Banrisul - analise de mercado

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Global Strategic Conversations Cohort 1

Banco do Estado do Rio Grande do Sul (Banrisul)
The Competitive Position within Brazilian Banking Market

Renato J Meneghello renatom@br.ibm.com

1

1. Overview
Total
 Capital
  The “Banco do Estado do Rio Grande do Sul SA (aka Banrisul)” is a Brazilian bank based in the south of the country. Founded in 1928 and major controlled by thestate of Rio Grande do Sul (with 57% of total capital), Banrisul is in 11th position in Brazilian banks ranking and offers a Other
  range of financial products and services, such as personal 0,2%
  and real estate loans, long-term financing, lines of credit for the agricultural and cattle-raising sectors, general business lines of credit, debit and credit cards, savings deposits, demand andtime deposits, funds, investment, brokerage and asset management. As of December 2011 Banrisul served its customers in 1,278 points, distributed in 442 branches (401 in Rio Grande do Sul, 25 in Santa Catarina, 14 in other Brazilian states, one in New York and one in Grand Cayman), 275 banking service stations and 561 electronic service stations. The Bank focuses its banking services on the needs ofretail customers, small- and medium-sized companies and public sector entities. It’s most important product is their own debit card known as Banricompras which has more market share than Visa and Mastercard together in the south of Brazil.

(i)

Project focus

(ii)

(iii)

(iv)

(v)

Banrisul group consists of five major companies: (i)The bank itself, (ii)the consortiumadministration co., (iii)the brokerage and exchange co., (iv)the logistics co. and (v)the corporate cards and benefits company. For the project purposes we will analyze only the Bank that holds the major revenue income.
Net Income by Company

BANRISUL Consortium Adm Brokerage & Exchange Co Logistics Corporate Service Cards

Net income of corporation reached R$ 904M in 2011 (chart above). The other groupcompanies are, basically, to create conditions for bank participation in the various markets in which it operates.

2

Despite being a regional bank BANRISUL’s strategy is to be a retail bank so it's fair enough to compare it with the largest Brazilian banks, which ones Banrisul considers as direct competitors, with national presence both public (as Banco do Brasil) and private (as Itau). Inthis analysis we should include Sicredi (a regional credit union, biggest in south of Brazil and mainly competitor of Banrisul) but this was not possible due lack of financial information available to general market. Instead, we are using BNB (Banco do Nordeste do Brasil) as a benchmark bank –same profile, similar market.
ROE COMPARISION
50,00% 45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00%10,00%
5,00% 0,00%

2011
BANRISUL ITAU

2010
BANCO DO BRASIL

2009
BNB BRADESCO

2008
SANTANDER

2007
Industry Avg

2. Industry Structural Analysis
The industry is very much attractive, especially in Brazil where we have a +22% ROE, in average. Banrisul was increasing its performance consistently in last 3 years, +22% YTY grew in 1Q2012, same rate as its competitors. In 2007 withthe intend to reach the Bovespa’s corporate governance level 1 to attract more investors and to propitiate modernization and more competitiveness Banrisul issued a huge stock option offering rising the bank’s ROE dramatically (almost 50%) in that year and distorting its performance analysis.
+11% Banrisul’s Return on Equity 11% (2011) 0% 22%

Economic Average

Industry Positioning Company'sInfluence Influence Profitability

3

It’s hard to make an analysis of entire Brazilian banking industry without take in consideration that, regionally, the state of Rio Grande do Sul is a very particular market comparing with the rest of Brazil. Customers are very loyal with regional products and services and competitors from other parts of country usually face some resistance in local...
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