Brazilian banking has undergone a wave of consolidations that make even the American banking industry look diffuse. Since the 1990s, nearly all Brazilian banks larger than the regional level have been gobbled up by larger competitors. Today, the only two significant players that remain are Bradesco and its arch rival, Itau Unibanco.
But one bank, Bradesco, has been making inroads to become the undisputed king of the Brazilian banking market. Under the leadership of Mario Cypriano, from 1999 to 2009, Bradesco grew by amounts unprecedented in the history of Brazilian finance. With the stock price increasing by a factor of more than 200 times, Cypriano eventually pushed the bank to the number one slot in the country. But then, shortly after his successor, Luiz Carlos Trabuco, took over in 2009, Itau and Unibanco merged, becoming the single largest banking entity in the country.
This pushed Bradesco back to a distant number-two spot in an increasingly high stakes game for who will ultimately control the Brazilian banking industry. But now, in a market that was already largely consolidated and in a macro economic environment that had rendered further organic growth extremely difficult, Trabuco found himself in a nearly intractable position. Getting significantly more Brazilians to sign up for Bradesco’s products would be nearly impossible, at least on a scale that would propel the bank back to the number one position. Furthermore, there were no immediate viable candidate companies for acquisition.
This meant that, for the first 6 years of his reign as CEO, Trabuco oversaw a declining stock price and stagnant business. He tried and failed at making various inroads to acquiring other banks. There simply weren’t any suitable deals with motivated sellers.
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But then, in 2015, rumors began flying around the Brazilian banking industry that HSBC Brazil, a subsidiary of the second largest bank in the world, was looking to divest itself of its Brazilian holdings according to banco.bradesco. The increasingly consolidated and hyper-competitive Brazilian market had proven too difficult to turn a profit in. HSBC, with hundreds of profitable markets across the globe, had been sinking valuable capital and human resources into the losing Brazilian market for years. The bank’s management had finally had enough.
Trabuco quickly pounced on the opportunity. He immediately contacted the head of HSBC Brazil and let him know that Bradesco was a serious and motivated buyer. Trabuco was pleased to learn that HSBC was, indeed, looking to quickly and completely divest its Brazilian assets. Throughout the summer of 2015, both firms ironed out the details of what the final acquisition would look like. By the fall of 2015, they had come to a deal. Bradesco would buy the firm outright for $5.2 billion in and all-cash deal, the largest of its kind in Brazilian history. By late 2015, the deal had closed, rocketing Bradesco back to the number-one spot in the Brazilian financial space, across a number of metrics.
Trabuco was widely lauded in the Brazilian financial press, being awarded the Isto E Dinheiro Entrepreneur of the Year award as well as many other accolades. The stock price, which had lost significant value throughout Trabuco’s tenure, began rebounding. By the middle of 2017, it had booked gains over its 2009 level for the first time in years. The deal seemed to be a major coup for Trabuco and his organization.
However, what the deal, which has placed Bradesco over the $400-billion-in-assets mark, will ultimately mean for the firm has yet to be seen. Bradesco is in a position to begin consolidating itself as the major bank of Brazil. Whether Trabuco will be able to ultimately capitalize on this favorable position remains to be seen.
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