December 03, 2008

Banco Bradesco SA is among banks likely to lead industry consolidation in Brazil, analysts say, after recent deals created bigger competitors and stock market declines made some smaller rivals cheaper.Bradesco lost its position as the country’s No. 1 non- government bank after Banco Itau Holding Financeira SA and Uniao de Bancos Brasileiros SA on Nov. 3 said they would combine to become Latin America’s biggest financial institution. That puts pressure on Bradesco and federally controlled Banco do Brasil SA to keep up by acquiring small- and mid-size banks, said Raymond James analyst Federico Rey-Marino in a Nov. 21 research note.
Consolidation becomes more palatable to bank owners as Latin America’s biggest economy slows and the global credit crunch devalues assets. Itau Chief Executive Officer Roberto Egydio Setubal said last month the decision to buy Unibanco was “a direct result” of Banco Santander SA‘s purchase of ABN Amro Holding NV’s Brazilian unit, Banco Real. That may leave Bradesco and Banco do Brasil scrounging to find suitable partners, said Pedro Fonseca, an analyst at Keefe, Bruyette & Woods Ltd.“The problem is that there aren’t many targets left that could really change this new picture,” said Fonseca, in a telephone interview from London. “The new strategy to gain scale now would be to attract more clients. Maybe acquiring rights to manage payroll from companies could be the next attack.”