Latin Finance - March/April 2009 - 20

man of the year acquired the state of Minas Gerais’ bank, addition to the family connection, Setubal BEMGE. already displayed a knack for numbers. A colleague of Setubal says Itaú was the Both helped him jumpstart his career as a first to really take advantage of the central banker. bank’s measures, a view that is echoed “Without a doubt, banking today has throughout the sector. “I’ve always admired become based on a more rational process, Itaú’s focus on its expansion of its built with mathematical and statistical commercial network,” says Fernando models,” says Setubal. “I think my Sotelino, a professor at Columbia mathematics background helped me University and former co-CEO of Unibanco understand the bank’s activities and and head of its wholesale banking division, develop them.” A 1983 Citibank internship in New York referring to the PROER days. But being a good buyer is also about under retail banking guru John Reed gave the future CEO a peek into the inner workings of a powerful, financially efficient and LatAm Banks by Market Cap ($bn) technology-driven operation. Itaú Unibanco margin widens This resonated with what 60 Setubal had already seen back 2009 2008 2007 home. “My father was also an engineer, and one of the marks 50 he left at Itaú was establishing a very rational culture at the 40 bank,” says Setubal. “Itaú has historically had a very positive 30 relationship with technology.” Familiarity with the nuts 20 and bolts of banking and a penchant for cutting costs through technology are 10 paramount in Setubal’s ability to lead. “He likes to get into the 0 numbers and he understands the details,” says a senior banker at Itaú who declines to be identified. “He gets the macro picture as well as the Source: Economatica micro side of things,” adds the banker. Being on a number of international committees, including the knowing when not to commit. One need Institute of International Finance, the only look as far as BofA’s rushed purchase International Monetary Conference, an of Merrill Lynch in September as an organization of CEOs from around the example of a deal that seemed at first blush world, as well as the international advisory to combine the best of two worlds in committees of the New York Fed and the banking, but that in reality ended up NYSE, helps shape his big picture view. compromising both institutions, giving the acquirer’s shareholders a particular pain. Setubal demonstrated his steady hand Knowing When to Walk with the potential acquisition of Sudameris When Setubal was named CEO in 1994, Brazil’s central bank was set to embark on a from Italy’s Intesa in 2002. Itaú’s $1.5 bank privatization program called PROER, billion bid for Sudameris beat out slightly which gave Itaú the chance to expand. The lower offers from Unibanco and Bradesco, executive proved to be a capable dealmaker giving it exclusive rights on due diligence. After digging further into the numbers, and under his leadership, Itaú scored two banks that gave it a significant retail boost. Itaú’s executives realized the asset was complex and had many more problems It bought retail assets of Rio de Janeiro’s than it had first imagined. It chose to fold. state bank Banerj in 1997, and in 1998 it Santander (Brazil) Banco do Brasil Bradesco Banco de Chile Unibanco Santander (Chile) Banco de Credito Itaú Unibanco Bancolombia Itaú “We had had a very complicated discussion with Intesa. We kept a level head at the time, and were concerned about things beyond merely being [larger in] size,” he says. “That was the best deal Itaú didn’t do,” says a Brazilian banking executive who at the time held a senior role at a Brazilian financial institution. Strategic Expansion Itaú’s subsequent moves under Setubal’s stewardship capture the CEO’s vision. Its acquisition of BBA Creditanstalt at the end of 2002 made its combined wholesale banking operation the country’s largest, while its purchase of BankBoston’s private banking give it a firm footprint in Chile and Uruguay, 2006 marking its first sizable push into LatAm. Brazilian markets were severely whacked in 2002 by the election of Lula, which followed shortly after an Argentine default that spooked investors. But Setubal pursued a strategy to develop a wholesale and investment bank platform, betting on eventual recovery and rise of Brazilian corporates. Some observers draw parallels between then and the current situation, where even more opportunities might open up as foreign competitors retrench amid troubles in developed markets. Itaú’s competitors, meanwhile, had their sights elsewhere, and, some would argue, not on the ball. In 2004, Unibanco revamped its overall structure and strategy. In an effort to boost internal synergies, it refocused on cross selling and lending, which turned out to be a valuecreating exercise, according to an executive familiar with Unibanco’s initiatives at the time. By extension, however, it de-emphasized investment banking and pared down international distribution. This was less than a year before the first wave of Brazil IPOs, which paved the way for an equity fee bonanza, most of which went to foreign-owned shops. By then, Itaú had already gotten a sizable and, in the view of most Brazilian Nossa Caixa Banorte 20 LATINFINANCE March/April 2009

Latin Finance - March/April 2009

Table of Contents for the Digital Edition of Latin Finance - March/April 2009