Bradesco buys outside Brazil to compete within


Rob Dwyer
Published on:

Move adds offshore platform for private clients; bank argues BAC Florida Bank deal adds to its story as the momentum play in the market.


Photo: Egberto Nogueira / Imã Foto galeria

Bradesco’s first international acquisition was announced this week: the bank has agreed (subject to regulatory approvals) to buy BAC Florida Bank for $500 million.

The acquisition is significant if not substantial; because while adding BAC’s US business won’t move the needle on Bradesco’s wealth management business in terms of assets under management (AUM), it provides important impetus to the international component of private banking in Brazil.

BAC Florida manages $1.8 billion compared with just over R$200 billion ($50 billion) of AUM at Bradesco private bank. However, the changing investment environment in Brazil is speeding up portfolio diversification and Brazilians are increasingly interested in allocating wealth internationally.

Leandro Miranda was head of Bradesco BBI when the investment bank was mandated by Bradesco’s senior management to search for a US wealth management business. Miranda, now Bradesco’s investor relations officer (IRO), told Euromoney that the bank managed to pursue the acquisition without entering a competitive situation.

“We identified three possible targets but we decided to actively pursue just one,” he says. “We approached the bank’s owners [Nicaraguan business conglomerate Grupo Pellas] and the negotiations went smoothly – they were as keen as we were to ensure that the culture and management approach was a good fit.”


Miranda says Bradesco will leave BAC Florida’s management in place and the bank will be run with a high degree of autonomy. The bank decided to conduct a one-step, 100% cash acquisition, he says, and all the senior management and key talent have been retained.

More than 70% of the US-based bank’s loan portfolio is comprised of mortgages – a popular area for diversification among wealthy Brazilians. However, Miranda says he expects that BAC will build a wider portfolio of investment products in the near future to offer broader diversification options to the bank’s Brazilian clients.

According to Bradesco, 20% of BAC’s clients are Brazilian ex-pats, with the remainder being mainly other Latin American nationals and 9% from the US. Bradesco’s CEO Octavio de Lazari said on a press call that the acquisition would expand the bank’s regional presence in private banking but that the bank isn’t aiming at any retail expansion within Latin America.

Octavio Lazari_160x186

Octavio de Lazari, Bradesco

Bradesco’s announcement may be swiftly followed by its competitors: BTG Pactual has told Euromoney that it is interested in a potential US acquisition. 

While not wanting to comment specifically on the Bradesco acquisition, Itaú says its own acquisition of the entity that emerged from the merger of the private banks and Banco Boston in Miami in 2007 has been important to its leadership of the local market (at nearly 30% market share). 

Fernando Beyruti, head of Itaú’s international private bank in Miami, says that the current interest rate environment is a “trigger point” for further diversification.

Beyruti says the bank continues to invest in the organic growth of its international business and points to a $25 million IT investment, as well as key hires over the past 12 months that include a six-person strong trading team (from Credit Suisse’s Cayman office), and under the leadership of Pedro Barbosa has been expanding its fund of funds business, which offers 66 funds on its open platform. It now also offers a fund of hedge funds illustrating the increasing diversification of assets of Brazilian’s offshore portfolios.

Beyruti also points out that Itaú’s wealth management business is part of a broader investment banking international operation and says it will continue to differentiate through the ability to provide IB and corporate services such as cash management. In total, Itaú private bank manages $120 billion – $24 billion of which is offshore.

Moody’s says the acquisition has a price-to-tangible book value of around 2.5 times. Considering BAC Florida’s 13.2% CET1 ratio in 2018, the deal is estimated to consume just 0.3 percentage points of Bradesco’s tangible common equity ratio, which was 9.7% as of March 2019. Bradesco is using internal earnings generation that on average accounted for 2% of risk-weighted assets each year to replenish its tangible common equity ratio from a low of 6.6% in September following its R$16 billion purchase of HSBC Brazil.

Lazari has targeted improving the bank’s private bank since he became CEO in February 2018, based on a realization that this important segment is going to become much more competitive in the future as investors are forced to seek risk as interest rates fall in the country.

“Improving the competitive positioning of the wealth management segment is one of the top priorities of the bank and this acquisition is part of a multi-pronged strategy to enhance clients’ experiences and improve the bank’s performance,” says Miranda.


The bank is also continuing to deepen its use of technology. It has developed and deployed an artificial intelligent system called BIA (Bradesco intelligence artificial) that is used across the bank’s new organizational structure (three ‘verticals’ – wealth management, wholesale and retail).

“Not only is BIA helping to improve client service and experience but it is helping to identify and execute on cross-selling opportunities,” says Miranda, who adds that the bank has identified 39 million individuals who are customers of at least one area of the bank (including insurance) but that aren’t one of the bank’s 28 million checking account customers.

The bank’s purely digital bank, Next, has also been growing quickly. Next has been adding around 7,000 account holders per day and is approaching one million customers. Approximately 80% of those customers were not previously Bradesco customers. The bank is studying strategies to best realize the value of Next – either through an IPO or strategic partnership with a technology partner – and the digital bank would also benefit from being in a different regulatory regime than Bradesco, as one of the largest and most systemically important banks in the country.

Miranda says he has been enjoying himself as IRO: “We have a great story to tell,” he says. “I wish we could release our financial data on a daily basis – not quarterly!” he jokes.

He says that the organizational reforms of Lazari and the chairman Trabuco are leading to improving revenues – the bank has, for the first time, introduced variable rewards for individuals. Improvements in data technology have also improved credit performance, with NPLs falling.

It seems that investors and analysts agree. Bradesco’s stock price is outperforming its private-sector peers. A recent poll by UBS found that despite the stronger recent performance investors still think there is more upside for Bradesco than its traditional rival Itaú: in late April, 81% reported that they were bullish on Bradesco, with 3% bearish, compared with 36% bullish and 10% bearish on Itaú’s stock.