAm] versus other markets. LatAm issuers benefited from low rates and tight margins until the sell-off at the end of August.”

While not as active recently as some competitors in the loan market, JPMorgan has also used its balance sheet strength for key clients and picking up ancillary business along the way. “Our strategy is to be close to the client with what they need,” adds D’Avola. “We thought the syndicated loan market was going to open so we wanted to show them the possibility of doing a revolving credit facility.”

One triumph in this space was a $3 billion revolving credit facility from Brazilian mining company Vale, which JPMorgan led along with Credit Agricole CIB, Mizuho and Natixis. Adapting a European style pricing mechanism, the deal set a new tight benchmark that was quickly imitated by other blue-chips keen to take advantage of the new pricing environment.

Equity Standoff

Meanwhile, it was a mixed year for ECM, with many deals underperforming or being cancelled outright against broader market volatility, though JPMorgan did mange to get some of the better secondary performers past the finish line.

The IPO from McDonald’s franchisee Arcos Dorados was perhaps the largest feather in the shop’s cap. The deal marked the region’s biggest SEC-registered IPO since Banco Santander Brasil’s in 2009, and it was one of the rare outperformers at a time when market instability weighed heavily upon the region’s stock markets.

While it is tough to beat local Brazilian shops like Itaú BBA in the region’s largest economy, JPMorgan sees itself as the leading ECM bank region-wide. “Outside of Brazil we are number one by far,” says André Maciel, a vice-president in investment banking at JPMorgan.

That doesn’t mean that the shop didn’t clinch its fair share of Brazilian mandates as well. JPMorgan acted as an active book runner on locally listed and 144/RegS IPOs such as Sierra Brasil, Brasil Insurance, Autometal, Abril Educação, and CR Pharmaceuticals, while also leading follow-ons for Colombia’s Grupo Exito and Chile’s E-CL.

A US listing for Ternium illustrated JPMorgan’s ability to put together and finally execute complex transactions, even under less than ideal circumstances. The deal involved a follow-on for the sale of a 14.25% stake held by Brazil’s Usiminas and a $250 million private placement of shares to parent Techint.

Despite tough market conditions, leads were able to complete what was the largest equity offering from an Argentine company in over 10 years. “Usiminas’s object was to sell everything,” Maciel says “In the end it worked well because the stock price was able to find support and we could exercise the greenshoe in full.”

A Broad Reach

M&A volumes dropped over the last year, but JPMorgan advised on its fair share of completed transactions through the qualifying period and remained within a hair’s breadth of the top position.

The shop advised on a broad range of M&A transaction, reflecting its broad geographical and sector reach. Not only did they illustrate the bank’s ability to bring foreign entities into LatAm, but also to introduce them to foreign targets as well, not to mention ride the trend of intra-regional investment flows.

“If you look at our M&A practice we are across the region, not just Brazil and Mexico,” says Moises Mainster, a managing director at JPMorgan, co-heading the bank’s LatAm M&A business. “We are across sell-side, buy-side, domestic, cross-border, inbound and outbound. That is where our uniqueness lies.”

For instance, it advised on the Hoyts General Cinema South America’s Argentine subsidiary to Cinemark Holdings, acted as financial advisor to Colombia’s Exito on its $746 million acquisition of stakes in Casino’s Uruguayan subsidiaries Disco and Devoto, to GE Capital on its disposal of its 49.8% stake in Colombia’s Banco Colpatria, to HJ Heinz on its $618 million purchase of Brazilian food company Quero Alimentos, and to Brazil’s Marfrig on its $1.3 billion purchase of Keystone Foods in the US.

“There are large traditional national champions that have strong positions in the local markets, are generating cash like crazy and are looking for opportunities outside [their countries],” says Ignacio Benito, a managing director at JPMorgan, and co-head of LatAm M&A.

The bank also acted as financial advisor to Brazil’s Odebrecht Oil and Gas when it agreed to sell a minority stake to Temasek Holdings, marking the Singaporean sovereign wealth fund’s first Latin American investment since setting up office in São Paulo in 2008. The bank was also financial advisor to Ixe on its merger with Banorte in Mexico, helping it become the third largest banking entity in the country.

Going forward, Aguzin expects to see more interest from financial investors, which will not only be buying assets in LatAm, but also perhaps realizing exits as well. “I would expect financial sponsors to be a more relevant part of our business, same goes for sovereign wealth funds,” he says.

Aguzin points to how Latin American borrowers can now access to record low financing, in the local markets in Chile, Peru and Colombia, which may encourage financial investors to take on more leverage than they did in the past. LF