HSBC’s Brazil Comeback Plan: Open Broker-Dealer, Boost Hiring

(Bloomberg) -- HSBC Holdings Plc is plotting a comeback in Brazil three years after selling its unit there, saying the new government’s slow start in reforming the economy won’t hold up its plans.

“We are still optimistic,” Alexandre Guiao, HSBC’s chief executive officer for Brazil, said in an interview at the bank’s Sao Paulo office. “We thought the process to approve the reforms would be quicker, that the economy would be at another level by now, but we still believe the approval will happen this year and growth will take off.”

A non-compete period tied to the sale of the unit to Banco Bradesco SA ended in December, and HSBC’s strategy is to become “relevant” again in Brazil corporate and investment banking, Guiao said. The London-based company is planning to offer local-currency credit and brokerage services, but won’t be getting back into retail banking. That business is “too competitive, and we don’t have enough scale,” Guiao said.

The lender is applying this month for an upgrade of its license to let it offer more services, such as cash management, instead of just investment banking.

“We are talking to the central bank, and already let them know we’re going there again next year to apply for a broker-dealer license,” Guiao said.

Read more: Bradesco’s CEO would buy HSBC unit again, even at a higher price

Local-currency lending will start in the second half, and HSBC also expects to participate as an underwriter on local bonds -- a market where volume dropped 12% this year from the same period in 2018, to 58.4 billion reais ($15 billion), according to data compiled by Bloomberg.

The lender might also make loans to Brazil’s troubled states, as long as they have a guarantee from the federal government, Guiao said.

While it’s preparing to reopen a brokerage, HSBC will participate in equity sales, distributing them offshore and using BNP Paribas SA as a custodian. HSBC is also one of the banks hired for an initial public equity offering by power company Neoenergia SA.

President Jair Bolsonaro, who won the October elections, has made many positive moves since taking office, including “naming the right people for the finance and economic ministries,” Guiao said.

Planned divestitures by state-owned banks and companies are also a plus, according to Guiao, as those firms sell subsidiaries and stakes in units to raise cash and improve fiscal accounts. The Neoenergia deal, for example, also stems from stake sales by a state-owned bank and its pension fund. HSBC hopes to participate as an adviser on many of those transactions, working for the buyer or the seller, Guiao said.

“There is also the infrastructure investment plan, where we see a lot of opportunity for a global and specialized bank like us,” Guiao said, citing roads, railroads, airports and ports.

Bradesco Sale

After selling its unit to Bradesco for $5.2 billion, HSBC kept a small investment-banking subsidiary in the nation with about 45 people. It could only do offshore transactions, as well as related derivatives and foreign-exchange deals. It also kept a treasury desk that invested shareholders’ equity of about 1 billion reais.

The bank approved an expansion plan at the end of last year and more than doubled the number of employees in Brazil to about 100, with a goal of reaching roughly 190 by the end of 2020. Most of the senior-management team is in place, including the recent hiring of Marco Siqueira as country head of global liquidity and cash management.

Total exposure to Brazilian risk increased 15% so far this year, Guiao said. The goal is to triple revenue and profit in five years, and increase the number of clients to 650 from 150.

“The government has all the willingness to do the right thing, and because of that we’re keeping the pace of our new investment plan,” Guiao said.

To contact the reporters on this story: Cristiane Lucchesi in Sao Paulo at clucchesi5@bloomberg.net;Felipe Marques in Sao Paulo at fmarques10@bloomberg.net;Julia Leite in Sao Paulo at jleite3@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Steve Dickson, Dan Reichl

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