Top 100 banks: after a stormy 2002, banks look forward to increased trade and integration.

Read the tiny type first. The reporter's dictum for deciphering financial results--that all the news is in the footnotes--holds true for 2002's LATIN TRADE Top 100 Banks. A lot of the usual suspects are here, although in far different places than a year ago. By dint of sheer size, state-run Banco do Brasil stays on top, but Mexico's Banamex moved to No. 2 from No. 5, displacing Brazil's biggest private bank, Bradesco, in the process.

That flip-flop is partly the result of U.S. banking giant Citibank's US$12.5 billion 2001 buyout of Banamex, but it also reflects Mexico's maturing economic and trade links with the United States. As the North American Free Trade Agreement nears the 10-year mark, in January, the two economies are moving more in sync.

We weren't content with simply explaining who's biggest. For the first time, LATIN TRADE has chosen to rank the best banks in Latin America. That's thanks to rising levels of openness and improvements in public reporting by the banks and the government institutions that oversee them--another result of increased international trade and investment.

For the last 18 months, however, bankers have been doing more accounting than banking in Latin America. A technical bankruptcy routed Argentina's financial sector. Currency devaluations and turmoil hurt in Brazil and Venezuela. Shareholders felt it, as banks took billions in reserves and losses.

The financial storm is bringing decisive action. International banks are merging operations to cut costs and jettisoning money-losing operations. The less-committed foreign banks are simply leaving. Local institutions are acquiring assets at bargain-basement prices.

Bigger, but better? It's clear from the changes in the LATIN TRADE Top 100 that Mexican banking is back, as the six Mexican institutions in the top 20 moved up in the rankings. The Chileans had a good showing too, also with six, not counting mergers completed after 2002 numbers were in.

In part, the financial musical chairs game is tied to currency. Brazil's real slid nearly 50% during 2002, while the Mexican peso slipped just 15% against the dollar. Currency differences thus pushed many Brazilian banks lower in our ranking, while the Mexicans and Chileans stood their ground or gained, relatively.

The Chilean peso lost just 3% of its value against the dollar in 2002. A rising trade profile and international integration has helped push Chile's banks higher. And its maturing industry, coupled with global hard times, pushed along delayed merger activity, leaving behind larger and ostensibly healthier institutions.

The long-awaited merger of Banco Santander Chile and Banco Santiago, for example, helped solidify results at the Spanish bank's Chilean unit; directors recently told investors that a 25% increase in net income in the second quarter of 2003 was directly related to the merger's culmination in April.

By fall, Spanish giant Banco Santander Central Hispano (BSCH) had also begun to merge its two Mexican subsidiaries, Banca Serfin and Banco Santander Mexicano, creating a super bank with $25 billion in assets. The merger, billed as a cost-cutting strategy, will push the combined bank into the top 10 in next year's list, alongside Mexico-based rivals Banamex and Spanish-controlled BBVA Bancomer.

Meanwhile, BSCH sold its Peruvian unit to retail bank Banco de Credito del Peru, it said, to focus on corporate banking. Santander also bought the Latin American operations of Coutts Group, the international private banking arm of The Royal Bank of Scotland Group, picking up $2.6 billion in assets.

Bank of America, a U.S. financial institution, paid $1.6 billion to buy 25% of Grupo Financiero Santander Serfin in Mexico, even as it sold its investment fund division in Brazil to HSBC Bank Brasil.

For the English banking giant HSBC Holdings, Mexico was also the focus. It paid $1.13 billion for Grupo Financiero Bital, Mexico's fifth-largest banking group with 14,000 branches and 6 million customers across the country. By year-end, HSBC had put $798 million into Grupo Financiero Bital.

Dutch bank ABN AMRO continued to expand in the region, buying Banco Sudameris from Italy's Banco Intesa in Brazil through its Brazilian unit for cash and stock worth more than $750 million. Banco Intesa picked up a 12.9% stake in the Brazilian operation in the deal. Intesa's Banco Sudameris Argentina unit merged with Argentina's Banco Patagonia, creating Banco Patagonia-Sudameris.

Banco Itau, Brazil's second-largest private bank, got into the buying game, even into financial businesses outside of traditional banking. Itau bought Brazil's Banco BBA-Creditanstalt for $932 million in November 2002, to become the country's largest corporate bank. By December, Itau had bought 99% of Banco Fiat, the vehicle-financing unit of Italian automaker Fiat, for $244 million. Banco Fiat finances 40% of the car company sales in Brazil.

Looking out, looking in. Banco Bradesco, meanwhile, said in January 2003 it will buy BBV Banco, the Brazilian unit of Spain's Banco Bilbao Vizcaya Argentaria, for approximately $585 million. Bradesco will give BBVA in Spain a 4.5% chunk in Bradesco as part of the deal.

Bradesco also bought the Brazilian assets of J.P. Morgan Fleming Asset. Management, valued at approximately $1.93 billion, while Banco Votorantim took over $100 million worth of asset management operations from Banco BNL do Brasil, a unit of Italy's Banca Nazionale del Lavoro.

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Integration of international banking proceeds apace. Banorte and Banco Popular Espanol are offering joint banking services in both countries. Citigroup later allowed Citibank North America customers to transfer as much as $3,500 a day from an account in the United States to a Banamex account or cash machine in Mexico for $5 per transaction--far lower than traditional wire transfers. That could have something to do with the nearly 30 million Mexicans now living on U.S. soil.

As the global recession forced a lot of big corporate players to the sidelines to heal their balance sheets, many banks looked inward for new business in previously unexplored markets--small and medium-sized business, even micro-sized loans. Mexico's Bital, for instance, worked with German car-maker Mercedes-Benz Mexico to offer credit lines of up to $1 million to small and medium transportation companies, hoping to sell more Mercedes brand buses.

Grupo Blektra, a Mexican retailer and bank, got permission to begin offering retirement funds, investing $5 million in the effort. Citibank Brasil spent $5.5 million to open nine outlets in Brazil to make loans to low-income clients.

Banco do Brasil, meanwhile, began offering credit small business credit of up to $17,000 through a company credit card provided by Brazil's Banco Nacional de Desenvolvimento Economico e Social.

What's ahead? Look for the Mexican integration story to continue as the U.S. economy picks up steam. Argentine banks, once they get their finances in order--a painful process in hard times and nigh impossible when the currency completely falls away--are likely to see a boom on increased exports.

Brazil can expect better times with a strengthening global economy and the expansion of its private sector abroad. as will some banks in Central America and Andean countries, particularly as they improve trade ties with the much larger U.S. economy. The black hole, for now, remains Venezuela, where a stalled economy, lack of hard currency and the political turmoil driving it all seem to have no horizon.