Branching out

Branching out

Interviews People

Itaú Unibanco became Brazil’s largest commercial bank in November 2008 when two former rivals — Banco Itaú and Unibanco — came together to form a financial institution with more than $260 billion in total assets. Since then, the São Paulo-based lender has held on to its position in its home market, amassing 1.5 trillion reais ($390 billion) in assets in Brazil by the end of March 2018.

The bank has not sat still in the rest of Latin America. After setting up shop in Argentina in the 1990s, Itaú expanded its presence across the region by buying the BankBoston brand in Brazil, Chile and Argentina in 2006. It also acquired Citi’s retail banking business in Uruguay in 2013 and bought CorpBanca in 2014, giving it more branches in Chile and Colombia.

Latin America contributes 25% of loans and 8% of profits to Itaú’s results, and it wants to keep going. With the expressed intent of becoming the Latin American bank, Itaú has formed the LatAm Strategic Council, headed by Ricardo Villela Marino and including the former CEO Roberto Setúbal and the current CEO Candido Bracher as members.

Eduardo Vassimon, head of the investment banking division Itaú BBA, also sits on the council, along with Chile’s former finance minister Andrés Velasco, Argentina’s former economy minister Alfonso Prat-Gay, Bank of America Merrill Lynch’s former vice chairperson Sonia Dulá, former Santander banker Angel Corocstégui and Facebook’s head of virtual reality Hugo Barra.

“We don’t want to be global. We want to be Latin American,” Marino says.

LatinFinance spoke with Marino about Itaú’s expansion plans and how it can use regional markets as a testing ground for new products.

LatinFinance: What are the priorities for the LatAm Strategic Council?

Ricardo Villela Marino: Our first priority is to reach the same level of management and the same results that we have in Brazil. We are moving in that direction, but there is still a gap.

LF: Does that mean becoming the largest commercial bank in the region?

RM: No. Size is a result of good management and good results. Of course, in banking, scale is fundamental. It is important for us to be among the three largest banks [in each market] to have the scale to serve our clients, but size alone is never the final objective.

We want to create a regional franchise. Starbucks is everywhere, but a customer at a Starbucks in Buenos Aires can get an alfajor along with a tall soymilk latte. We want to do something analogous in banking — customized services in a regional bank.

LF: You say Itaú wants to become the Latin American bank, but it cannot be a truly Latin American bank without a presence in Mexico. How do you intend to enter the Mexican market?

RM: It’s not a priority, but if the market presents an opportunity to go to Mexico, we will look into it. If it makes sense for our clients and our shareholders, we’ll do it. At the moment, there isn’t anything, but if current trends continue — NAFTA negotiations, the border wall, an AMLO government — there could be an opportunity.

LF: Itaú’s businesses in Latin America now account for 25% of loans and 8% of profits. Do you have growth targets for the region?

RM: We don’t have targets. The truth is, we don’t have much more room for growth in the Brazilian market. We don’t want to go to China, Australia, Africa or Eastern Europe. Knowing the risks and the opportunities in the region and knowing that our clients travel and operate in the region, it makes sense to grow in Latin America.

These markets are concentrated but they are still very competitive. This is an ongoing discussion in Brazil — that the market is concentrated in the hands of a few banks and isn’t competitive — but I don’t think we have ever competed as much as we do today. The only exception is Argentina, where the top five banks have 50% of the market. But this is an anomaly. In the next five years, there will be more consolidation in the banking industry in Argentina. But that doesn’t mean there will be less competition.

LF: If good management is the first priority and entering the Mexican market is the third, what is the second priority?

RM: Digital banking is also a top priority. We are fairly advanced in mobile banking. We are the market leaders in Uruguay and Paraguay. We are also a benchmark in Brazil. We are doing okay among other banks, but we have to compare ourselves to Amazon, Google and Uber. We have to focus less on the product and more on the client.

Our top priority is not just to be the Latin American bank, but the digital Latin American bank.

LF: Many fintechs in Latin America claim to be more agile than big banks like Itaú. How does a bank the size of Itaú compete with financial startups?

RM: We don’t want to compete with them. They want to compete with us. We see fintechs as co-competitors, as both collaborators and competitors, rather than just competitors. We see fintechs more as allies than as enemies. We can also buy a fintech company, if that is the case, or bring in people from fintechs or copy their products, as we’ve done with credit cards.

Most fintechs aren’t banks. Most have just one product. One processes payments, while others offer credit cards, insurance or fund management. None of them has the same portfolio of products or the balance sheet to compete with a leading bank like Itaú. The real threat is not fintechs but bigtechs. By that I mean an Amazon bank, a Facebook bank, WeChat bank or Alibaba bank. We need to pay attention to what they will do to our market, and they need to be subject to the same regulations.

LF: Speaking of technology, how do you view blockchain?

RM: I see it as revolutionary. It is as important as the internet was in the 1990s. The underlying technology of distributed ledgers has 1,001 uses. Itaú leads one of the desks at [the distributed ledger consortium] R3. Undoubtedly, we need to pay a lot of attention to this technology.

LF: How do you view the long-term prospects for economic growth in Latin America?

RM: It is difficult to talk about five years down the road, but we have a vision. Creating the council signals our commitment to the region for the long term. We aren’t here because we’re just thinking about the next quarter. We are looking at the next 10 years.

When we acquired BankBoston in Chile in 2006, I said, “We are here to stay.” BankBoston had three owners in less than six years. The employees were suspicious that we had bought the bank only to sell it later. But we told them that we had come to grow the business and be a part of the community. That is how we view Latin America today. Our mission used to include only Brazil. Now it includes Latin America. LF

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