When he took over as Bradesco CEO, in 2009, Luiz Carlos Trabuco Cappi was widely heralded as being the man who would finally establish the firm as the undisputed champion of the Brazilian banking industry. It was, therefore, extremely disappointing to many when he failed to deliver on that promise, instead overseeing a period of serious stagnation in the company’s stock price and its prospects for future growth.
However, all that changed in 2015, when Trabuco Cappi completed the largest single acquisition of a company in Brazilian history. Today, the CEO’s critics are largely eating craw, as the company is now poised to make a serious run for the status of Brazil’s first soft monopoly on banking.
Monopoly rent is the goal, even if Trabuco Cappi insists it isn’t
Any critic of Trabuco Cappi should always keep in mind that, although the prior CEO, Mario Cypriano, oversaw one of the most incredible periods of growth and value creation of any company in Brazilian history, that incredible explosion of Bradesco onto the national scene was largely the work of Trabuco Cappi himself.
As a minor executive at the firm, Trabuco Cappi had been almost solely responsible for the remarkable growth experienced in the firm’s financial planning unit as well as its insurance underwriting line. Combined, Trabuco Cappi was personally responsible for something on the order of half of all of the company’s profits. This not only made him a tremendously valuable employee, it also gave his unique takes on things the weight of serious credibility.
Thus, when he took over as CEO in 2009, his critics probably should have listed closely to Trabuco Cappi’s dire warning about the quickly deteriorating macroeconomic picture. He foresaw the stagnation in growth, especially organic acquisition of new customers, which he knew would be severely hampered by the profound economic slowdown that hit Brazil in the wake of the 2009 global recession.
But many people had no patience for such pronouncements. Then, within the first year of Trabuco Cappi taking the helm, Banco Itau merged with Unibanco, forming the largest banking conglomerate in the country, by far. Again, critics were dismayed that Trabuco Cappi would let this deal happen without at least making an effort to make an acquisition of one of the firms himself. However, it is unlikely he could have done anything about the deal.
Over the next six years, the firm’s share price was pummeled. As Bradesco was unable to grow and continued posting lackluster results, the share price declined by more than 50 percent. The market was clearly not happy with Trabuco Cappi’s leadership according to crunchbase.com.
Then, in 2015, it became known that HSBC was looking to rid itself of all of its Brazilian businesses. The hyper-competitive Brazilian banking industry proved to be too much for the global giant to handle. They were flushing cash into the operation and hemorrhaging capital and human resources. They wanted out as fast as possible.
Trabuco Cappi immediately jumped on the deal. By mid-summer, it was announced that there would be a purchase of all of HSBC’s Brazilian assets for $5.2 billion in an all-cash deal. This would mark the largest acquisition of a private company in Brazilian history. It would also immediately put Bradesco back into the number-one position in the Brazilian banking industry, across a large number of metrics.
The markets responded with glee. By 2016, Bradesco was trading at nearly two times its 2015 lows. The newfound confidence was largely a product of the firm now being positioned to make serious inroads to the virtual elimination of all competition within Brazil. Trabuco Cappi had positioned the firm to become a banking monopoly.
If he can pull it off, the rewards to the shareholders could ultimately be astonishing. A monopolistic Bradesco could be a guaranteed cash cow for anyone who owns it, and the markets will certainly continue soaring as Trabuco Cappi turns his bank into a free money machine.
Find more about Luiz Carlos Trabuco Cappi: https://www.bradescori.com.br/site/conteudo/interna/default3.aspx?secaoId=572