Banco Bradesco CEO Eyes M&As in Brazil’s Healthcare and Mexico’s Retail Banking

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SAO PAULO – Brazilian lender Banco Bradesco SA is seeking new acquisitions, particularly in the healthcare sector, chief executive Octavio Lazari said, following its breakthrough in retail banking in Mexico with the purchase of a payment company there.

In an interview at the bank’s headquarters in Osasco, Lazari said Bradesco’s insurance unit was looking to invest in hospitals or make acquisitions to compete with rivals offering insurance and health services. The hospital group Rede Dor Sao Luiz SA announced in February the acquisition of the insurer Sul America.

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Brazil’s second private bank, Bradesco has one of the largest health insurance operations in the country, with 4 million beneficiaries. Owning hospitals and clinics would help this operation cope with medical inflation.

Asked about the possibility of resuming talks to buy UnitedHealth Group Inc’s unit in Brazil, after talks broke down earlier this year, Lazari said it would depend “on what they (UnitedHealth) want to do.”

“Bradesco’s door remains open,” he added.

Recent stock market performance has made health care trading “easier” by reducing sky-high multiples, Lazari said.

Rather than relying solely on mergers and acquisitions, Bradesco also began building its own hospitals, using real estate from its extensive branch portfolio.

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The first is a partnership with Albert Einstein Hospital, one of the best hospitals in Brazil. The bank is exploring potential partnerships with other hospital operators such as Sirio Libanes and Beneficencia Portuguesa, Lazari said.

RETAIL BANKING IN MEXICO

Mexico will be the first country where Bradesco aims to operate retail banking services outside of Brazil, following the acquisition, announced this month, of payments company Ictineo Plataforma, enabling it to build a digital bank in the country. .

Lazari said the Mexican market has plenty of room for growth, with 40% of the population still unbanked.

“They are similar to what the Brazilian market was like five or 10 years ago,” he said.

Bradesco has operated a credit card operation in Mexico for 12 years and now has 3 million customers with private label credit cards. This operation is profitable but small, generating 150 million reais ($29 million) in annual net income.

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The new digital retail bank in Mexico, which has yet to be named, will start by offering digital accounts to current customers, then expand into payroll-backed loans and mortgages.

The overseas digital banking business is a radical departure from Bradesco’s traditional strength as a physical bank in Brazil.

After closing about 1,500 branches in Brazil over the past three years, Lazari said the current network of 3,500 branches is adequate.

The lender is now working to reduce the average size of branches, while allocating the freed up real estate to new projects such as hospitals and residential buildings.

Bradesco has three digital banks in Brazil: Next, with 14 million customers; Digio, with 4 million; and Bitz, with 8 million. Across all of its brands, Bradesco is adding customers at a rate of about 4 million new accounts per year, he said.

The key to monetizing digital accounts, which typically don’t charge fees, is to offer credit and other products, Lazari said, adding that Bradesco’s digital banks aren’t yet profitable.

($1 = 5.1808 reais) (Reporting by Tatiana Bautzer; Editing by Brad Haynes and Richard Pullin)

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