Over the course of the last 20 years, the Brazilian banking sector has undergone a period of consolidation the likes of which have rarely been seen in a major country. What was once a highly diverse industry, with dozens of regional players all competing on substantially different business models and offering consumers a wide range of choices, has become a two-industry show. Today, the only two banks in the country that matter are Bradesco and arch rival Itau Unibanco.
The radical transformation of the Brazilian banking industry from diversified to highly concentrated mostly took place over the decade of the 2000s. This was the result of Bradesco, Banco Itau and Unibanco taking advantage of cheap money and an ever-increasing total market, gobbling up every small bank in their vicinity. By the end of the 2000s, there were only about five major banks left. Then Itau and Unibanco merged, creating the a bank that enjoyed almost total dominance over the country.
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Luiz Carlos Trabuco Takes The Helm, Fights Major Headwinds
In 2009, the famed CEO of Bradesco, Mario Cypriano, finally stepped down. Cypriano had overseen an expansion of his bank that was scarcely rivaled in all of Brazilian business history, having expanded the bank’s capital by a factor of more than 30, amid a stock price that had soared by a factor of more than 100. But Cyrpiano’s replacement, inveterate banker Luiz Carlos Trabuco, would not be nearly as fortunate as his predecessor.
The fallout from the global financial crisis of 2008 was already being felt across Brazil, a country that would end up paying a particularly steep cost for the shenanigans of the North American real estate market. With the macroeconomic picture slipping, the prospects for Trabuco to realize his goal of continuing significant organic growth across the company’s businesses was quickly becoming a Sisyphean task.
Then, shortly after Trabuco took the helm in 2009, Bradesco’s arch-rivals, Banco Itau and Unibanco, merged, forming what was, by far, the largest banking conglomerate in the country. This was a deep shock to Bradesco and its shareholders. The bank suddenly went from a position of clear dominance to a distant second place. This left it exposed to attacks from Itau Unibanco by undercutting it across its various business lines.
Over the next few years, things went from bad to worse for Bradesco. Trabuco was not only unable to achieve any modicum of organic growth, but he ultimately would oversee a significant decline in the bank’s customer base. This was reflected in the company’s stock price, which, by 2014, had plummeted to less than 50 percent of its 2009 highs. There were rumors that Trabuco himself would soon face forced resignation. Bradesco was clearly on a trajectory that would not end well for anyone associated with the bank.
But then, in 2015, Trabuco got wind that HSBC, the second largest banking company in the world, wanted to dump all of its Brazilian assets. Trabuco quickly moved to draft a letter of intent, ensuring HSBC that Bradesco could secure the financing to make a deal happen quickly. In an incredible upset, Trabuco was able to successfully beat Itau Unibanco out of the gate, securing a deal that had the potential to dramatically tilt the Brazilian banking field back towards Bradesco’s favor.
By the fall of 2015, it was announced that the deal had closed. Bradesco acquired HSBC Brazil, in full, for $5.2 billion in cash. It was the largest deal in Brazilian economy.
Today, Bradesco’s stock is trading at all-time highs, and Trabuco is once again leading the unquestioned dominant player in Brazilian banking. How he uses his favorable position will be a story to watch over the coming years.
Learn more about Luiz Carlos Trabuco: http://www1.folha.uol.com.br/mercado/2016/09/1810520-bradesco-quer-manter-trabuco-na-presidencia-por-mais-dois-anos.shtml