Banking on Brazil
CEO Fabio Barbosa has plans to lead newly public Santander Brasil to the top of one of the world’s fastest-growing banking industries.
Paulo Fridman
Being near the equator isn’t the only thing making Brazil hot these days. Sure, it’s hosting the 2014 FIFA World Cup, and it beat out Chicago, Madrid and Tokyo for the 2016 Summer Olympic games. But for Fabio Barbosa, CEO of Banco Santander (Brasil) SA (BSBR), what’s heart-pumping about his native country is the torrid economic growth and demographic shifts taking place there. Economists predict annual GDP growth of roughly 5 percent over the next five or more years (compared with an average of 3.3 percent from 1998 to 2008), making Brazil the growth leader among all emerging markets. And with a burgeoning middle class, low interest rates and business-friendly government regulations, consumer demand for financial services — credit cards, mortgages, small business loans and insurance — is expected to explode over the next decade.
“Brazil is an enormous market, and it recovered from the global financial crisis quickly and with little damage,” says Mauro Guillén, director of the Joseph H. Lauder Institute of Management and International Studies at the University of Pennsylvania’s Wharton School and co-author of Building a Global Bank: The Transformation of Banco Santander (2008). “The growing wealth and demand for financial services are a huge opportunity for Santander.”
That’s precisely what Barbosa, 54, was telling investors in Brazil, the U.S. and Europe last fall in a marathon of meetings leading up to the company’s initial public offering on Oct. 7, 2009. The deal raised more than $8 billion, making it the largest IPO in Brazil’s history and the world’s biggest deal since Visa Inc.’s (V) $19 billion public offering in March 2008, according to Renaissance Capital, an IPO research firm based in Greenwich, Conn. It was also the first major offering made simultaneously in Brazil and the U.S., with 60 percent of the shares being traded in the U.S. Santander Brasil’s parent company, Banco Santander SA (STD) — the largest bank in the eurozone by market cap, with $115 billion — retains an 82 percent stake in the Brazilian operations, an investment worth about $43 billion, according to the company.
Barbosa says his goal is to make Santander Brasil the best full-service bank in Brazil within five years. He does not underestimate the job before him. With $182 billion in assets, Santander Brasil says it currently ranks third, behind giants Itaú Unibanco Holding SA (ITUB) and Banco Bradesco SA (BBD), among Brazil’s non-state-owned banks. “The biggest challenge we have now is to deliver on the results we committed to when we spoke to investors during the road show,” the CEO says from the company’s headquarters in São Paulo. That plan, Barbosa explains, involves not just riding the tide of growth under way in Brazil for financial services but also grabbing market share from the company’s biggest competitors. “Sure, the conditions are better for gaining market share in a growing economy than in a declining one,” he explains, “but we will have to win over customers from our competitors as well.”
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“The management style of the bank in Brazil is very much the Santander global style,” says Robert Tornabell, professor emeritus and former dean at the ESADE Business School in Barcelona, who ran a training program for top-level Santander managers in Spain and Latin America in the early 1990s. “Clever, tough, but polite, with good control of nonperforming loans and low delinquency rates on consumer credit, mortgages and business loans.”
Barbosa counts better governance and transparency among the bank’s strengths as a public company. “We answer to a board of directors now and have to be ready to present clear information to analysts and investors,” he says. “I think this gives shareholders much more confidence about the company and what we are doing.” But with more than 80 percent of the company’s shares remaining in the hands of parent Santander of Spain, Barbosa’s operations still benefit by being part of a “solid international bank,” he says. “It gives us better market coverage and allows us to serve international clients on a differentiated basis and create better conditions for local clients to bank internationally.”
