History Awaits

Luiz Carlos Trabuco Is Coy About Monopolistic Intentions, But Shareholders Are Optmistic

Throughout Latin America, one of the central features of many economies has been the ability of companies to flout weak anti-trust laws, creating vast monopolies that are some of the most profitable ventures in the world. In the mid-20th century, such American giants as International Telephone and Telegraph and the United Fruit Company enjoyed such extensive power throughout Latin America that they often operated as de facto government organizations. Today, Carlos Slim, major shareholder of TelMex, often trades places with Bill Gates as the richest man in the world. When considering that TelMex is nothing more than Mexico’s largest telephone provider, it’s amazing that a man who is only part owner in such an enterprise is counted among the wealthiest men in the world. The reason, of course, is that TelMex is effectively a hard monopoly.

The prizes for status of the only real provider of a crucial service within a Latin American country can thus be enormous. Although it is declasse for businessmen to openly talk about their ambitions to become monopoly rentiers, it is widely understood that such is the goal of many of the region’s most prominent capitalists.

It is in this context, as well as that of the, somewhat paradoxically, hyper-competitive Brazilian banking industry, that we are introduced to Luiz Carlos Trabuco, CEO of Bradesco. Trabuco is widely acknowledged to be one of the country’s foremost banking experts, with a career spanning more than 45 years, all with Bradesco. Since 2009, he has been the CEO of one of the country’s largest financial services firms, Grupo Bradesco. But he has faced some particularly difficult challenges during his time in the company’s executive suite. Having inherited a company in an industry wracked by the financial crisis of 2008, Trabuco struggled mightily for the first six years of his tenure to achieve any growth at all. Making matters worse, in his first year as CEO, two of Bradesco’s closest rivals, Banco Itau and Unibanco, merged. This created the largest financial services conglomerate in the country and pushed Bradesco back to a distant second place. It refocused Trabuco’s main challenge as CEO. He would need to grow the firm, reestablishing Bradesco as the undisputed leader in Brazilian banking.

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But this would prove difficult. The macroeconomic picture in the early 2010s was not pretty in Brazil. With the country still reeling from the global financial meltdown, the prosepects for organic growth were slim. Luiz Carlos Trabuco would need to instead concentrate on realizing growth through the continued strategic acquisition of competitor banks. But this would also prove difficult. After the roaring 2000s of Brazilian finance, few viable targets for acquisition were left. This paucity of good buys for Bradesco would leave Trabuco twiddling his thumbs for six entire years, while the stock price sunk lower and lower. By 2015, there were vocal calls for a change, whether through immediately improving results or new management.

But then, in 2015, Trabuco began hearing through the grapevine that HSBC was tiring of the constant stream of losses being produced by its Brazilian operations. The bank was accustomed to operating in profitable markets and could no longer justify sinking tens of millions of the firm’s capital into losing bets in Brazil. It wanted out as quickly as possible. Trabuco offered a way.

By the end of 2015, Trabuco had announced that Bradesco had entered into an agreement to purchase the entirety of HSBC Brazil’s assets for $5.2 billion, the largest purchase in the history of Brazil. This was a huge coup for both Trabuco and Bradesco. It immediately put the firm back on top in many areas. Throughout 2015 and 2016, the stock price also began bouncing back. By early 2017, Bradesco’s stock had more than doubled.

Today, Trabuco is once again leading the largest financial services firm in Brazil. His strategy of pursuing monopoly status is paying off, and shareholders agree that Bradesco is back on the rise.

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