Brazil Banking: Bradesco bouyant, HSBC on the back foot

Bradesco’s senior management is reported to be delighted with the price paid for HSBC Brazil, despite its final bid having been more than expected.

Meanwhile, the UK-based universal bank faces obstacles in its claims to be able to continue to serve investment banking and corporate clients in Brazil – and also challenges to hold on to its Mexican unit, which is now the bank’s focus for its Latin American investment banking strategy.

Bradesco won the auction for HSBC Brazil with a bid of R$17.6 billion ($5.2 billion), or 1.8 times book value – more than Bradesco’s initial 1.2 times valuation. The price is almost 15 times projected profits for 2015.

However, Bradesco’s chairman Lazaro Brandao’s comments to business magazine Exame, in which he claimed the bank increased its bid only “slightly” and that it had “been psychologically prepared for a fight” for HSBC Brazil, corresponds with comments made by other senior management to Euromoney.

Beyond scale

The acquisition will take Bradesco close to the size of Itaú and into contention, once again, in the fight to be the largest private bank in Brazil (not to be underestimated as an important employee-motivational tool in the country). Beyond scale the bank adds strategic assets, not least 1 million high-income clients (defined as earning more than R$10,000 a month) – or a 125% increase – in the retail segment that has been dominated by Itaú.

“The opportunities to enhance Bradesco’s position in private banking and the mass affluent section is probably the greatest prize,” says one person with direct knowledge of the transaction. “And more than the additional clients it is the know-how of the bankers in this area that made Bradesco ensure that it won this auction.”

Until the transaction is final, Bradesco cannot see HSBC’s client list or start its client-retention exercise but informal conversations with the bankers have been taking place and Bradesco has been keen to reassure HSBC bankers that there will be no redundancies.

For the full article visit Euromoney Magazine

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