Value, profits and access

Roberto Setúbal lives and breathes banking. He is an authority on the abstruse subject of international bank capital adequacy regulations. He is also Brazil’s most successful banker. As chief executive officer of Banco Itaú, he has transformed it into the country’s most profitable and best-managed large bank. Itaú is a repeat winner of LatinFinance’s award for best bank in Latin America.

Says Setúbal, “We started the year with the best possible expectations. But the US economy underperformed, the Argentine crisis has become more intense. We expected a normal rainy season but now we face power shortages.” The bank also expected continued growth in loan demand, but Setúbal says, “Now we are becoming more cautious. Loan growth has fallen to 10% from 15% and although maturities are increasing, they are doing so at a slower rate than forecast. The same applies to revenues.”

Setúbal has used advanced banking systems to sharpen Itaú’s efficiency. “I believe in technology, that through technology you can do things better,” he says. Itaú has taken an unusual approach to Internet banking, which has grown rapidly in Brazil. The bank struck an alliance with AOL Latin America, a joint venture between the US Internet giant and the Cisneros group of Venezuela. Itaú took a minority stake in AOL Latin America last year without committing any capital. Setúbal merely agreed to use its portal as the entry to Itaú’s online banking system.

Setúbal has also made technology the cornerstone of traditional banking relationships. “I do not believe that you can build a business based on personal branch manager relationships. I believe in credit scoring and technology, and this has proved right in all the crises we have been through. Itaú managers are there to sell products. Loan approval is automated.”

Setúbal is also segmenting the bank’s franchises more carefully. He has created a new upscale branch network and brand for wealthier customers. The bank now services small and medium-sized companies with separate units and their own exclusive Itaú managers.

Roberto Setúbal is the second member of his family – one of the two clans that control the bank – to run the bank and the Setúbal name has begun closely associated with Itaú. His father Olavo, a former foreign minister, was in charge in the 1980s. Under the younger Setúbal, Itaú has become fixated on profits and shareholder value. Investors have reacted by driving up its market capitalization well above that of its rival Banco Bradesco, a much bigger bank when measured by assets.

Setúbal denies that he is merely fattening up the bank for a future sale. He says that “Because of this effort we have made in terms of shareholder value and profits, we will always have access to capital. The market will give the response we need for a couple of billion dollars the day we need to acquire a bank in Brazil or abroad. That is why, as long as we keep this up, we will be a winner with globalization. We will never be forced into a corner and made to sell.”