The growth of Bradesco BBI's investment banking arm in recent years has reflected that of the Brazilian economy. Its head explains how the bank's strong team and excellent client relationships have been the bedrock for this growth.

The calm confidence of Renato Ejnisman, head of investment banking at Bradesco BBI, can be seen throughout the institution, and he exemplifies an assurance that the bank believes will see it realise its goal of becoming the investment bank of choice in Brazil. However, that is not an easy undertaking, since the race to the top is a hard-fought one involving many established names. But given the quick growth of Bradesco BBI’s investment banking division, which was only set up in 2007, and the benefits of being part of the third largest banking group in Brazil, this ambition seems to be grounded in reality.

Bradesco BBI was ranked the second most successful bookrunner in the Brazilian debt capital markets last year, after Itaú BBA, raising a total of $2.6bn for clients. A similar amount – $2.15bn – was placed on the international market, leaving the bank in eighth position in the ranking, according to data provider Dealogic. Some progress has also been made in the mergers and acquisitions space, where the bank ranked eighth place in 2011, having provided advice on 23 deals worth a total of $12.22bn. 

Building on reputation

“Very quickly, we became a strong player in the investment banking arena,” says Mr Ejnisman. “Obviously the fact that we are part of Bradesco, that we have the [corporate client] relationship, [that] we have a brand name that is recognisable... that helps.”

In fixed income, Bradesco BBI has improved in both the value and the number of deals it is involved in, and since inception it has always been one of the country’s top few investment banks in the sector. Stronger growth has been felt in equities, where the bank moved from ninth place in 2007 to third place last year. Despite general lower activity in the stock exchange, Bradesco BBI placed $1.64bn in the BM&F Bovespa and closed 2011 in third place in the rankings among Brazilian banks.

We had a big increment in our activity last year; we invested a lot. We hired a bunch of people from numerous investment banks to strengthen the team. Many were Brazilian bankers coming back to Brazil, many were already based here. The results came quicker than we ever imagined

Renato Ejnisman

Mr Ejnisman put this success down to the commitment of the division and a series of excellent appointments to the team. “We had a big increment in our activity last year; we invested a lot,” he says. “We hired a bunch of people from numerous investment banks to strengthen the team. Many were Brazilian bankers coming back to Brazil, many were already based here. The results came quicker than we ever imagined. We increased the investment banking team by more than 20% over the past year, and we still have room to grow.”

One of these new recruits is Leandro de Miranda, who has led the bank’s successful fixed-income division since July last year, and was previously with Credit Suisse and BTG Pactual.

Having such a strong team leads to stronger client relationships, which Mr Ejnisman believes is making a real difference for Bradesco. He recalls a deal in late 2011, where the strength of the bank’s relationships with its clients proved crucial. This was the acquisition financing put together for Brazilian industrial conglomerate Petropar as it entered into negotiations to takeover the hygiene business of UK-based non-woven fabric maker Fiberweb for $286m in cash. The structure put together by Bradesco raised $210m and effectively made the acquisition possible, says Mr Ejnisman.

What made the deal stand out was that Bradesco was not even involved in the purchase or its financing to start with. It was thanks to the relationship and initiative of a coverage banker that the solution was suggested and then taken on by the client. Further, funds were raised through products that had not been used in the country for two years, which were debêntures cambiais, dollar-denominated bonds issued in the Brazilian market, at a time of weak economic and credit conditions in the acquisition target’s home market in Europe.

“Over the past year we have increased the number of more sophisticated transactions that we have done for clients,” says Mr Ejnisman. “We financed Petropar’s acquisition of Fiberweb. Initially, [the client] was looking at a transaction that was dollar denominated because it was taking over a foreign company, so it would have been a natural hedge for it. We had one of our coverage bankers visiting the client and he became aware of the situation. Even [though] we weren’t involved in the [takeover] and not even in the financing, we ended up developing a solution that involved debêntures cambiais – a structure that hadn’t been used for years – and we ended up taking the lead in the transaction. In the end, we had a client that was able to accomplish [the acquisition deal] and we probably reduced its cost of funding.”

Local competition

As Brazil and its companies grow and attract interest from overseas, so too does the competition among the country’s banks. All players are keen to emphasise their strengths. Brazilian investment banks with sizeable local balance sheets at their disposal have easier access to corporate clients. However, international firms can offer overwhelmingly larger sales forces and greater investor reach.

Over the past year we have increased the number of more sophisticated transactions that we have done for clients

Renato Ejnisman

Mr Ejnisman, however, is unfazed by the competition on show from overseas players. He says: “When you look at [international investment banks’] sales teams, they will probably have hundreds of [sales] people who will have thousands of [clients] but the reality is that when you are launching an equity offering or a debt offering of a Brazilian issuer, 90% of that sales force won’t be involved, probably won’t even know about the deal.” Unsurprisingly, many other local players share this view.

Brazilian issuance has been powering ahead, with a total issuance that went from just below $7bn in 2007 to almost $19bn last year, and a jaw-dropping $30bn for the first quarter of 2012. Until now, most of this growth has been driven by international bonds, allowing issuers to take advantage of the low interest rate environment abroad. But much is expected to change domestically, thanks to the decreasing value of the real and plans to deepen the debentures market through tax breaks on new structures, such as infrastructure bonds, and the creation of a Novo Mercado in the fixed-income space, on the lines of the one created over a decade ago in Brazil’s stock exchange, BM&F Bovespa, in which companies voluntarily adopt stricter corporate governance practices.

Selectivity, not conservatism

However, bankers and investors ought not to become overly excited. Despite its success and recent progress, Brazil is still battling with some crucial issues, such as corporate governance and issuers’ abilities to tap the market at the right time, due to the complexities of the issuance process. Smaller companies feel this the most.

Mr Ejnisman recalls a few recent deals that did not perform as anticipated or had to be withdrawn, either because of structural issues or simply because of adverse market conditions, but which had been
 put together with a justified sense of optimism. He is keen to point out that Bradesco has an embedded sense of “responsibility to being attached to the right [client] names” in all of its operations, and thus retains a low risk profile.

However, as is the case with any investment banker, Mr Ejnisman looks slightly uneasy at being associated to the word ‘conservative’. “It is not a matter of being more conservative, it is a matter of being more selective. I think we are as aggressive as any other investment bank but we know how to better select our deals. We have a larger pool of history to base our decisions on.”  

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