Santander Brasil Buys Debt Collector to Fuel Growth, CEO Says

  • Sergio Rial says Brazilian banks must adjust business models
  • Bank chief on the economy: ‘The ground has stopped falling’

Banco Santander Brasil SA bought a credit-recovery firm to help boost revenue as interest rates fall, the company’s chief executive officer said.

“Banks need to rethink their business models,” Sergio Rial said in a wide-ranging interview last week at the company’s Sao Paulo headquarters, where the 57-year-old CEO discussed his July purchase of Ipanema Credit Management. “Santander is strengthening its expertise and technology with this acquisition.”

Fallout from Brazil’s worst-ever recession has drawn a growing number of firms to the market for soured loans and other troubled assets. Last year, Itau Unibanco Holding SA acquired Recovery do Brasil SA, the biggest distressed-asset management firm in Latin America. Dallas-based Lone Star Funds is buying Apoema Capital Partners, a Brazilian firm that manages about 4.5 billion reais ($1.4 billion) in distressed assets, a person with knowledge of the matter said in April.

Prospects for debt recovery have improved with the nation’s economy, which expanded in the first quarter after two straight years of contraction. “The ground has stopped falling,” said Rial, who regularly flouts the button-down stereotype of a Brazilian bank CEO by eschewing neckties in favor of more business-casual attire.

“Lower inflation represents a real income gain for families, and interest-rate reductions help to stimulate the economy,” he said, also praising the government’s “fiscal responsibility.” As next year’s election approaches, “continuity of this policy is very important,” he said.

Loan Sales

The CEO declined to comment on the price Santander Brasil paid for 70 percent of Sao Paulo-based Ipanema, which has about 30 employees.

The purchase doesn’t mean Santander Brasil, one of the pioneers for selling distressed credit portfolios to the market, will get out of that business, Rial said. The company recently sold 1.3 billion reais in bad loans to Brazilian investors, people familiar with the matter said in May.

Buying Ipanema fits Rial’s full-speed-ahead strategy for managing the bank, which he imparts on employees in sometimes colorful ways. At the 2015 year-end company gathering, the CEO walked on stage dressed head-to-toe in the red-and-white iconic jumpsuit of a Ferrari Formula 1 driver, delivering a speech he called “Speed Up, Santander.”

Rial, who recommends all employees read a book called “Exponential Organizations: Why new organizations are ten times better, faster, and cheaper than yours (and what to do about it),” wasn’t slowed much by Brazil’s recession and the ensuing rise in customer delinquency rates. Profit and net interest income at the company, which was responsible for 26 percent of its Spanish parent’s earnings in the first half of this year, have climbed every quarter since Rial started as CEO in January 2016.

“I do believe that to navigate in a crisis can be a great opportunity, as the Chinese say,” he said.

Interest Income

Santander Brasil’s loan portfolio expanded 5.1 percent in the past 12 months, even while Brazil’s total credit shrank 1.6 percent, central bank data show. Revenue is also rising faster than the company’s peers. Net interest income -- interest earned on assets minus payments to depositors -- rose almost 17 percent in the first half of 2017 from a year earlier. Similar figures at Itau and Banco Bradesco SA, Brazil’s largest non-government-owned lenders, shrank by as much as 8.6 percent in the same period.

“We grew a lot on auto loans and direct credit to consumers, and payroll loans and credit cards,” he said. “We really took market share from competitors.”

“More recently, we focused on mortgage loans providing costumers with the lowest interest rates in the market, and we want competitors to follow us," he said.

In investment banking, Santander ranked third based on fees this year through July 19, up from fourth in the same period of 2016, according to Dealogic, the London-based research firm.

Digital Bank

Santander is also focused on improving its electronic-banking platform, but doesn’t plan any acquisitions, according to Rial, who denied media reports saying the company was considering the purchase of digital lender Banco Original SA.

While Santander has improved its profitability under Rial, its 15.9 percent return on equity for the first half of the year compares with 21.8 percent at Itau and 18.2 percent at Bradesco.

Closing that gap will be challenging, according to Carlos Macedo, an analyst at Goldman Sachs Group Inc.

“Santander is better than Itau and Bradesco on the expense side, but it’s well behind on the revenue side,” Macedo said. “The bank is not as big as peers in highly profitable non-bank businesses like insurance, asset management and merchant acquiring.”

Past Posts

Rial, who was born in Rio de Janeiro, joined Santander Brasil as chairman in February 2015, ending a one-year period as CEO of food processor Marfrig Global Foods SA. He became the bank’s CEO about a year later, succeeding Spaniard Jesus Zabalza. Past jobs included stints at ABN Amro Group NV, Bear Stearns Cos. and Cargill Inc., where he was chief financial officer of the agricultural giant.

“From the commodities world, I brought to the bank relentless risk-management discipline,” Rial said.

He also brought his flair for showmanship. At the 2016 employee gathering he topped his year-earlier Ferrari-jumpsuit presentation with a holographic image of himself coming from the future, giving his current self advice on how to achieve the bank’s goals.

This year’s venue is already set: All of the firm’s roughly 46,600 employees will be invited to Allianz Parque, a soccer stadium in Sao Paulo. No word yet on what kind of performance Rial has planned.

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