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Banco do Brasil, Bradesco decide to delist Cielo

The long-awaited move was also made by rival banks

02/06/2024

Cielo repeats move made by other major banks with their card acquirers — Foto: Divulgação

Cielo repeats move made by other major banks with their card acquirers — Foto: Divulgação

Banco do Brasil and Bradesco, Cielo’s controlling shareholders, have decided to make a takeover bid to take the credit card company off the stock exchange. The move, which had been expected by the market for years as the company lost market share to rivals Stone and PagSeguro, came as a surprise due to its timing. Expectations had cooled as the card acquirer’s results recovered.

No date has yet been set for the takeover bid. The amount to be paid per share is expected to be R$5.35, up from Monday’s close of R$5.03. Bank of America has been hired as the independent appraiser of the transaction. The shares are up 10.79% since the beginning of 2024, but are down 52.55% over five years.

In a notice of material fact, BB reported that its board of directors had approved an increase in its indirect stake in Cielo to 49.99%. Bradesco’s statement does not mention a stake.

With the takeover bid, Cielo’s registration as a public company with the CVM will be changed from category “A” to “B,” which includes issuers with securities other than shares. “The application for registration of the tender offer with the CVM will be made within the time limit set by the applicable regulations,” BB said.

The buyback repeats the move made by other major banks with their card acquirers. In the past, Santander listed its acquirer Getnet on the stock exchange, but withdrew it from the market shortly thereafter. The same happened with Itaú’s Rede, whose shares were traded on the market in the 2000s.

Cielo has been losing market share for several quarters, and market participants and analysts point to a more aggressive competitive stance by acquirers linked to non-listed banks—in other words, Rede and Getnet. In the second quarter of last year, Cielo lost the lead to Rede.

An executive familiar with the talks said that BB and Bradesco had already been discussing a delisting and, after much discussion, reached an agreement, even though the company’s shares have risen in recent months. Currently, the card acquirer has a market capitalization of R$13.7 billion. Bradesco owns 30.06%, BB 28.65% and 40.57% are floating shares.

The discussions have been going on for years and have passed through several federal administrations, cooling and heating up at certain times. There were talks during the last administration, but according to a source, they are flowing better now. Banco do Brasil is a state-run bank.

Cielo released its results last night and once again felt the impact of its strategy to focus on profitability in the fourth quarter. The card acquirer saw a decline in volumes processed and in its active client base. On the other hand, receivables factoring products broke records.

The company reported recurring net income of R$480.8 million in the fourth quarter, up 5.3% from the previous quarter, but down 1.9% from the same period in 2022. According to the company, the decrease reflects the lower volumes processed by Cielo Brasil and the increased investments in the commercial team and the operational transformation process. These factors were partially offset by the steady improvement in the financial result, it added.

Net operating revenues for the period stood at R$2.77 billion, up 5.8% quarter-over-quarter and 0.6% year-over-year. Cielo Brasil’s revenue decreased by 2.4% compared to the same period of 2022, while Cateno’s revenue increased by 5.2%. In the fourth quarter, the card acquirer’s total payment volume (TPV), after losing market share in recent quarters, was R$221.85 billion, up 12.4% quarter-over-quarter and down 4.1% year-over-year. On the credit side, the volume decreased by 1.1% year-over-year. On the debit side, it decreased by 8.4%.

The company ended the year with 870,000 active customers, down 5.3% quarter-over-quarter and 17.7% year-over-year. Cielo said the decline was mainly due to the behavior of smaller customer segments. The “take rate” (the fee charged for each transaction) was 0.74%, compared with 0.79% in the third quarter and 0.72% a year earlier. The card acquirer also reported a new record in term products. The receivables factoring solutions amounted to R$33.7 billion.

*Por Álvaro Campos, Mariana Ribeiro — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Bradesco expands investments in Mexico

Bank seeks to double its 3 million-user base and multiply its portfolio by four in five years

08/26/2022

Octavio de Lazari Junior — Foto: Leo Pinheiro/Valor

Octavio de Lazari Junior — Foto: Leo Pinheiro/Valor

Bradesco has announced the acquisition of Ictineo Plataforma, a popular financial institution (sofipo) that operates with individuals in Mexico, strengthening its first and only international retail operation. The deal will give access to regulatory authorization to distribute new products in the country.

The bank has been operating for 12 years in the Mexican market and has about 3 million clients of white label and branded cards. The acquisition was made through subsidiary Bradescard México.

The goal is to, at least, double this user base and multiply the portfolio by four in five years — although the bank does not reveal how large the portfolio is now. The value of the transaction was not disclosed.

According to Bradesco, Bradescard México is one of the leading consumer finance companies in the retail chain segment but does not have a license to work in other financial business fronts because it operates as a limited liability company in Mexico.

“The acquisition of the Ictineo Plataforma institution will open a new financial business front for us with high growth potential in Mexico, a country with several attributes, such as being the second largest GDP in Latin America,” Bradesco CEO Octavio de Lazari Junior said in a statement. “We will have the possibility of expanding our operations to be similar to a digital bank to gain a more robust presence in a relevant market such as the Mexican one,” he adds.

Recently, Mr. Lazari had already suggested that he intended to expand the operation in Mexico, which has a market similar to the Brazilian one. He even said that the movement could include the creation of a digital bank, stating that it could take one of the brands used here in Brazil there: “There is no digital bank called Digio in Mexico,” he said.

Alexandre Monteiro, head of Bradescard México, said that the goal with the purchase of Ictineo is to focus on a digital strategy. “The first step will be to offer digital accounts, payroll-deduction loans, and investment accounts,” he said in the note. “It is a relevant move to consolidate Bradescard in the Mexican financial market.”

Bradescard México has plans to carry out the distribution of other products, such as car financing and housing credit. In the credit card segment, in five years Bradescard intends to be among the largest card issuers in Mexico, expanding the number of trade agreements with new retailers and strengthening the digital distribution channel with important investments in technology.

Ictineo has a portfolio of only about R$4 million and less than 3,000 clients. That is, Bradesco is basically buying the license. The bank has no branches there and does not intend to have any. The idea is to strengthen distribution in the stores of partner retailers — one of the most important is Walmart’s chain Bodega Aurrerá — and invest heavily in digital channels, which will include a marketing campaign. For now, the name of the digital bank is likely to be Bradescard, but a change in the future is possible. There could even be an agreement to use the Digio brand, or another Bradesco digital initiative, but this has not been decided yet.

In the cards’ operation, with a focus on low-income clients, Bradescard has a significant market share, close to 24%, and competes with names such as Coppel and Azteca. By creating a digital bank, it will compete with the operations of the large traditional banks and also with new entrants such as Nubank and Rappicard, a partnership between the delivery app Rappi and Banorte.

“We have an important banking role. We are the first card for many of our users. We’re going to maintain that focus, but also increase the number of products and have a broader relationship with our clients. We are going to move up a little from the base of the pyramid and compete with Nubank, which, in my view, targets a slightly more middle-class audience,” the executive said.

Mr. Monteiro points out that another positive aspect brought by the new license has to do with funding. Until then, the card operation was basically financed by accrued profits. Now Bradescard will be able to capture deposits. According to him, the popular financial society license (sofipo) meets all the bank’s needs and there is no plan, at least for the time being, to seek a bank license.

The conclusion of the deal is subject to approval by the authorities in Mexico (Comisión Nacional Bancaria y de Valores, CNBV) and Brazil (Central Bank).

*By Álvaro Campos — São Paulo

Source: Valor International

https://valorinternational.globo.com/
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Bradesco, BV create independent asset management firm

New company is born with R$41bn and will have a compensation formula to draw, retain talents

08/25/2022

Roberto Paris — Foto: Ana Paula Paiva/Valor

Roberto Paris — Foto: Ana Paula Paiva/Valor

The creation of a new asset management company by Bradesco together with the assets that came from BV DTVM aims at building a structure similar to that of independent assets and wealth management firms. This means having a corporate model capable of attracting and retaining professionals, in addition to assessing possible acquisition opportunities, especially in the universe of alternative funds, said Roberto Paris, Bradesco’s managing director.

The deal complements a niche in which Bradesco’s asset management business did not operate directly, and makes this core of private banking originated from the BV base gain an appearance of wealth management, in which banks do not need to hold custody of assets, said José Alberto Salvini, CEO of BV. “It has to do with the partnership structure, to make things easy, aligned with the interests of investors, portfolio managers, and with more agility in offering more complex alternative products that require specific approvals, which can sometimes take longer in a conservative structure,” Mr. Paris said.

According to him, the investment industry in Brazil has undergone profound changes and, along the way, many specialized assets of several types have emerged. BV Asset has participation, development, and real estate funds. “Bradesco even provides clients with third-party [alternative] products, but it didn’t participate directly in this market,” Mr. Paris said.

The asset management company, with no name yet, is born with R$41.7 billion under its umbrella, and R$22 billion in private banking custody. The idea is that the new brand will not refer to any of the groups to which it will be linked and will even operate at different addresses of the two banks. At the end of July, BV ranked 24th in Anbima’s ranking of asset managers. It had R$12.9 billion in private-equity funds, including wealth management funds and investment organizations. The firm’s real estate funds have R$6.1 billion, and there are more R$8 billion in hedge funds. Fixed income, the large base of Bradesco Asset Management (Bram), totaled only R$11.3 billion.

According to the agreement, Bradesco will hold 51% of BV DTVM’s capital, will have a majority of representatives on the board and the members will choose jointly who will be the executive leadership of the operation. Currently, the asset management company and BV’s private bank are institutionally represented by Luiz Sedrani, the firm’s chief investment officer. The value of the deal was not disclosed.

Mr. Salvini, with BV, said that the partnership with Bradesco makes perfect sense because the portfolios complement each other. On top of that, having access to a giant distribution channel, such as Bradesco’s, is an advantage, as well as other possibilities that arise from the partnership. “Our private banking model is likely to improve a lot. Bradesco offers products that we don’t have, they have BAC in Florida [which props up Bradesco’s platform in the U.S.], and our clients will be able to use this channel,” he says.

According to him, if BV DTVM had partnered with BB Asset, from Banco do Brasil, of which BV is a partner, this would not bring so much difference in the supply of products. In addition, as the asset management firm is controlled by a state-run bank (Banco do Brasil), it would face more difficulties in hiring professionals in an industry in which the compensation model is tied to the performance of the funds.

BV is focused on retail, and the executive realized that if he wanted to do something different, he would need to find a strategic partner. “We didn’t even get to talk to other players, the match with Bradesco was complete.”

Today, BV DTVM is connected to the main investment platforms, although with a small presence in some. The association with Bradesco does not change this performance. The offer to private-banking clients is likely to include investment consolidation services, access to other applications, and an online trading platform, in addition to estate and succession planning.

As for the products offered, the BV DTVM’s executive acknowledged that the company is known for its structured funds but says that it does not intend to be limited to that. “We will also have liquid funds, with very specialized people.” Considering the custody part, BV DTVM has almost 150 employees. Mr. Salvini says the private-banking team is being expanded, but that the staff does not need to grow that much in the coming years.

In its history of consolidation, Bradesco has always preferred complete acquisitions, but this design is not defined at the start of the deal with BV. “At the first moment, it is a partnership, that’s what you have, and it is expected to continue for a long time. As time goes by, everything can be evaluated, but the goal is to keep this structure to serve the client and consolidate itself as an independent reference asset management company,” says Mr. Paris. Mr. Salvini said that it is not in BV partners’ plans sell the entire operation.

This year, Bradesco took over BNP Paribas’ wealth management portfolio in Brazil and had already made a similar move with J.P. Morgan’s private equity structure. “The strategies are ultimately aimed at strengthening services to high-income clients,” Mr. Paris says. In 2015, one highlight of the acquisition of HSBC was the high-net-worth client base the English group had in Brazil. Bradesco gathered then R$100 billion in private banking and about 15% of that came from HSBC. Currently, Bradesco has R$380 billion in private banking and R$544 billion in asset management.

*By Adriana Cotias, Álvaro Campos — São Paulo

https://valorinternational.globo.com/
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Beneficência, Fleury, Bradesco join forces to create healthcare company

Carlos Marinelli, Denise Santos and Jeane Tsutsui — Foto: Ana Paula Paiva/Valor

Carlos Marinelli, Denise Santos and Jeane Tsutsui — Foto: Ana Paula Paiva/Valor

With an investment of R$678 million, BP (Beneficência Portuguesa), Fleury and Bradesco Seguros (through Atlântica Hospitais, the insurer’s the hospitals and clinics arm) have joined forces to create a company specialized in oncology. The investment, which will be made in the first five years of operation of the new project, is intended for the construction of clinics and cancer centers in the country. Each one of the partners will have a 33% stake, and the investment will be in the same proportion.

The laboratories of the Fleury group, whose main shareholder is Bradesco Seguros, and the medical clinics of Atlântica, which has 27 units in seven states, may be service providers of this new company, whose name is still being defined. Surgeries, on the other hand, will be in charge of the Beneficência Portuguesa Hospital in the case of patients in São Paulo. In other cities, the idea is that the more complex cases will be executed at the new company’s own cancer centers or accredited hospitals. This new company will operate nationwide and the service can be provided through healthcare plans or privately.

“Besides the investment in the structure, we will put our expertise, doing oncology research in this new company,” BP CEO Denise Santos said. “It is a way of expanding our knowledge of so many years in oncology in Brazil.”

With this partnership, the hospital group, the network of medical diagnosis and the health insurance company will invest at the same time in cancer treatment — one of the diseases with the highest incidence in the world, and with an estimated 66,300 new cases this year in Brazil — and a medical service model known as integrated care. In this format, which is one of the world’s main trends in the sector, health companies participate in all stages of medical care.

The verticalized operators were the first to bet on this model as a tool to reduce costs and trim the dependence on health service providers that gain in volume. At the other end of the chain, about three years ago, medical diagnosis company Dasa was the first to adopt this concept of integrated care by also investing in hospitals to participate in the entire chain.

In 2020, Fleury decided to diversify its business and is also betting on medical clinics to be present in yet another link of the chain. “Considering the aging population and the consequent increase in cancer cases, early diagnosis is essential,” Fleury CEO Jeane Tsutsui said.

According to Carlos Marinelli, general director of Atlântica Hospitais, the boarding of Bradesco Seguros in the business “is a way for the insurer to participate in the healthcare value chain.” Last year, the insurance company created a healthcare arm to invest in hospitals. According to sources, this strategy intensified after SulAmérica, its main competitor, was sold to Rede D’Or. In this scenario, there are also uncertainties about the future of UnitedHealth, owner of Amil, in Brazil and the merger between the verticalized operators Hapvida and NotreDame Intermédica, which together have more than 80 hospitals.

Mr. Marinelli, who started discussing the creation of the new oncology company before the pandemic, when he was still CEO of Fleury, explains that there are synergies between the new company and Atlântica’s network of clinics. “Patients who have finished their cancer treatment can be followed up by a doctor from our clinics,” said Mr. Marinelli.

The executive added that the service contracts of the Atlântica clinics and the accreditation of Bradesco Saúde with the new company will have the same market criteria. The creation of the new company still depends on the approval of the antitrust regulator CADE.

Source: Valor International

https://valorinternational.globo.com

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