Roberto Setubal does not have to think twice about Itau’s greatest achievement within the past year. “The greatest conquest was the purchase of BankBoston, thanks to which we have assumed the leadership in various market segments. We moved upscale in private banking, and we led in asset management and corporate banking,” the CEO of the family-controlled Sao Paulo-based Banco Itau tells Emerging Markets. “We have the most valuable brand in the whole of Latin America,” he adds.
The $2.1 billion transaction with Bank of America Corporation was cleared by the Brazilian central bank in August and approved by Itau’s general assembly at the end of last month (August 25). In return, the US institution has gained a minority stake in Itau, Brazil’s second largest private bank in terms of assets.
“Limits have been negotiated,” according to Setubal. Initially, Bank of America took 5.8% of Itau in equity. The proportion has since increased to 7.5% but is capped to 20% by mutual agreement. One of Itau’s board members is appointed by Bank of America. In the meantime, Itau has also acquired BankBoston’s operations in Chile and Uruguay (official approval is still pending in these countries). As a result, Itau’s profile boasts assets of 203 billion reais (around $94.6 billion), 91.7 billion reais in loans (some $42.6 billion) and 168.8 billion reais (around $78.5 billion) in assets of third parties (June 2006 figures).
As he operates in the very lucrative Brazilian market, Setubal remains committed to achieving high returns for shareholders, with return on equity (ROEs ) of around 35%. “Itau has been attracting foreign investors, thanks to emerging market growth and its capacity to manage risks in an emerging market environment. Such investors are not looking for a bank in Europe,” he recently told the Brazilian Institute of Corporate Governance (IBGC). Corporate culture based on ethical values and customer services as well as investment in information technology have proved to be some of Itau’s greatest strengths, according to Setubal.
It has also managed to diversify its activities and gain scale in the largest and most complex Latin American market. “It’s probably the best structured bank,” says Jan Jarne, a former Itau international executive. “Itau was made and structured by engineers,” such as Roberto Setubal’s father, Olavo, who also acted as mayor of Sao Paulo. “They were all engineers apart from the number two, who was a lawyer ... Roberto was then sent to Citibank as assistant to the chairman. This is where he picked up on credit operations. Olavo told him: ‘Take a hard look at products in consumer finance’. And he did !” Up until today, Roberto Setubal acknowledges that Itau is still engineer-minded. “We tend to adopt more rational and quantitative processes; we have deeper management techniques,” he says. —Thierry Ogier