Firm Announces Debut Greenwich Share and Quality Leaders for Brazil
For the first time, Greenwich Associates in 2013 is naming the leading dealers and brokers in Brazilian fixed income, foreign exchange and equities.
Based on the results of its proprietary research with more than 120 financial institutions and large corporations in the country, Greenwich Associates has quantified the dominant position of Banco Itau in the Brazilian fixed income market, identified Banco do Brasil as the clear leader in Brazilian FX trading and discovered that a trio of brokers controls 45% of Brazil’s market for institutional equity research and advisory services. The full results of the Greenwich Associates study are presented in a new report entitled Greenwich Leaders: Brazilian Fixed Income, FX and Equities.
Fixed Income: Banco Itau Dominates
Banco Itau dominates the Brazilian fixed income market and is the 2013 Greenwich Share Leader in Overall Brazilian Fixed Income. Its 18.6% market share in fixed income trading is over 10 percentage points higher than that of its nearest competitors. Behind Banco Itau comes a group of five closely matched dealers — Link Securities, HSBC, Banco do Brasil, Goldman Sachs and Bradesco — all with market shares ranging from 6.2% to 8.0%.
“Banco Itau’s position is even more dominant when the analysis is limited to the trading of local Brazilian products,” says Greenwich Associates consultant David Stryker. “In on-shore trading of real-denominated fixed income products, the bank has a market share of 20% — more than doubles that of its closest rivals.”
Of the foreign banks active in Brazil, only HSBC has a meaningful presence in local products. Other foreign banks that rank highly in fixed income trading, such as Goldman Sachs, Barclays and Deutsche Bank, derive their positions largely from their performance in the off-shore trading business. In fact, Barclays’ strength in off-shore trading garners the bank some of the market’s best quality ratings from Brazilian clients. Barclays joins Banco Itau and BTG Pactual in claiming the title of 2013 Greenwich Quality Leader in Overall Brazilian Fixed-Income Service. Greenwich Quality Leaders are dealers that receive quality ratings from trading clients that top those awarded to competitors by a statistically significant margin.
“One thing that stands out in our research results is the importance to banks of winning a Top 3 trading relationship with Brazilian clients,” says Greenwich Associates consultant Brain Jones. “In other markets like the United States, the typical institution allocates 60-70%% of its business to its Top 3 dealers. In Brazil, an institution’s Top 3 dealers capture upwards of 80% of total trading volume.”
Foreign Exchange: Banco do Brasil Edges Rivals
Earning Top 3 dealer status with important clients is equally as important for banks competing for foreign exchange trading business. As in fixed income, Brazilian FX market participants allocate almost 80% of their trading business to their three leading dealers. “In FX, banks win these coveted positions largely on the strength of their execution capabilities and pricing,” says David Stryker.
Banco do Brasil has leveraged these capabilities to secure a 21.1% market share and the lead over its rivals in Brazilian FX trading. The bank leads its next closest rival by over 9% and is the 2013 Greenwich Share Leader in Brazilian Foreign Exchange. The 2013 Greenwich Quality Leaders in Brazilian Foreign Exchange are Banco do Brasil, Banco Itau and Citi.
Banco do Brasil amasses the bulk of its market share in FX trading from its relationships with Brazilian corporates. In fact, Banco do Brasil claims an impressive 32.7% market share in FX trading among corporates.
Equities: Trio of Dealers Control 45% of Research/Advisory Business
In Brazil, banks’ equity brokerage revenues are driven in large part by research. Institutional investors allocate approximately two-thirds of their equity trading business and subsequent commission payments to brokers as compensation for research and advisory services, with corporate access driving the bulk of that spending.
Three firms—Credit Suisse, BTG Pactual and Bank of America Merrill Lynch— dominate the equity research business among Brazilian institutional equity investors included in the Greenwich Associates study. These firms, which are essentially tied at the top of this market, control an aggregate vote share of approximately 45%. These three firms are the 2013 Greenwich Share Leaders in Brazilian Equity Research/Advisory. Behind these leaders is another trio of research providers—J.P. Morgan, Banco Itau and Morgan Stanley—that are also evenly matched and together control an aggregate vote share of approximately 30%. The 2013 Greenwich Quality Leaders in Brazilian Equity Analyst & Research Service are Banco Itau , BTG Pactual, Credit Suisse, and Deutsche Bank.