Over the last two decades, two banks have dominated the Brazilian financial markets. One is Itau Unibanco, a huge conglomerate that has gone on one of the largest acquisition sprees of any company in Brazilian history.
The other is Bradesco, the bank that spans every market in finance and has undergone phenomenal growth since its inception 70 years ago. But Bradesco has one thing that its competitor does not. Its CEO, Luiz Carlos Trabuco is one of the most experienced bankers in Brazil, and he’s focused on being number one.
Over the 2000s, Bradesco underwent explosive growth. The tenure of Mario Cypriano, Trabuco’s predecessor, proved to be one of the most phenomenal growth periods of any company in recent memory. Over the course of 10 years, the company’s stock price increased by nearly 100 times. Cypriano also grew the bank’s assets from just $5 billion to well over $30 billion. Much of this growth was the product of a voracious appetite for acquisitions. However, by the time Trabuco took the helm, the Brazilian banking industry had changed.
There were no longer dozens of good acquisition targets, all had already been acquired. The organic growth in the retail banking industry itself had also slowed. Brazil’s population of economically significant individuals who did not have banking services had diminished to almost nothing by 2010. That left organic growth taking place only based on new customers entering the market, a process slowed by overall economic stagnation.
With much fewer viable targets for acquisition, Luiz Carlos Trabuco Cappi was looking for one big deal that could give him the increase in size that he needed to dethrone Itau Unibanco from the number-one position. After waiting patiently for six years, he finally saw an opportunity that piqued his interest.
HSBC had been losing money on its Brazilian division. It was being forced to spend a great deal of manpower on maintaining its Brazilian assets in an ever more competitive environment. It was looking for a way out. Trabuco offered them one.
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In 2015, Trabuco announced that he had closed an all cash deal for the purchase of HSBC Brazil for $5.2 billion. This represented the largest business transaction in Brazilian history and gave Trabuco and Bradesco a leg up in the heated race with its competitor for the title of largest bank in Brazil. Over the next year, Trabuco worked feverishly to successfully integrate all of HSBCs assets into Bradesco. He largely succeeded. Today, Bradesco is the largest bank in Brazil by almost every measure except for total assets. It has the most branches, the most account holders, the most money under management and the most checking accounts of any bank in the country. It is also poised to take over Itau Unibanco in the area of total assets, if trends continue on the same path they are currently on.
By most accounts, the acquisition of HSBC Brazil represents a coup for Trabuco, who was facing increasing pressure from shareholders and his board for not continuing in the high-growth footsteps of his predecessor. But industry analysts say that continuing to grow at anything near the rate of the wildcatting 2010s was completely unrealistic according to jusbrasil.com.br. Even the fact that Trabuco has been able to continue to grow the company at all, say some, is testament to his high degree of managerial talent.
Now that the industry is a de facto duopoly, any real further growth would almost have to be organic by definition. However, some believe that once Trabuco has achieved the position of dominance that he seeks, he will begin an aggressive campaign to go after Unibanco’s market share, becoming the Brazilian banking industry’s sole remaining superpower.
Find more about Luiz Carlos Trabuco Cappi: http://www.tostoadv.com/bradesco-quer-mudar-regra-para-trabuco-ficar-no-cargo/