ABN Amro’s Brazilian come-back

Acquiring a small bank in Brazil may seem like a rather brave thing to do right now. Over the past two years, seven small or mid-sized lenders have either been closed down or changed ownership as a result of financial difficulties. Several of those cases have allegedly involved fraud.

However, if you’re a big foreign bank looking to get into Brazil and you’re savvy enough to know which bank to choose, an acquisition in the sector could be a very smart move. Not only are shareholders now willing to sell for a low price, but it can also be one of the simplest ways to get a banking licence in the country.

For this reason, ABN Amro’s acquisition of Rio de Janeiro-based Banco CR2 last week seems to make sense.

While Rick Torken, country executive for Brazil, declined to comment on the acquisition itself, he says it was part of plans to expand the bank’s main Energy, Commodities and Transportation (ECT) business in the country as ABN Amro has technically been in Brazil since 1916, becoming one of the biggest banks in the country with the acquisition of Banco Real in 1998.

However, after being dismembered during the recent financial crisis, ABN Amro has had to start again in Brazil, opening its representative office in São Paulo in January last year.

Torken says the bank is still waiting for approval for its CR2 acquisition from the central bank, but expects to take on as many as 65 people initially. The new offices in São Paulo could house up to 150 if things go really well.

In spite of Brazil’s recent economic slowdown, vast investments in the oil industry and the country’s prominence as one of the world’s agricultural powerhouses still make Brazil a very attractive market for the bank, he says.

And after seeing the country swing violently between economic/political crises throughout the 1990s, Torken says that investing in Brazil nowadays – regardless of the sector – certainly takes less bravery than it used to.

“Brazil is like a super-tanker now…you can’t move its course that much. Yes, it’s partially run by the government, but it’s a capitalist country – it’s also largely run by companies now.”

Related reading:
Banco Cruzeiro: good riddance, beyondbrics
Brazil liquidates two banks amid slowdown, FT
Brazil: another bank, another “accounting irregularity”, beyondbrics
Brazilian banks: big is definitely better, beyondbrics