Brazilian banking: Itaú sets sights on expansion beyond Brazil


Chloe Hayward
Published on:

Setubal wants to buy outside Brazil; Barbosa confident that Santander Real merger will be complete within a year

Roberto Setúbal, Itaú Unibanco

"We have a very strong share of the banking system in Brazil and now we should look beyond Brazil’s borders more"

Roberto Setúbal, Itaú Unibanco

Roberto Setúbal, chief executive of Itaú Unibanco, has never been shy about showing his ambition. Following the acquisition of Unibanco in November, he is already thinking about his next move – and this time it might be cross-border.

"Since our merger with Unibanco, we believe that the next step will be a more international move, not just a local step. We have a very strong share of the banking system in Brazil and now we should look beyond Brazil’s borders more," says Setúbal.

"Itaú is present in the Mercosur countries [Argentina, Brazil, Paraguay and Uruguay] already but we want to be a regional bank," he adds. "However, despite the rumours we are not looking at Banamex [Citi’s bank in Mexico] now. We recognize that it is a great franchise but we have never had talks with Citi along those lines. If one day Citi does decide to sell, which isn’t the case now, then we will look at it."

Integration first

Setúbal says that any further acquisitions will not take place until the integration with Unibanco is complete. "We are not looking to acquire anything immediately – we are prioritizing the merger with Unibanco with a view to making new acquisitions in about 18 months," he says.

So far Itaú Unibanco’s merger has progressed smoothly. Decisions have been made quickly and within two months of announcing the merger a new executive committee was finalized and staff cuts made. "The first challenge of this merger was the people. We had to choose from a lot of good people from both banks," says Setúbal. "You can’t keep everybody, especially at the top. You have to select people from both companies and then make sure these choices are well received internally. We have been meritocratic in making these tough decisions."

Itaú BBA, the investment and corporate banking unit of Itaú Unibanco, has been totally merged for over a month. The three treasuries – Banco Itaú, Itaú BBA and Unibanco – have also all been integrated into one centralized department. However, IT integration is still a work in progress although Setúbal hopes the process will be complete in the coming months.

Slow headway

Making a merger work takes time, as Santander Real is discovering. Although Santander bought Banco Real from ABN Amro in the summer of 2008, the merger of the two retail bank channels is proving to be a slow process.

"We started the merger process in July [2008] when we got the green light from the Netherlands," says Fabio Barbosa, chief executive of Banco Santander Real. "That is when we organized the board and active committee. The wholesale and investment banks have now been merged, so has the private bank. We are pretty advanced with this merger but the two networks – Banco Real and Banespa Santander – are still separate at the moment. We hope to merge them in the first half of 2010."

Some analysts speculate that the reason Santander is delaying the merger is because of the difference in cultures between the two banks.

Banco Real has a strong reputation as a conservatively run, sustainable lender with strong private and investment banks. In contrast, Banespa, which Santander already owned following its acquisition in 2000, was the leading private-sector bank for public workers, with an emphasis on personal loans and credit cards.

"In any merger, culture is always an important issue," says Barbosa. "You will never find two companies that have the same culture. We have looked for the common ground on which we were going to build the organization and how we can optimize the fact that we have two different cultures on the table... we are not trying to mitigate the problems like some people want me to say. We see the glass as half full. I have no doubt that culture is a long-term process."

Many market players suggest that Barbosa, the former chief executive of Banco Real, will create a larger version of his old bank. However, Barbosa is keen to put an end to these assumptions. "The merged bank will be a new bank, not more Banespa or more Real, but new," he says. "We are building a new bank that has reacted to the changing environment of today."