Prior to his phenomenal coup de grace, the acquisition of HSBC Brazil, against arch rival Itau Unibanco, long-time Bradesco CEO Luiz Carlos Trabuco had fallen out of favor with both shareholders and the business press, as the firm lost ground to its competitors and the stock price slid to just 20 percent of its all time highs. But the poor performance of the early period in Trabuco’s rein was largely not of his making.
The CEO had inherited a bank that had maxed out its potential under its current structure. There was also the larger macroeconomic picture that he was forced to contend with. Brazil was in the grips of one of the worst recessions in its history, a fact that did nothing to help a major player in the banking sector.
A troublesome inheritance
Taking the reins from his predecessor, Mario Cypriano, in 2009, Luiz Carlos Trabuco seemed to ascend to the highest office at Grupo Bradesco just at the right time. The veteran banker took over at a time when the company’s stock was breaking record highs almost daily. Under Cypriano alone, the company had increased its market capitalization by more than 100 fold, an incredible feat that took less than ten years.
But as many analysts now freely acknowledge, everything was not as good as it seemed. As Trabuco took over, Brazil was just beginning to feel the terrible effects of the 2008 Brazilian economic downturn. The international ripples of the 2008 financial crises would ultimately be felt in Brazil more forcefully than just about any other country on Earth. In fact, by 2017, Brazil has still not completely recovered from the economic woes that started with the collapse of the U.S. housing market. This broad downturn in the economy was particularly bad for the banking sector, which has been traditionally quite sensitive to disruptions in the larger economy.
In addition to the macroeconomic problems that Trabuco was facing when he took office, shortly after he became CEO, arch rival banks Banco Itau and Unibanco merged. This instantly knocked Bradesco, which had been the number-one bank in Brazil under a number of measures, bank to a distant second place. While this would be bad news for any leading company in any industry, in a commodity industry like banking, it becomes highly problematic, especially where there is weak regulation and anti-monopoly controls.
Itau Unibanco, the newly formed merged entity, immediately began using its economies of scale and its market position to undercut Bradesco. The rival bank was able to start making serious incursions into Bradesco’s market strongholds, sending the stock price steadily lower. By the end of 2014, Bradesco’s stock had lost nearly 80 percent of its value. Investors were growing impatient with Trabuco and his overall strategic vision. There were rumors that his ouster was in the making.
But then, in 2015, Trabuco as president pulled off one of the biggest coups in the history of Brazilian finance. When HSBC, the second largest global banking conglomerate, began putting word out that it was seeking to dump all of its Brazilian assets, Trabuco moved quickly and certainly. How Trabuco pulled the deal off is anyone’s guess. But many insiders say that Trabuco pulled no punches in getting it done.
As observers watched stunned from the sidelines, Trabuco was able to raise the capital for the $5.2 billion deal, pulling off the largest acquisition in Brazilian history, right under the nose of Itau Unibanco. The latter was never even in serious contention to make a bid for HSBC Brazil’s assets.
Most believe that Trabuco alone was the only one who could have gotten such a deal done.
Learn more about Luiz Carlos Trabuco: https://g1.globo.com/economia/negocios/noticia/sucessao-no-conselho-do-bradesco-foi-um-ato-planejado-diz-trabuco.ghtml