Brazil is one of the largest and most dynamic economies in Latin America, and its financial system reflects this reality. Among the more than 100 banks operating in the country, three stand out for their size, profitability and presence: Bradesco, Santander and Itaú. These three banks account for more than 50% of the total assets of the Brazilian banking system, and have a strong influence on the economic and social development of the country. In this article, we will analyze the characteristics, results and challenges of each of these banks.
Bradesco
Bradesco is the second largest bank in Brazil, with assets of R$ 1.6 trillion (about US$ 300 billion) at the end of 2020. It was founded in 1943 by Amador Aguiar, a visionary businessman who bet on the growth potential of the Brazilian domestic market. Bradesco has been characterized by technological innovation, geographic expansion, and diversification of products and services. The bank has more than 71 million customers, including individuals and corporations, and a network of more than 24 thousand points of service, including branches, ATMs and banking correspondents.
Bradesco performed well in 2020, despite the crisis caused by the Covid-19 pandemic. The bank recorded a net income of R$19.5 billion (about US$3.7 billion), a drop of 24.8% compared to 2019, but above market expectations. The bank managed to increase its service revenues, reduce its operating costs and maintain its loan portfolio quality, which grew 18.3% in the year, reaching R$ 812.7 billion (about US$ 153 billion). The bank’s return on equity (ROE) was 14.8% in 2020, one of the highest in the sector.
Bradesco’s challenges for the future include maintaining its leadership in the insurance segment, where it is the largest operator in Brazil, with a market share of 25%; continuing to invest in digital transformation, to improve its customers’ experience and compete with fintechs; and expanding its presence in the retail banking segment, where it has a smaller share than its competitors.
Santander
Santander is the third largest bank in Brazil, with assets of R$ 1.1 trillion (about US$ 207 billion) at the end of 2020. It is a subsidiary of the Spanish Santander Group, which has a presence in more than 20 countries. Santander began operations in Brazil in 1982, and consolidated its position as one of the country’s leading banks after the acquisition of Banespa in 2000. Santander focuses on offering integrated financial solutions to its customers, with a value proposition based on simplicity, agility and efficiency. The bank has more than 47 million customers, including individuals and corporations, and a network of more than 15 thousand points of service, including branches, ATMs and banking correspondents.
Santander had a solid result in 2020, despite the crisis caused by the Covid-19 pandemic. The bank recorded a net income of R$13.4 billion (about US$2.5 billion), a 4.8% drop compared to 2019, but in line with market expectations. The bank managed to increase its fee income, control its credit provisions and improve its operating efficiency, which reached 40.1%, the best level in history. The bank’s loan portfolio grew 12.4% in the year, reaching R$ 462.5 billion (about US$ 87 billion). The bank’s return on equity (ROE) was 19.5% in 2020, the highest in the sector.
Santander’s challenges for the future include continuing to grow in the retail banking segment, where it has gained market share in recent years; strengthening its position in the wholesale banking segment, where it has a large portfolio of corporate clients; and continuing with its sustainability strategy, which includes a commitment to allocate US$ 5 billion to renewable energy projects in Brazil until 2025.
Itaú
Itaú is the largest bank in Brazil, with assets of R$ 2 trillion (about US$ 377 billion) at the end of 2020. It is the result of the merger of two historic banks: Itaú, founded in 1945 by Alfredo Egydio de Souza Aranha, and Unibanco, founded in 1924 by João Moreira Salles. Itaú has stood out for its solvency, profitability and leadership in the Brazilian financial market. The bank has more than 56 million customers, including individuals and corporations, and a network of more than 18 thousand points of service, including branches, ATMs and banking correspondents.
Itaú had a disappointing result in 2020, due to the crisis caused by the Covid-19 pandemic. The bank recorded a net income of R$ 18.5 billion (about US$ 3.5 billion), a drop of 34.6% compared to 2019, and below market expectations. The bank suffered strong pressure on its financial margins, due to lower interest rates and increased competition. In addition, it had to increase its credit provisions, to cope with the increase in non-performing loans. The bank’s loan portfolio grew 20.2% in the year, reaching R$ 906.5 billion (about US$ 171 billion). The bank’s return on equity (ROE) was 13.5% in 2020, the lowest in the sector.
Itaú’s challenges for the future include recovering its profitability, which has been eroded by the crisis and increased competition; accelerating its digital transformation to improve the customer experience and compete with fintechs; and completing the spin-off of its stake in XP, the largest investment platform in Brazil, which generated a conflict of interest with the bank.
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