After acquiring BESI, Haitong should inject fresh capital and hire professionals

Fresh capital injection should be one of the first management initiatives by Chinese bank Haitong in the recently acquired Banco Espírito Santo Investimento (BESI) in Brazil. The bank has yet to provide details on the move, but the strategy is part of a series of actions the Chinese group plans to drive the growth of its Brazilian branch, despite the recession that has forced investment banks to rethink about continuing their operations in the country.

"We don't have an opportunistic vision of our business. We don't go to Brazil when things are good and leave the country when things get bad," says the CEO of the Haitong group, José Maria Ricciardi.

Ricciardi has been in BESI since 1992 and became CEO in 2003. Today he leads Haitong's operations in the Americas and Europe. From Portugal, he spoke to Valor via conference call held at the bank's headquarters in São Paulo.

According to him, under Haitong's control, the Brazilian branch has a bigger capacity for growth as it has a shareholder with greater financial strength. In this regard, in addition to strengthening capital, the bank should hire professionals in the country to expand areas that still have potential for growth to generate new business.

The hiring plans also include the possibility of replacing the current CEO of the Brazilian branch, Rafael Valverde who, in an atypical structure during this transition period, heads the Haitong branches in the United States and Portugal. The idea is to hire a Brazilian CEO who will initially report to Valverde and ultimately take over the operations.

Other professionals will be hired for specific lines of operation. "We will invest more in areas where we still are in the incipient stage, such as Private Banking, Wealth Management and Asset Management." In Private Banking, the bank is in fact considering the possibility of acquisitions.

To grow in Brazil amidst a sluggish economic scenario, the bank's strategy is to fill up gaps and meet the needs of companies during the crisis. Ricciardi believes that when markets are not doing well, there are also opportunities that can be explored by banks. "Companies have to sell subsidiaries, some need to pay debts or extend deadlines, and others need to capitalize," he explains.

Outside Brazil, the bank wants to use its structure in China, where it is the second largest investment bank, to broaden the dialogue between Brazil and China. When asked whether the slowdown in China's economic growth would not hinder these plans, Ricciardi replied in the negative.

Contrary to market predictions, he believes that China's diverse overseas investments will continue because of the massive growth of the Chinese middle class, which increased from 100 million to 300 million people. "The Chinese middle class should reach 800 million people by 2030. This increase will boost domestic consumption and offset any possible decrease in exports," he explains.

He also foresees that Chinese investors, who accumulated capital in recent years, will diversify their investments and focus on Latin America, the United States and Europe. Haitong expects to broker these operations.

"The Chinese will start internationalizing their assets and invest in pension funds and investment funds, and not just in infrastructure," he says. The close relationship between the two countries also raises the possibility of the bank serving as a bridge between publicly-held Brazilian companies looking to trade their shares on the Shanghai stock exchange and Chinese companies that wish to trade their securities on the Brazilian stock exchange.

The plans are ambitious and Haitong is aiming to become one of Brazil's leading players. Apart from the advantage of belonging to China’s second largest business group, the bank will launch a marketing campaign to strengthen its brand in the Brazilian market. The first phase of the campaign started in September and should last three months.

The idea is to use a bridge as the campaign symbol, to represent the connection between one of the world's biggest economies and Latin America’s leading nation. 

For now, however, Haitong has to deal with the legacy of BESI's previous management, which ended the first half with a profit of R$2.2 million, nearly 12 times lower than in the same period in 2014. The result was affected by lower revenues and a higher volume of financial expenses and provisions.

BESI was acquired in December by Haitong International Holdings, which retained 80% control of the bank in Brazil. The remaining 20% is held by Bradesco and there are no plans to undo this alliance. Haitong acquired control from Novo Banco, a financial institution created with the healthy assets of Banco Espírito Santo (BES) after its collapse and intervention by the Central Bank of Portugal.

The Espírito Santo group, the bank’s former controller, is still undergoing restructuring to raise funds to pay off creditors. The group put up its non-financial assets for sale, such as interests held in companies including Monteiro Aranha and Brazil Hospitality Group (BHG). This divestment process is expected to be concluded by the end of 2016.