Arab Banking Corporation’s optimism for the Brazilian market

With portfolio assets of approximately 45 billion riyals (US$8.8 billion), Bank ABC Brazil is the most important subsidiary of the Arab Banking Corporation, a group headquartered in Bahrain.

Nearly 20% of its portfolio consists of electricity and hydrocarbon projects, as the demand for financing is increasingly high.

In this interview with BNamericas, Rodrigo Montemore, Commercial Director of Corporate Banking at ABC Brasil, explains why the business outlook is positive.

America: How big is Banco ABC in Brazil and what proportion of the oil, gas and electricity sectors are in its portfolio?

Montemore: We are a listed foreign bank, with a presence in Brazil since 2007. About 65% of our capital is in Arab hands, in Bahrain. Brazil contributes between 25% and 30% of the bank’s results and is its most important subsidiary.

We have 45,000 million riyals in assets, of which 25% are related to the agricultural business. Electrical energy accounts for about 15% and hydrocarbons for 3%.

We operate in three divisions: The middle market, which includes companies whose income ranges between 30 million and 300 million riyals per year. corporate banking, where there are groups with a revenue of 300 million RRL per year; and commercial and investment banks, which deal with large groups such as Vale and Petrobras, with revenues exceeding OMR 4000 million per year. Corporate banking accounts for nearly 60% of the 45 billion riyals of assets.

America: How would you rate your job prospects in the oil and gas field?

Montemore: Today, in oil and gas, we are divided into two worlds. One is operation and maintenance [OyM], which includes service providers such as coastal navigation, offshore support, diving, etc. After years of suffering, these companies are beginning to benefit from higher oil prices and the resumption of Petrobras investments, and we are already seeing strong demand for capital expenditures and working capital. Working capital is allocated, for example, to ships that need modifications to fulfill specific contracts of Petrobras or to mobilize these contracts, with recruitment and training of personnel, acquisition of materials, etc. We use our own resources, from the bank’s balance sheet, but we also carry them bonds to the market.

There is also an exploration and production group [EyP]. After a period of crisis, Petrobras began to resume investments and divests on land and in shallow waters. At that time there were companies such as 3R Petroleum and PRIO [antes PetroRio] and PetroRecôncavo, among others, began surfing this wave. They have been rolled out to the public and offered follow-up offers to access the equity, fixed income and capital markets, as well as issuance bonds. With oil prices above $90 per barrel, they have hedged at levels that pay well, considering extraction costs of between $20 per barrel and $30 per barrel. We have been a very important player in these hedging operations, in the equity and debt markets.

For example, PetroRio has gained access to the international market by issuing bonds for oil exploitation at an astonishing level.

America: Will there be more players seeking access to capital markets taking advantage of the current situation?

Montemore: Yes, they searched for us. Some private equity funds are interested in the assets that Petrobras can sell. New entrants can make their debut in this market, under very favorable conditions. The fixed income market is very attractive, while the variable income market is slightly lower due to the macroeconomic situation and the high level of [tasa de política monetaria] Selic we live. However, they are studying this possibility due to high oil prices.

America: What are the prospects for the electric power sector?

Montemore: We provide services for generators, especially solar and wind power plants, small hydroelectric plants, small hydroelectric plants and [sistemas de] Distributed generation as well as transmission and distribution companies. We create an area Project financingWe provide consulting services before and after tenders for supply and transportation, and we are among the top three exporters of bonds infrastructure in Brazil.

Editor’s note: ABC aired bonds For companies like EnergizingAnd the kopecks s Alianca Geração de Energia.

Recently, a client from Minas Gerais working with small hydropower plants hired us and we financed his project by attracting investors from among our contacts, which allowed us to structure a very long-term debt. In this case, the operations of real estate credit certificates [CRI]where the right to land surface use is what supports CRI emissions.

America: Are more individuals or companies looking for it in the distributed generation sector?

Montemore: We had, in the recent past, a very high demand for wind power and transmission projects. Now there is an increase in the demand for distributed generation, as well as between individuals, as well as projects of centralized solar power generation and self-production.

In 2020, we established an energy marketer focused on the free market. Among the various products it offers is the use of bank credit to fund companies that buy energy in this environment. We are in a position to conduct financial operations using the free market purchase and sale of energy contracts as collateral.