Over the past two decades, the Brazilian banking industry has followed the lead of many of its global counterparts. The trend towards consolidation has been unstoppable, with only two real players emerging as the leaders of the country’s banking system, having gobbled up almost all of their viable competitors. Those two banks are Itau Unibanco and Bradesco.
Since taking over in 2009, Bradesco’s CEO, Luiz Carlos Trabuco, had been looking for a suitable acquisition target. While the Brazilian banking system had experienced phenomenal growth over the decade of the 2000s, that organic growth had slowed by 2009. Since then, the industry has stagnated, with many banks actually declining in revenues. In this environment of stagnating growth and declining profits, Trabuco saw the only way his bank had any chance of catching up with its larger competitor was through strategic acquisitions. The problem was that almost all the good targets had already been acquired.
Then, in 2015, rumors started swirling that HSBC, the second largest private bank in the world, was looking to dump its Brazilian assets. Word on the street was that the global firm had been heavily losing on its Brazilian operations and wanted out for good. Trabuco jumped on the case, immediately reaching out and beginning talks with HSBC higher-ups about a possible acquisition. By the middle of 2015, it became clear that a deal was in the works.
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By late 2015, Bradesco had made official announcements that it would complete the all-cash purchase of HSBC Brazil by the end of the year for $5.2 billion, marking the largest business transaction in the history of Bradesco. Upon completion of the deal, Trabuco was awarded the Isto E Dinheiro Entrepreneur of the Year Award. He was also lauded in the media for having instantaneously grown his company, with one single transaction, from a distant second place to a serious competitor for the status of largest bank in Brazil. It was a great triumph for Bradesco.
Today, Bradesco is one of the largest Brazilian financial institution in a number of measures. In fact, they come out ahead of Unibanco on almost every measurement of success except for total assets. Bradesco has the largest number of branches in Brazil, at over 5,000. They also have the highest amount of assets under management, the largest number of account holders and the highest deposit amount from retail customers.
This is more than just a vanity contest for the respective banks’ executives. In the current de facto duopoly market, the firm that ultimately comes out on top has a road to becoming the undisputed leading bank in Brazil. That is likely to come with many rewards, including monopoly pricing power across many different products. In a stagnating market, where no real growth has occurred in the better part of a decade, this zero sum game of winner-take-all may be the only way for either one of the two firms to actually create value for their shareholders.
Given Luiz Carlos Trabuco’s long history in upper management and his formidable experience in the banking industry, it would be a good bet that he and Bradesco are poised to come out on top. And the stakes could not be higher.
But Luiz Carlos Trabuco Cappi is circumspect about his ambitions. He says that his real goal is only to provide the best possible customer service to the bank’s clients and that getting to be the largest bank in Brazil is not a major goal in itself. Time will tell.
Learn more about Luiz Carlos Trabuco Cappi: https://relationshipscience.com/luiz-carlos-trabuco-cappi-p3489986