Banco de la Nación wants to sell debt after a 30-year hiatus

The new head of Argentina’s largest bank is embarking on a Javier Milei-style overhaul of the institution and planning its return to international capital markets for the first time in 30 years.

Longtime banking executive Daniel Tillard was appointed by Milei last December to transform Banco de la Nación, the state-run bank that has two-and-a-half times the assets of its next competitor in Argentina, Banco Galicia. They’re wasting no time so far.

In the first year, Tillard is cutting 1,000 jobs, or six percent of the bank’s total workforce, a part of Milei’s broader spending cuts.

While Tillard’s team is cleaning up a balance sheet laden with bad loans, the Executive is considering adopting a public-private banking model like Banco do Brasil, in which the federal government there owns half the institution.

These are all steps toward a return to markets — and a microcosm of Argentina’s own bid to attract international investment after a sovereign debt restructuring in 2020.

“We are going to do what is possible under the circumstances. First, a debt issuance in the local capital market; and then, an international one,” Tillard, 67, told Bloomberg News, declining to detail when or how much debt he would seek to sell or at what interest rate. “Our aspiration is to imitate the Banco do Brasil model.”

Tillard and Milei had to pare back some ambitions earlier this year when opposition lawmakers forced the administration to remove Banco Nación from a list of state-run companies that would be privatised as part of a larger package of reforms.

Now, the government no longer speaks explicitly of privatisation, private equity or an initial public offering, but of seeking financing through debt issuance.

Nevertheless, the bank is still an active pawn on Milei’s chessboard. Economy Minister Luis Caputo announced Tuesday that the government was closing Banco Nación branches in municipalities that imposed “unjustified” taxes, adding that Tillard would carry out the order.

Banco Nación last issued bonds in international markets in early 1993. The issuance was for US$150 million over three years with a coupon of nine percent per annum.

Founded in 1891, the bank is part of Argentina’s fabric and volatile identity: Its titanic headquarters sit right across from the Casa Rosada presidential palace in Buenos Aires — an ode to the country’s ambitions a century ago.

The solvency of the state-owned bank has been threatened throughout its 133 years by the mismanagement of military, populist and conservative governments. The most recent blow was from agricultural company Vicentin, which defaulted on more than US$300 million in debt with Banco Nación in 2019.

Tillard boasts of having implemented a similar transformation in his eight years as president of BanCor, the state-run bank of Córdoba Province. On his watch, BanCor reduced its number of employees to 2,000 from 2,700, and tripled the number of savings accounts, according to cCentral Bank data. The return on assets increased to 2.7percent from 1.9 percent in this period.

Banco Nación invests half as much as its competitors in technology development, and Tillard wants it to be better prepared as credit lending is growing at a double-digit pace. Domestic banks started offering home mortgages in recent months for the first time in six years.

“We have to go to the capital market for additional financing to deepen our lending” and close the technology gap with competitors, Tillard said.

Tillard says his IPO hopes aren’t done for good. “It is feasible to do it, but it depends on congressional approval. If it needs to be done, it will be done at some point,” he says.

He tapped Argentine law firm Liendo & Asociados seven months ago to revamp Banco Nación and convert it into a limited partnership, a type of organisation that limits shareholders’ liability to the capital they contributed. The new project seeks to modify the company’s bylaws, improve the organisation’s deficiencies and avoid mistakes in the loans it grants, among other things.

Still, Tillard’s ultimate goal looks like its Brazilian counterpart. Banco do Brasil is a privately-owned, publicly-traded corporation that’s controlled by the federal government, which holds approximately 50 percent of the shares. It’s Latin America’s second-largest bank, with 3,980 branches in its country and nearly 20 subsidiaries in 15 countries.

“If you see that something is successful, you try to imitate it,” Tillard said.