When Luiz Carlos Trabuco, a banker who had been with his firm for 40 years, took over the helm as CEO of Bradesco, one of the largest banks in Brazil, in 2009, the mood was running wild and expectations were high. Unfortunately, a confluence of macroeconomic circumstances and, some might argue, missed opportunities would conspire to make the first six years of Trabuco’s reign as head of his firm among the worst of his otherwise standout career.
Throughout the decade of the 2000s, Trabuco’s predecessor, Mario Cypriano, had successfully led Bradesco through a period of growth so phenomenal that similar examples defy memory. Over a decade, the firm’s stock price shot skyward to over 100 times its value in the late-90s. The bank’s balance sheets exploded from just a few hundred million in assets to over $30 billion. It was amid this period of unprecedented growth that Trabuco took the captain’s chair. But these results simply could not continue under the conditions in which Trabuco soon found himself laboring.
For starters, the macroeconomic picture of Brazil had rapidly deteriorated. The global financial crisis of 2008, set off by the criminal insanity of the U.S. housing market, had affected Brazil deeply. The country was struggling to ward off a deep recession and most industries were suffering from a contraction in revenues. Under these circumstances, Trabuco’s stated goal of creating organic growth would be all but impossible. The firm’s revenues, at least in the short term, had nowhere to go but down.
Read more on Bloomberg.com
Making matters considerably worse, rival banks Banco Itau and Unibanco completed their merger shortly after Trabuco became CEO of the firm. This was a devastating blow to Bradesco, which had previously traded back and forth with Unibanco for the number-one slot in the country’s banking sector. Now, Bradesco found itself a distant second in one of the most hyper-competitive banking industries in the world. Bradesco was now exposed to the machinations of a much larger and better-heeled competitor that would be looking to attack it at every opportunity, using its huge pricing advantages and economies of scale to slowly beat its smaller competitor into submission. Things were not looking up.
Luiz Carlos Trabuco struggled to keep his firm competitive. Between 2009 and 2015, the stock price of Bradesco sank by more than 50 percent. The company continued losing ground to Itau Unibanco, which was gaining market share, even as the Brazilian banking industry as a whole declined.
But then in early 2015, Trabuco was presented with the opportunity of a lifetime. Word on the street had it that HSBC had tired of the Brazilian banking industry. It’s Brazilian unit, HSBC Brazil, had experienced year-over-year losses for many years in a row. HSBC was pumping cash and manpower into a losing market and was ready to throw in the towel.
Trabuco immediately moved to draft a letter of intent and let them know that Bradesco was not only serious but that it had the cash on hand to make them an offer that the competition was unlikely to be able to match. The two firms quickly ironed out a deal. By the fall of 2015, it was announced that Bradesco would acquire HSBC Brazil for $5.2 billion in an all-cash deal. The acquisition instantly rocketed Bradesco back to the number-one spot across many different metrics, dramatically changing the competitive landscape of the Brazilian banking sector with one stroke of the pen.
Trabuco was instantly hailed as a hero. For the successful completion of the deal, he was awarded the 2015 Isto E Dinheiro Entrepreneur of the Year Award. Today, Bradesco is in the best position it has ever found itself to become Brazil’s undisputed leading bank.
Find more about Luis Carlos Trabuco: http://www.infomoney.com.br/mercados/noticia/6024599/frases-luiz-carlos-trabuco-sobre-economia-brasileira-davos