29
SECTORAL ROUNDTABLE SEPT 14TH, 2016 Financial Services
SECTORAL ROUNDTABLE
SEPT 14TH, 2016
Financial Services
AGENDA
15 min. Introduction: Global and Regional Context
Presented by Nicolás Masjuan, Partner, Bain & Company
30 min. The Government’s Agenda
Presented by Alfonso Prat Gay, Minister of Treasury and Public
Finance, and Luis Caputo, Finance Secretary
30 min. The Private Sector Perspective
Panelists include:
Enrique Cristofani - CEO, Banco Santander Rio
Juan Cruz Elizagaray - Partner & Country Head of Argentina &
Uruguay, Compass Group
Ernesto Allaria - President, Buenos Aires Stock Market Inc. (MERVAL)
Introduction
Presented by Nicolás Masjuan, Partner, Bain
& Company
DRIVER OF SOCIO-ECONOMIC GROWTH
•Source of GDP
growth, job creation
and investment
•Growth enabler for
other industries
DRIVER OF SOCIO-ECONOMIC GROWTH
•Source of GDP
growth, job creation
and investment
•Growth enabler for
other industries
Note: * considers Net credit assets for Chile, Brazil, Mexico, Argentina, Colombia and US, and Total bank loans for other countries
Source: Central Banks; EIU; Bain analysis
Net credit assets* (% of GDP, 2015)
LATAM
Other countries
Legend:
0
100%
200%
1,000 2,000 50,000 $100,000
$3,000B
Net Credit
assets*
Germany
UK
Japan
40%
30%
BANKING SYSTEM CAN GROW 3X
Brazil
GDP per capita(US$, 2015)
5,000 20,000
Chile
Argentina
Peru
10,000
Russia
Turkey
Colombia
Mexico
France
Canada
Australia
Italy
South
Korea
Note: considers average data for 1H 2015. Excludes public sector.
Source: BCRA; Secretaría de Hacienda y Crédito Público de México; Banco Central do Brasil; SBIF; Banco Central de Reservas de Perú; Superintendencia Financiera de Colombia;
Banco de la República; Bain analysis
SEGMENT NET CREDIT ASSETS (% OF GDP, 2015)
COMMERCIAL
MORTGAGE
CONSUMER
OPPORTUNITIES ACROSS SEGMENTS
10
20
30
40
50%
8
47
15
12
22
16
Time deposits(% of GDP, 2015)
Demand deposits(% of GDP, 2015)
Note: considers average data for 1S 2015
Source: BCRA; Secretaría de Hacienda y Crédito Público de México; Banco Central do Brasil; SBIF; Bain analysis
Need to create conditions and mechanisms to capture long term savings
0CHL BRA COL ARG
0
10
20
30
40
50%
23
COL CHL BRA ARG
10
MAIN GAP IN TIME DEPOSITS
0
20
40
60
80
100%
Mass Affluent Micro-businesses
& Professionals
SMEs
(Small)
SMEs
(Medium)
Corporate
PROFIT POOL WILL CHANGE DRASTICALLY (1/2)
Risk Adjusted Revenues(AR$B)
Transactions
Deposits
Loans
Source: BCRA (2014-2015); Bain Analysis
20
40
60
80
100%
Mass CorporateSMEs
(Medium)
Micro-businesses
& Professionals
Affluent SMEs
(Small)
PROFIT POOL WILL CHANGE DRASTICALLY (2/2)
Risk Adjusted Revenues(AR$B)
Transactions
Deposits
Loans
Source: BCRA (2014-2015); Bain Analysis
0
Refocus strategic priorities
Ride the
consolidation wave
1
2
3
Deploy omnichannelcostumer experience
Develop digital capabilities
Expand & sophisticate
corporate bankingCreate profitable
mortgage offering
Enhance value prop.
for individualsCrack the code
on SMEs
7 KEY CHALLENGES AHEAD
DRIVER OF SOCIO-ECONOMIC GROWTH
•Source of GDP
growth, job creation
and investment
•Growth enabler for
other industries
ARGCHL BRA PER MEX COLCHL MEX COL BRA PER ARG
Amount of outstanding corporate bonds (% of GDP, 2015)
Market capitalization(% of GDP, 2015)
Source: Bloomberg; Indec
45
3130
28
25
5
79
3129
26 24
8
0
20
40
60
80
100%Domestic
External
0
10
20
30
40
50%
LEAST DEVELOPED MARKET IN LATAM
• Sound macroeconomicframework and stable
economic policies - Monetary stability
- Fiscal sustainability
• Sound and enforced investor
rights and transparency
regulation
• Fiscal incentives for private
investors and corporate issuers
• Predictable rule of law
• Credited intermediaries:
investment banks, rating agencies &
auditors
• Solid infrastructure: products,
systems, integrated markets
• Dynamic and flexible regulator
• Suitable conditions for
institutional, foreign and retail
investors
• Mechanisms to foster domestic
long-term savings
• Advantages and non-fiscal
incentives for corporate issuers
• Lowered barriers to entry
• Debt management strategy to
drive liquidity and issuance
predictability
• Building of robust local currency
yield curve
4 CRITICAL GROWTH ENABLERS
28%
Amount
(in B USD)
Argentina’s potential of domestic equity and corporate debt markets (as % of GDP)
Note: Estimates done based on GDP 2015. Source: Indec, Bain Analysis
+ U$122B(~87B of free
float)
+ U$150B
0
10
20
30%
Today
8%
53
Today
5%
Potential
Domestic
Foreign
28%
30 180
REACHING FAIR SIZE IMPLIES +U$270B
Potential
175
The Government’s Agenda
Presented by Alfonso Prat Gay,
Minister of Treasury & Public Finance and
Luis Caputo, Secretary of Finance
132%
109%
94%
83%76%
72%64% 62% 62%
56%
46% 45% 45%41% 39% 37%
31% 30% 28% 28% 25%21%
5%
Sw
eden
Germ
any
Norw
ay
Austria
Canada
France
UK
Spain
Australia
Italy
Sin
gapore
Chile
US
New
Zela
nd
South
A
fric
a
Chin
a
Brazil
Peru
Mexic
o
Japan
Colo
mbia
India
Argentina
Market capitalization (% of GDP) – 2015
Corporate bond penetration (% of GDP) – 2015
8%
24% 26% 29% 31%
79%
Argentina Peru Brazil Colombia Mexico Chile
GROWTH POTENTIAL
Source: Bloomberg, MSCI
DEVELOPMENT OF LOCAL CAPITAL MARKETS
Gross public domestic and external debt (% of GDP) – 2015
33%
43%
61%66%
81%
94%
67%
57%
39%34%
19%
6%
Argentina Uruguay Peru Colombia Mexico Brazil
Domestic Debt External Debt
ALLEVIATE DEPENDANCE ON EXTERNAL FINANCING
Source: MHyFP – Secretaría de Política Económica, Central Banks and Ministries of Finance of Latin American countries
DEVELOPMENT OF LOCAL CAPITAL MARKETS
•Lifting of the “cepo”
1
•Tax amnesty and redress with pensioners
•Holdouts resolution
2
3
WHAT HAS BEEN DONE
PAVING THE WAY
6,25%
6,88%
7,50%
8,00%
6,63%
7,13%
3,70%
4,80%
5,88%
6,00%
6,58% 6,63%
3%
4%
5%
6%
7%
8%
9%
0 5 10 15 20 25 30 35
Yie
ld
Tenor (years)
April
July
Current
0.63%
0.55%
Argentina sovereign curve – September 2016
2.55%
2.08%
1.62%
1.37%
LOWER FINANCING COSTS
Source: Reuters
IMPROVEMENTS ACHIEVED
International Market (US$ mm) – September 2016
2.1721.502 2.311
600862
1.780
3.457
19,250
5,900
4,460
0
5.000
10.000
15.000
20.000
25.000
30.000
Provinces
Sovereign
Companies
29,610
ACCESS TO CAPITAL MARKETS BY PROVINCES AND COMPANIES
Source: Reuters – IFR News
IMPROVEMENTS ACHIEVED
126.291 126.294124.186
125,530127.079
122.953
129.415
136.466 136,930
143.989
150.089
162.269
179.402
120.000
130.000
140.000
150.000
160.000
170.000
180.000
190.000
Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16
Since December 2015:
• 56,449 new accounts
• 46% growth
Number of individual accounts in mutual funds
DEVELOPMENT OF MUTUAL FUNDS
Source: CAFCI
IMPROVEMENTS ACHIEVED
Ba3
Ca
Caa1
B3
Ca
B3
Ba2
Ba1
Baa3
Baa2
A3
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
Argentina
Perú
Investment
Grade
Argentina sovereign curve – September 2016
CREDIT RATING UPGRADE
Source: Moody’s
Baa2
Baa3
Ba1
B2
B3
Caa1
Caa2
Caa3
Ca
C
A2
Baa1
A3
A1
B1
Ba2
Ba3
CHALLENGES AHEAD
4,48%
4,86%
5,73%
6,06%
6,22%
6,63%
4,00%
4,50%
5,00%
5,50%
6,00%
6,50%
7,00%
0 5 10 15 20 25 30 35 40
Peru sovereign curve in domestic currency – September 2016
Tenor (years)
ACCESS TO FINANCING IN DOMESTIC CURRENCY
Source: Bloomberg
CHALLENGES AHEAD
Strong and modern legal framework harmonized with global standards
•Capital Markets Law Reform
1
•New Derivatives Law (ISDA Netting Jurisdiction)
•New Mutual Funds Law
•Tax deferral for long term savings (life and retirement insurance)
•Other laws (Crowdfunding, PyMES, etc.)
2
4
5
3
WHAT WE ARE WORKING ON
PAVING THE WAY
• Amend previous law shortcomings
- Remove CNV interventionist powers
- Improve mechanisms for investors’ protection
1
• Eliminate tax asymmetries and new deferral scheme
- Promote long term savings
- Forge an investor base in domestic currency
• Create a strong and modern legal framework
- Achieve transparency and efficiency
- Develop new savings and investment instruments
- Broaden financing alternatives for domestic enterprises
Channel savings and investments to finance real economy projects
2
3
NEW CAPITAL MARKETS LAW
PAVING THE WAY
The Private Sector’s Perspective
CEO, Argentina
Partner & Country Head,
Argentina & Uruguay
President, Argentina
THE PRIVATE SECTOR’S PERSPECTIVE
