Over the last few weeks, the ground has been shifting under the executive suite at Bradesco, one of the largest banks in Latin America. It has been announced that the current CEO, Luiz Carlos Trabuco Cappi, will be stepping down and replacing the outgoing chairman, Lazaro Brandao in the latter’s position. Trabuco Cappi will be required to appoint his own successor in the CEO slot by March of 2018, a task that he has assured stakeholders that he will be taking his time with.
Who will be the next CEO of Bradesco? And what will it mean?
The grand strategy of Grupo Bradesco, now the largest banking group in Brazil, by various measures, has largely been set in stone by the events of the last few decades. This makes it unlikely that the new CEO will be faced with any major strategic challenges. Instead, it is anticipated that whoever ends up replacing Trabuco Cappi will be largely tasked with the daily operations and tactical means of continuing to cement the bank’s countrywide dominance.
But as late as the mid-2010s, there was still a great deal of uncertainty as to how Bradesco would proceed or if it was even capable of surviving at all. Trabuco Cappi himself has a somewhat rocky ride as CEO, at least at the beginning. He was appointed by the retiring CEO Mario Cypriano in 2009, and he inherited one of the most difficult situations in the bank’s history. While many in the business press as well as some shareholders have blamed Trabuco Cappi for the bank’s less-than-stellar performance throughout the early part of his reign of CEO, most acknowledge that the immense problems that he faced were largely structural and baked into the cake.
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When Trabuco Cappi took over, the bank was just coming off the most explosive period of growth in its history. Between 1990 and 2009, the company’s stock price had increased by a factor of roughly 300 times. This incredible growth was the product of a vastly improving Brazilian macro-economy, aggressively going after acquisitions of smaller banks and successfully promoting organic growth across all of its markets and product lines. But in 2009, a perfect storm threatened to catastrophically undermine all of these sources of the bank’s prosperity.
In that year, the country of Brazil first started really feeling the effects from the fallout of the global financial crises, which had been set off in 2008 by the real estate bubble popping in North America. By the middle of 2009, it was quickly becoming apparent that Brazil, with its complex economy based largely on foreign investment, was going to be hit unusually hard according to banco.bradesco. This caused a deep recession in the country from which it still has not fully recovered. Such an economic downturn was disastrous for a banking industry that is exquisitely sensitive to macroeconomic conditions.
Another problem that emerged was the one-two punch to Bradesco of rapidly dwindling acquisition targets as well as the merger of its two chief rival banks, Banco Itau and Unibanco. This merger slammed Bradesco back to a distant second place in the rankings of Brazilian financial institutions, making it vulnerable to being pushed around and priced out of markets by the now much larger Itau Unibanco, which could use its massive economies of scale against its smaller competitor.
Throughout the 2010s, the bank’s stock price slid to just 20 percent of its all time highs of 2009. But then, in 2015, Trabuco Cappi was able to complete the purchase of HSBC Brazil. This single transaction rocketed Bradesco back to the number-one position and turned the tables on Itau Unibanco.
Visit istoedinheiro.com.br for more details about Luiz Carlos Trabuco Cappi.