HSBC acquisition poses big test for Bradesco CEO Trabuco

lunes 3 de agosto de 2015 16:21 GYT

By Guillermo Parra-Bernal

SAO PAULO Aug 3 (Reuters) - Banco Bradesco SA sat on the sidelines for years while Brazilian banking rivals bulked up through a series of takeovers. On Monday, it made a grab for HSBC Holdings Plc's domestic business, one that will boost its assets by 16 percent.

Now comes the hard part - integrating that business, including HSBC's 851 branches, 5 million clients and 21,000 employees in Brazil, in the midst of the country's worst economic downturn in 25 years.

Chief Executive Officer Luiz Carlos Trabuco Cappi, eager to grab Brazil's last major banking takeover target, outbid rivals by offering to pay 17.6 billion reais ($5.2 billion) for the money-losing unit, valuing it at a hefty 1.8 times book value.

Analysts and investors said the acquisition, the largest in Bradesco's 74-year history, will test Trabuco's ability to absorb large asset management, banking and insurance assets at a time of high inflation, slumping demand for credit and rising unemployment in Latin America's largest economy.

Bradesco's prowess in making the hefty purchase price pay off depends on how fast Trabuco can achieve up to 6 billion reais in promised cost savings, analysts said. Those will depend largely on how Bradesco cuts thousands of jobs without running afoul of labor conflicts and tough scrutiny from politicians who could slow down the process.

Still, Trabuco, 63, has earned a reputation for keeping costs down. The CEO comes from a working-class background, began his career as an intern at the bank 40 years ago and is known to shun the spotlight.

Bradesco's non-interest expenses grew below annual inflation over the past 14 quarters, rivaling Itaú Unibanco Holding SA , which analysts largely consider to be Brazil's most cost-efficient bank.

Trabuco dodged questions on whether job cuts were part of the savings plan, although Brazil's largest financial industry union is already planning nationwide demonstrations to fight any attempt by Bradesco to fire HSBC staff. He also has some convincing to do when it comes to shareholders: the bank's preferred shares sank as much as 4.4 percent on Monday.   Continuación...