With HSBC Acquisition, Luiz Carlos Trabuco Propels Bradesco Back To Number One

The Brazilian banking industry has become one of the most cutthroat on the planet. The wave of acquisitions that took place throughout the 2000s ultimately created one of the most concentrated banking sectors in the world, with only a handful of major players able to gobble up almost any competitor that would dare to enter the market. Today, that situation has intensified, but under a radically different landscape than what was present at the end of the 2000s.

One man, Luiz Carlos Trabuco, is responsible for this tectonic shift in the Brazilain banking topography. Trabuco was first appointed as CEO of his firm, where he had labored intensely since 1969, in 2009. This was at the beginning of the fallout from the global financial crisis. Although Trabuco stated that his goal was to pursue organic growth and build the firm into the largest bank, thus achieving a highly coveted strategic position, most industry observers noted that in the macroeconomic climate that then prevailed, such a goal would be difficult, if not impossible, to realize.

Making matters worse, shortly after Trabuco took the reins of Bradesco, two of the bank’s largest competitors merged. Banco Itau and Unibanco combined to form what would become the largest banking conglomerate in Brazil. Bradesco, which had traded off between first and second place for the better part of a decade, now faced serious strategic challenges. With one deal, the bank had been relegated to a distant second place. Trabuco and his firm could now expect to be tossed around like a rag doll, exposed to the huge economies of scale that its larger rival could now leverage to punish the smaller bank in all of its markets. This is exactly what Itau Unibanco began doing in 2010.

With no way to pursue organic growth due to the stagnant economy and being undercut and price-warred into submission across much of its product line, Bradesco began seriously losing ground. Between 2010 and 2014, the company was constantly battered by economic headwinds and the blows of its better-heeled competitor on its market share. The company’s stock price plummeted. In just four years, Bradesco’s stock lost more than half of its value. Whispers began being heard of Trabuco’s resignation or forced ouster. Bradesco was in peril and Trabuco’s stellar career looked as though it may be coming to an ignominious end.

But then, the struggling bank caught a break. In 2015, rumors began flying that global banking giant HSBC was looking to dump all of its Brazilian assets. HSBC Brazil was one of the five largest banks in the country. It’s acquisition could easily boost Bradesco to the top of the banking sector once again. Trabuco wasted no time in feeling out HSBC’s intentions and drafting a letter of intent.

Beating Itau Unibanco to the table, Trabuco was able to put together a deal where Bradesco would acquire all of HSBC Brazil’s assets for $5.2 billion in cash. Amazingly, the deal went through in late 2015. Trabuco had successfully snatched one of the largest opportunities in Brazilian banking history from right under the nose of his largest competitor, radically shifting the dynamic of the Brazilian banking sector and once again rocketing Bradesco to the top of the ranks among various metrics for the size of his bank.

Now, the tables have turned. Bradesco is the largest bank in Brazil by number of branches, assets under active management and loans outstanding. Trabuco is now in the driver’s seat, with the economies of scale favoring him. Bradesco’s stock price is trading at all-time highs and many analysts expect that Trabuco may be able to establish Bradesco as a soft banking monopoly in the years to come.

Search more about Luis Carlos Trabuco: http://www1.folha.uol.com.br/mercado/2016/09/1810520-bradesco-quer-manter-trabuco-na-presidencia-por-mais-dois-anos.shtml

Martin Lustgarten Handles Investment Banking

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