Latin Finance - May 2008 - 52

roberto setúbal Tapping Mortgage Potential by Dan Shirai oberto Setúbal, CEO of Itaú Holding Financeira and president of the board of Itaú BBA, among other titles, has observed a sea change in Brazilian finance both at the institutional and retail level. In 1998, when he spoke to LatinFinance for its 10-year anniversary, Setúbal noted various currency regimes and the negative effects they had on banks’ operational strategies. Times were still tough and uncertain for Brazil, which was approaching some of the biggest financial crises in its recent history – not least the devaluation of the real in 1999, which was followed by the Argentine default in 2001 and the choppy election of Lula in 2002. Today, with all that seemingly behind Brazil, it is no wonder Setúbal is brimming with satisfaction and confidence. R Itaú continues its expansion in domestic and global markets, targeting the housing sector, debt capital markets and overseas investors. Veteran banker Roberto Setúbal elaborates. focused on developing a channel of access to foreign investors. We’re working through our external offices in New York, London, Portugal, Spain, Germany, Hong Kong and now we’re opening an office in Dubai. And we’re expanding our network of external offices to help access these investors. There is a great opportunity for Itaú to help in the intermediation of the flow. Most of Itaú’s overseas work has been focused on equity? What about fixed income? We’re working on that too. We recently hired a team of executives focused on fixed income and structured products from Deutsche Bank. We’re going to be a lot more active in that [asset class.] Huge, underexplored potential: Setúbal specifically for low income. Right now we see an enormous potential in the middle class, which is not properly served today. What is your outlook for middle and low income housing? This is a segment that will grow a lot in Brazil. There’s a huge potential there that is underexplored, mainly because of Brazil’s history of volatility and high interest rates. This segment will grow as long term interest rates fall to much lower levels. And this should happen over the coming years. So even if there are short term oscillations – as we’re seeing now – we’ll see the banks and borrowers more interested in doing mortgage financing. What impact will Brazil feel from the credit crunch? In terms of a direct impact, there will be hardly anything, especially because Brazilian banks have no exposure to subprime. Brazil will be affected indirectly as the rest of the world grows more slowly, so our exports may grow less, and we could see more of that kind of effect. It’s a medium term indirect effect. But given our favorable situation with our trade balance, our international reserves and low external debt levels – all this leads us to believe that Brazil won’t have any problems getting through the contractions that may occur in the global economy. LF What is the investment banking strategy? Our investment banking area is growing very rapidly. Last year was a record from all perspectives for Itaú BBA. This year, because of the global crisis, international investor appetite has lessened and the market is still waiting for a pickup in interest from these investors. Since Brazil is very well prepared to face this crisis – companies will continue to grow and turn out strong profits – the market will once again open itself up for Brazil. Our great strength is in the strong relationships we have with the companies that are issuing equity, and we’re very How is Itaú positioning itself for that? Itaú is very interested. We’ve sought out several alternatives to develop this and have prepared ourselves, in particular from a technological standpoint. And we’ve been creating channels to originate this type of financing. One example is the agreement we’ve recently done with Lopes, the biggest mortgage broker in the country. All of [Lopes’] mortgage sales will be bundled with an offer to have them financed through Itaú. So that’s one way to originate financing. We don’t have a strategy UPDATE For more on Itaú BBA see www.latinfinance.com > 52 LATINFINANCE May 2008

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Latin Finance - May 2008

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