Executives at Brazil's second-place private sector bank, Bradesco (NYSE: BBD), view 2011 as a "crucial year" for the bank's long-running, massive investment process to improve its IT architecture and build its branch network, executive VP and IR officer Domingos Figueiredo de Abreu told a conference call.
"There's nothing comparable in the world," the executive said during the 4Q10 earnings call with investors and analysts, asserting that many banks would eventually have to take on projects like this, but that Bradesco had already come to a major point in its process. "2011 will be a crucial year," he added.
The investments that in 2003 and have included new contingency planning, building construction, corporate governance practices for IT are now about 80% finished, Abreu said, also pointing to the 174 new branches built in 2010 and the 183 planned for 2011. But, he explained, the 2012 planning process was not concluded and the bank was unsure when its investment cycle would end.
However, the efficiency ratio has not fallen, rising in each of the last four quarters to 42.7% in 4Q10 from 40.5% in 4Q09. Bradesco hopes to bring this down to 39% this year and then around 35%, finally reaching 29% by 2014.
CAPITAL REQUIREMENTS IN THE MIX
As for Basel III and its effects on the Tier-1 capital ratio, Abreu said that the bank does not expect to need to raise capital in the near future, but that if central bank BCB pushed for a quick implementation it would need around 1.5bn-2bn reais (US$899mn-US$1.12bn).
Bradesco is also prepared for more macro-prudential measures from BCB should they appear, Abreu said. He expects any new measures to reduce growth but help push up margins, thereby mitigating their impact.
The bank is planning to grow in higher margin loan books, such as in SME lending, and take advantage of higher benchmark Selic rates to boost its revenues, as it beats market growth of about 15% in 2011, the executive said.