Latin Finance - April 2008 - 22

banesco strategy Banking the Revolution by Andy Webb-Vidal B ankers are usually the first businessmen up against the wall when the revolution comes. But Juan Carlos Escotet has managed not just to avoid a firing squad, he has revolutionized Banesco, making it Venezuela’s largest bank while also driving overseas expansion. The Venezuelan economy, which depends on oil for 90% of its export income, has been the most volatile in LatAm over the past two decades, creating real challenges for bankers. Add to that high volume political noise and a government intent on implementing Soviet-style regulation, and you would think financiers might well have fled long ago. Yet Escotet, Banesco’s president, has a reputation for being a shrewd operator. He has risen to the challenge and outflanked other bankers over the past five years to turn Banesco into Venezuela’s top bank by assets. Escotet is also one of the country’s most flamboyant businessmen, whispered to be the only owner in the region of a Bombardier Global Express jet, placing him in an exclusive club alongside Bill Gates and Oprah Winfrey. At the end of 2007, Banesco had total assets of $12.88 billion equivalent in bolivares – up 51% in a year. This put it ahead of the nearest domestic rival, Banco Mercantil, and the main Spanishowned competitors, Santander’s Banco de Venezuela and BBVA’s Banco Provincial. “Our aim was always to become the leading bank for quality of service. There was never an original aim to become the biggest bank in the country, and I never tire of saying that that’s just the consequence,” Escotet tells LatinFinance in an exclusive interview. “A good part of this [performance] rests on the fact that since the first day, The “Bolivarian Revolution” has smiled on Venezuela’s bankers, particularly the highly profitable Banesco. But a tougher outlook is driving expansion into Central America. Banco Unión, then Venezuela’s fourth-largest bank, eventually formed Banesco Banco Universal. Escotet himself holds a controlling majority equity stake in Banesco Holding. Profit Beneath the Rhetoric Managing a bank in Venezuela is no easy task under President Hugo Chávez, who has on several occasions lashed out at financial institutions for supposedly making “excessive profits.” Since 2003 he has maintained ceilings and floors on interest rates, in turn reducing banks’ intermediation margins. But ironically, Venezuelan banks have seen some of their most Escotet predicts golden decade for Central America profitable times ever under the leftist firebrand. Banesco has been a bank very focused In the early 2000s, they profited from the on strategic planning. We make a government’s issue of billions of dollars’ permanent effort to combat volatility, worth of high-yielding debt. More and to do that every year we envisage recently, despite a squeeze on interest rate the bank in three, five and eight years’ margins, financial institutions have time,” adds Escotet, 48, one of eight benefited from a massive increase in brothers born to immigrant parents who government expenditure and fast arrived in Venezuela in 1948 from León economic growth that has stoked demand and Asturias, in northwest Spain. for consumer loans. Banesco today is the result of eight Amid this credit expansion, Banesco mergers, most of which involved savings has captured the largest lending portfolio and loans entities in the 1990s to form in Venezuela, accounting for almost 16% Caja Familia. In 2000, a merger with of the total held by the 10 largest banks. 22 LATINFINANCE April 2008

Latin Finance - April 2008

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