Bradesco BBI is aiming to become a regional investment bank in Latin America over the next couple of years, according to its managing director Leandro Miranda.
Miranda, who has headed Bradesco’s investment banking unit since late 2014, laid out the bank’s new expansion strategy exclusively to Euromoney.
Miranda says he expects to grow rapidly its offices in New York, Mexico City and Buenos Aires to become a truly regional investment and commercial banking platform.
Miranda says the decision to become a regional player solidified after BBI’s recent experiment of expanding its trading desks to cover other Latin American bonds.
“For the past five years we have had one of the largest trading desks in Brazil and we frequently got enquiries to trade Mexican, Argentine or Chilean bonds,” he says. “We had to say no, but then we decided to broaden into these products and the surprising thing was that our portion of these clients’ Brazilian business also increased.
“This is because these counterparties like to have a single bank of choice where they can concentrate their business. They would rather have regional bank rather than single country banks.”
The decision to grow Bradesco BBI into a regional player is a marked departure from the division’s previous Brazil-only strategy. How far does Miranda think he can move to the regional model?
“A lot! I see Bradesco going LatAm very, very fast,” he replies. “We have just started to cover LatAm in research and trading in LatAm bonds. I foresee the same for equities in the very near future.
“And then last, but not least, we will need to approve credit lines as we push to be a truly Latin American bank.”
The push to developing the investment bank will precede the development of a regional commercial bank – complete with a significant balance sheet – resulting in a CIB franchise. The development of a regional retail banking operation is not part of the bank’s new Latin American strategy.
The model needs to be: be a great investment bank as part of a great financial conglomerate- Leandro Miranda, Bradesco BBI
This development strategy is similar to the approach taken by the bank when growing its Brazilian investment bank.
“I came to Bradesco in 2011 [from Credit Suisse] when were ranked second or third in the league tables. In two years we had become number one,” he says. “When I became head of the investment bank we were ranked 12 in M&A. Last year we were number one. And now I am backing equity – that is the build.”
Miranda’s growth model fits with his view of global investment banking.
“There is a major trend for universal banks around the world,” he says. “Unless you are Goldman Sachs, which has been an independent investment bank for a long time, then there is no room for standalone investment banks in the future.
“The model needs to be: be a great investment bank as part of a great financial conglomerate. That’s the only way to become the trusted adviser and bank of choice [for corporates].”
Miranda says he has been using this strategy to build its equity business, which is now one of the top-ranked banks in the league tables. He argues that winning IPO mandates requires banks to provide capital, combined with having the credibility from league-table rankings and being able to provide clients with ideas and market insight.
“If you only have ideas and the league table, it won’t guarantee [your franchise] mandates,” he says. “And if you aren’t guaranteed mandates at some point you will lose your league-table position and then you will be left with just ideas – in which case you should be an adviser and not a bank.”
Miranda’s approach unashamedly leverages the large corporate balance sheet of Bradesco. He also says the investment bank’s traditional weakness – lower-ranked research – has been bolstered by its acquisition of HSBC’s Brazilian unit.
“The HSBC acquisition was very complementary on the research side – around 50% of our research comes from HSBC and some of them are top-ranked,” says Miranda.
“It has made a major difference and we have been able to use this to increase our sales effort, as well as other recent hires of bankers from competitors such as Bank of America, Goldman Sachs and Morgan Stanley.”
Meanwhile, Miranda says stability on the origination side has helped developed trust with the senior managers of their corporate clients.
“Most of our origination bankers have been at the bank for the last five years and have made these companies a lot of money through fixed income and M&A transactions, and are now well placed to extend that into equity mandates,” he says.
Speaking shortly before the latest political crisis to rock Brazil, Miranda said his equity pipeline was looking strong. He said the bank had been instructed to bring six IPOs and two follow-ons to market and was in serious negotiations with another 25 companies regarding IPO deals.
“It is a very strong pipeline, especially when comparing it last year to previous year,” he says.
The bank recently held a conference for Brazilian companies looking to issue equity in New York and said the interest in Brazil among international investors was the strongest for many years. He argues that investors see more potential for growth in Brazil than elsewhere in the region other than arguably Argentina.
And it is Bradesco BBI’s bet that the banks they will choose to sell that equity will be the ones that have been lending to them through the cycle.