The Brazilian banking industry has become one of the most competitive in the world. The flurry of acquisitions that took place throughout the decade of the 2000s left the country with only a few top competitors. This forced a number of major banks, such as HSBC Brazil, into a state of perpetual unprofitability. Being unable to compete with the deep economies of scale of some of their larger competitors, many of these smaller banks ended up ultimately being acquired.
By 2009, the year in which CEO Luiz Carlos Trabuco took over the helm at Bradesco, then one of the largest banks in Brazil, the field had narrowed to just five major banks. Then, in that same year, Banco Itau merged with Unibanco, creating the largest bank in the country, by far, and sending Bradesco back to a distant second place. This event would set the state for the tenure of Luiz Carlos Trabuco, as he made it his mission to retake the number-one spot, a seemingly impossible task.
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Never underestimate Trabuco
By 2010, Trabuco found himself in an unenviable position. He was CEO of the second largest bank in Brazil, but he had no real prospects of catching up to number one. With hundreds of millions in assets more than Bradesco, Itau Unibanco would be able to leverage its size advantage and economies of scale to punish Bradesco in all of its principal markets. Trabuco and the business world as a whole anticipated that this is exactly what the giant conglomerate planned to do, as the Brazilian banking industry was now effectively a two-company sector.
It was, therefore, unsurprising that, over the next six years, Bradesco’s stock price plummeted and its market share began to slip. By 2015, the stock price was less than half of what it had been when Trabuco took over. Many of the company’s shareholders echoed some parts of the business press in accusing Trabuco of having let a golden opportunity slip by. These critics felt that Trabuco could have made a more serious run at acquiring either Unibanco or Itau, which would have completely removed the serious challenges that Bradesco was now facing. With a serious handicap in market share and capital, Bradesco was losing customers, market share and capitalization. It briefly appeared as if Trabuco would be ousted.
Meanwhile, all of this was occurring against a backdrop of terrible macroeconomics in Brazil. The country had struggled mightily after the global financial crash of 2008, which hit Brazil particularly hard. This meant that the Brazilian banking sector, like many other industries, had become a sort of negative-sum game, losing total revenues year-over year and converting into a contest of who could steal away who’s customers. This was a particularly brutal environment for Bradesco, which had just lost significant ground to its now far larger rival, Itau Unibanco.
This is the stage that was set for one of the largest coups in Brazilian banking history. The stock trajectory of Bradesco, up to 2015, would have indicated that the company was heading for oblivion. But in the early part of that year, Trabuco heard rumors that HSBC Brazil, one of the largest banks that had not yet been acquired, was going up for sale. Trabuco immediately pounced on the opportunity, drafting an offer before Itau Unibanco could entice HSBC to sell to them.
By the end of 2015, it was announced that Bradesco would acquire HSBC Brazil, in full, for $5.2 billion in cash. This transaction, the largest in Brazilian history, earned Trabuco the 2015 Isto E Dinheiro Entrepreneur of the Year Award. It has radically changed the landscape of Brazilian banking.
Learn more about Luis Carlos Trabuco: http://www.infomoney.com.br/mercados/noticia/6024599/frases-luiz-carlos-trabuco-sobre-economia-brasileira-davos