Banks in South Florida are exporting more commercial credit to business borrowers abroad as the area’s international trade expands.
“We’ll grow 10, 15 percent this year,” Espirito Santo Bank president Mark North said of the Miami bank’s portfolio of commercial and industrial loans to foreign creditors. Many are Latin American businesses that borrow to buy not only U.S. tools and machines but also such basic commodities as cardboard, corn, cotton, even rocks.
“We’ve done a huge amount of [financing for] rocks for gravel,” North said, ticking off the types of U.S. export sales that Espirito Santo finances. “It’s funny. You usually would think it’s going to be some fancy machine. It’s not always.”
Espirito Santo is one of 22 domestic banks out of 67 with headquarters in Miami-Dade, Broward and Palm Beach that provide export financing, revolving credit lines and other types of nonreal estate commercial credit to foreign borrowers. Their combined commercial and industrial loans to foreign borrowers totaled $979 million on Sept. 30, or 5 percent more than a year earlier.
A survey by the Daily Business Review also shows Espirito Santo Bank had $82 million of loans to commercial and industrial borrowers abroad on Sept. 30, the second-largest portfolio of foreign C&I loans among South Florida banks, well behind top-ranked Mercantil Commercebank in Coral Gables with $570 million. Other domestic banks in South Florida with sizable portfolios of business loans abroad at the end of the third quarter included BAC Florida Bank in Coral Gables at $58.7 million, Ocean Bank in Miami at $52.1 million and Intercredit Bank in Miami at $30.8 million.
Foreign banks are bigger players in this market, and many are poised for further growth. Consider the outlook at Banco Internacional de la Costa Rica, a Panama-based bank. Commercial and industrial loans to foreign businesses at the bank’s Miami branch office totaled $121 million at the end of September, up 16 percent from a year earlier, and faster growth is possible this year.
“We are talking about probably a 25 percent increase” this year, said J. Antonio Bejarano, general manager of the Miami office of Banco Internacional de la Costa Rica. “The growth in Latin America continues to be healthy.” Bejarano said the bank focuses on short- and medium-term C&I loans for working capital, inventory financing and equipment purchases: “We don’t do any real estate. We don’t do any construction.”
Latin American Growth
Eighteen of the 22 foreign banks with branch offices in Miami-Dade are commercial and industrial lenders abroad, and their C&I loans to non-U.S. borrowers totaled $4 billion at the end of September, up 53 percent from $2.6 billion a year earlier.
As an industry, “a lot of our growth is in Latin America, and that region has been pretty solid. It hasn’t had the type of [economic] crisis which has passed through the United States,” said M. Grisel Vega, general manager of the Miami office of Chile-based Banco de Crédito e Inversiones, or BCI.
The Miami branch of Spain-based Bankia had $759 million commercial and industrial loans to non-U.S. borrowers at the end of September, more than any other South Florida branch of a foreign bank. Bankia is the parent of Miami-based City National Bank of Florida. Other foreign banks with large portfolios of C&I loans to borrowers abroad at their Miami branches include France-based Credit Agricole at $643 million, Colombia-based Banco de Bogota at $497 million, Chile’s BCI at $465 million and Spain’s Banco de Sabadell at $435 million.
Some well-known banks with branches in Miami-Dade and head offices abroad have competitive advantages over domestic banks in the international business lending arena. For example, many foreign visitors and residents in South Florida do business at the area branches of banks with head offices in their home countries. “If they’re from Brazil, and there’s a Banco Itaú [branch] or Banco do Brasil, they may think of that bank first because that’s a bank they’re used to working with,” said Vega, president of the Florida International Bankers Association, a Miami-based professional trade group.
Demand For Financing
David Schwartz, executive director of FIBA, said foreign banks have avoided many of the real estate loan defaults in recent years that eroded the capital and lending capacity of domestic banks.
“I don’t think you saw the international banks hit that hard, so that did give them a big boost,” he said. At the same time, “there’s a lot of need and demand for financing” among international companies operating in Latin America and other offshore regions.
Both foreign and domestic lenders are gaining from South Florida’s expanding volume of imports and exports. International trade in the U.S. Customs district encompassing South Florida increased 10.7 percent to $102 billion in the first 10 months of 2012 compared with the same period in 2011, Coral Gables-based publisher WorldCity reported.
Both outbound and inbound trade increased year over year as exports rose by 6.2 percent and imports by 17.9 percent in the January-October period. WorldCity also reported South Florida’s top trade partner during the 10 months was Brazil, followed by Colombia, Switzerland, Costa Rica and Venezuela.
Lenders in South Florida commonly insure themselves against the risk of default on loans to finance U.S. exports, and the cost may be moderating. While the federal government’s Import-Export Bank is a dominant provider of this type of insurance, private underwriters appear more active following a lull in the wake of the global financial crisis that peaked in 2008.
“They kind of took a step back during the crisis and are now getting more involved,” said Simon Cruz, president and chief executive officer of Intercredit Bank in Miami and a member of the bank’s board of directors. “You are seeing the private insurance companies gain a larger footprint in this trade finance area,”
Intercredit, a domestic bank owned by Ecuadorean shareholders, had $30.8 million of commercial and industrial loans to foreign borrowers at the end of September, up 74 percent from a year earlier.
This year “we anticipate it growing another 15 percent,” Cruz said, citing solid business conditions in Costa Rica and other Latin American nations where some of Intercredit’s commercial customers are located. “Latin America has been experiencing strong economic growth during the whole downturn here in the United States.”