ItaúPrivateBank

ItaúPrivateBank
The 2O1O Euromoney Guide to
Private Banking in Latin America
Click here to read Celso Scaramuzza,
João Medeiros and Flavio Souza Interviews.
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interview
The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
Celso Scaramuzza - emphasis
on partnership
Celso Scaramuzza, head of private banking at Banco Itaú
explains how Brazil’s private banks are responding to the
demands of clients who want to put their money to work,
not just preserve their capital
How would you describe the Brazilian
private banking market?
The private banking market in Brazil
is growing dramatically. We are seeing
growth rates of 25% to 30% per annum
in assets under management, with most
of the growth coming from the onshore
market. The booming M&A market is
creating many new clients and a new
generation of wealth creators. With
economic growth this year of anything up
to 8% and the expectation of mediumterm general economic stability, this
market is no longer a fight for a share of
existing portfolios, it is an opportunity to
develop products and services for a new
group of sophisticated investors eager to
put their money to work, not simply to
protect their capital.
Is this growth coming from any particular
area or is it across Brazil?
Growth is coming not just from the
traditional geographies, São Paulo
state, for example - it is country-wide.
It is also across sectors. Agro-industry is
experiencing explosive growth; the airline
business too. Today we have executives in
São Paulo, Rio de Janeiro, Belo Horizonte,
Curitiba, Porto Alegre, Recife, Salvador,
Goiania and now in Ribeirão Preto. We are
covering nine states though if you consider
areas such as Mato Grosso and the north
this could rise to 15.
Celso Scaramuzza, head of private banking at
Banco Itaú
How do these new clients differ from
their predecessors and how do the banks
interview
The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
have to change their offerings to attract
them?
In one sense, they do not differ: there are
those who have inherited wealth and there
are those who have made new money.
But the difference is that in both cases
now they are entrepreneurial and looking
for new opportunities to invest in Brazil.
They understand the country’s potential
and they are not content with wealth
preservation - the traditional preoccupation
“Differentiation is the name of
the game, even in the traditional
private banking market”
of our private banking clients. In addition,
this new generation wants to make its
money grow outside the financial markets
and in ways that actively help the country
develop. So putting money into the bank is
not good enough; they want to take risks;
they want to start new companies.
For the banks this means a change in
emphasis, in products and in services.
What is important now is private equity,
real estate investment and trading advice,
advice on how to set up companies, advice
and execution on M&A and corporate
financing. Increasingly clients are looking
for a partnership with us rather than simply
a set of products. Essentially they are
demanding what you might call private
investment banking services and this is a
big change.
This implies a merging of the services
of the private bank with that of the
investment bank?
Exactly. We need to anticipate liquidity
events; we need to propose solutions
to capital structure issues before they
become apparent; we need to be able
to provide investment banking-type
solutions. Our private bank is already
working closely with Itaú BBA, our
investment bank, to provide this new
service. We started the service around
six months ago and we already have
30 deals in the pipeline and more than
15 mandates, representing a potential
of R$20 million in revenues. The most
important point in each of these potential
deals is that the private bank brought
the idea to the client and that it was the
private banker who was the differentiator,
in this case acting as a corporate financier.
That is the change: these conversations
with clients are strategic, they are not
product-oriented. We want the clients
to say, “these Itaú private bankers are
different; they tell us how to grow our
business, not sell us standard financial
products”.
Is this a difficult transition for the private
bank?
It is a challenge for all of us. We need to
take a holistic view of the client. We face
new competitors for this kind of business.
We might need to co-invest with the client
to show our commitment. These are not
traditional private banking products but
we are confident we are already developing
the kinds of services these new clients
demand.
How do you go about providing these
services?
We are convinced that private banking is
changing and that the model for the new
generation is changing. So beyond the
answer, “the private bank in partnership
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
with the investment bank”, I would say
that the private banker will stop being the
only point of contact in the relationship
and instead the technology interface
will become key. Information technology
will replace the single phone call to the
single private banker. The banker will be
responsible for this strategic support to
the client providing advice and ideas, but
will be supported by technologies such as
web and mobile.
What about the traditional products and
services? You will have to continue to
offer these as well?
Yes. We have to maintain and improve
the quality of our implementation of
existing products and services while at
the same time another team works on the
new initiatives - it’s a big development
programme. In the traditional product
areas our focus is on quality but also on
innovation. We have developed a range
of new treasury products as well some
more highly structured notes linked to
alternative asset classes such as real
estate and private equity.
Clearly, with rising interest rates, in the
short term there is a possibility that
Brazilian clients will be tempted to go
back to more plain-vanilla fixed-income
products. To ensure that they have the
best possible selection of investments
we need to improve our fixed-income
offerings and to come up with new ways
for clients to express more sophisticated
views. For example, for clients who do
not believe that interest rates will rise
as much as the futures markets are
predicting, we can structure notes that
will profit from that view. Differentiation
is the name of the game, even in the
traditional private banking market.
“This new generation wants to
make its money grow outside the
financial markets and in ways that
actively help the country develop.
So putting money into the bank
is not good enough; they want to
take risks; they want to start new
companies
How competitive is the private banking
market in Brazil and how does this affect
Banco Itaú?
The market is increasingly competitive.
Obviously we have two large domestic
competitors as well as a number of
boutiques and the large foreign banks
such as HSBC and Santander are also
represented here. Foreign investment
banks like Goldman Sachs are building
up teams and vying for both onshore and
offshore business. And we are even seeing
multi-family offices start to move into the
market. So, yes, there is competition and,
as it has always been, there is an eternal
war between scale and expertise.
That said, competition is our lifeblood.
The merger with Unibanco has given us
both the scale and expertise to compete
with any of these institutions and, looking
forward, Itaú has a unique opportunity
to increase its market share over the
next three years. We are exceptionally
well placed to meet the challenges of the
new marketplace. We have a first-class
team in both the front and back office,
a strong balance sheet, market-leading
infrastructure and an innovative plan for
the future. We are extremely optimistic for
the future.
interview
The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
João Luiz de Medeiros – The
international perspective
Despite its expanding domestic market, Itaú is keen to be
recognized beyond Brazil, as a fully-fledged international
private bank, competing with the global giants
With such an attractive domestic market,
why has Banco Itaú adopted such an
ambitious international private banking
strategy?
International wealth management is a
high-growth market in which the emerging
markets feature very strongly. Wealth
creation in Latin America, Asia, the Middle
East and eastern Europe continues to
outpace predictions, and servicing the
entrepreneurs and families generating this
is an extremely attractive business.
This is the main reason that private
banking is one of the beachheads of Itaú’s
international expansion. In addition, wealth
management is by definition cross-border.
It allows the bank to capitalize on its
proven strategy of following its customers.
And it requires relatively little risk capital.
When did this strategy begin?
Itaú was an early mover in entering foreign
wealth management markets. For example,
as long ago as 2006 we purchased the
BankBoston’s operastions in Chile and
Uruguay both of which had PB assets. We
have also bought the operations of ABN
Amro, Lloyds and a bank in Argentina. We
have additional penetration in Uruguay
and Paraguay, plus our operations in
Miami and the Caribbean. This gives us
a market-leading presence in the Latin
American ‘Southern Cone’ as well as the
wider region. Itaú has units in the Southern
Cone, the US, the UK, Luxembourg, Japan,
China and the Middle East. We have a large
percentage of clients who are non-Brazilian
as well as managing the offshore assets of
our Brazilian customers. And of course the
merger with Unibanco gave us the scale to
move outside Brazil even more quickly.
And what is the ultimate aim of the
strategy?
We do not want simply to be an
international private bank for our Brazilian
clients and some Hispanic clients on
the side. We want to be a fully-fledged
international private bank, operating with
internationally recognized best practice
and products, offering our services to all
private banking clients. Obviously we are
keen to leverage our Brazilian and other
regional clients, but that is just part of our
objective.
In Latin America, how important is it to
have local operations in the key markets?
When we were less international, we were
driven by business centres like Luxembourg
and Miami, and by our fiduciary centres in
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
the Caribbean. As we have focused more
on markets outside Brazil, it has become
clear that local market knowledge and
management are crucial. You need to know
what is happening on the ground in, say,
Argentina, not simply what your clients
are doing in your bank in Geneva. So local
knowledge is critical.
We have local banking franchises in
Argentina, Chile, Uruguay and Paraguay
which are integrated with our private
banking operations. In countries we do not
have a local presence yet, like Colombia,
Peru, Venezuelaand Mexico, we service
those clients from Miami. This network
gives us a regional viewpoint from the
ground up that other institutions will find
hard to emulate.
As you have accelerated your
international programme, what changes
have you made to your operations?
We have reshaped and restructured
our bank in Miami, which is where the
majority of our regional acquisitions have
been located. We are just about to open
a bank in Switzerland. One aim has been
to develop a common platform across our
operations to give our clients better service
by leveraging central systems. Additionally,
in the Caribbean, where we have units
in the Bahamas and in the Cayman
Islands, we are in the process of creating
independent and exclusively fiduciary units
that focus just on taking assets on behalf
of clients, offering a full array of trust
products, with the banking transactions
that were previously handled there now
executed by dedicated banking centres in,
say, Miami or Luxembourg or Switzerland.
And do you segment customers
internationally in the same way as you do
in Brazil?
Outside Brazil our bankers have a
somewhat greater dispersion of client size,
but the offer follows exactly the same
rules in terms of minimum ticket size, risk
appropriateness and overall service quality.
Have Brazilian clients become more or
less internationally active over the past
three years?
Brazil never fully fitted the old cliché of
other emerging markets in which private
wealth was moved offshore as quickly as
possible. In fact, Brazil has always been
an attractive place to invest and Brazilian
clients have always kept the majority of
their assets onshore. The difference now
is that they compare what is available
domestically with what is available
internationally much more actively and it is
much easier for them to switch from one to
the other. This means that it is important
for the providers of wealth management
services to offer a best-in-class range of
products and services, not simply a service
that satisfies the domestic market.
And can regional banks such as Itaú
compete with the global providers
who have traditionally dominated the
market?
The old model, where the foreign banks
were good abroad but not locally and the
domestic banks were good locally but not
abroad, is broken, and Itaú broke it first.
We have a fully-fledged global offering,
open architecture and we can sell best-ofbreed in our chosen asset classes. We have
impeccable execution and advisory in Latin
American products, together with global
standard products offerings in non-Latin
American products.
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interview
The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
that and we have adapted quickly to their
requirements.
How has the increased scrutiny of
regulators affected you and your clients?
João Luiz de Medeiros, director of Itaú Private
Bank International
Take one example.We have redesigned
our investment group to be truly crossborder. So we produce global investment
intelligence not only in São Paulo, but also
in Lisbon, Buenos Aires, Santiago and so
on. It is not Brazil-centric. And we’re not
copying global asset allocations. This is how
we add value. We add our own global view
as an overlay to the Latin American core.
Not many people are doing that because
not many people can.
Have your clients changed anything else
about what they require from a private
bank going forward?
Our clients value advice more than ever
and with interest rates low relative to
traditional levels they are looking outside
fixed-income products and outside
domestic markets. They are increasingly
interested in international opportunities
in private equity, real estate and other
risk assets. They want us to develop more
managed products and to offer more
third-party products. They see the value in
The regulators have always been concerned
about even-handedness, transparency and
suitability and that has been a global trend.
Our domestic regulator had already set the
bar high so the international framework
is not a problem for us. This is a highly
regulated industry, and it should be. Clients
are learning to exercise their rights and
lessons have been learned both by clients
and by the providers in terms of what each
should know about the products they were
buying or selling. In general I think that the
increased regulatory focus will result in a
better service for clients and will play into
the hands of banks like Itaú that already
have the systems and internal controls in
place to ensure that clients have access to
the products and services that are right for
them.
Ultimate objective?
When our clients think ‘Brazil’, we want
them to think Itaú. When they thing
‘Latin America’, we want them to think
‘Itaú’. Regardless of whether they are a
US private client, a UK fund manager or
a Brazilian entrepreneur, we want to be
associated with excellence in this region
and in this business, always with a truly
global outlook.
And more than that, we are looking for
long-term relationships with our clients,
not a short-term relationship based on the
sale of one or two products. We want to be
there for our clients across wealth cycles
and family cycles. This is how we will build
a sustainable international business.
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
11
Speaking their language
Itaú believes it has something special to offer its customers
in the Spanish-speaking countries of Latin American: an
understanding of the local environment and a commitment
to the market that the big international players do not
share. By Jason Mitchell
I
taú Private Bank International plans
to be one of the top three private
banks in Latin America within the
next few years and already has $13
billion in assets under management.
Part of Itaú Bank, Brazil’s largest retail
bank and one of the 10 biggest banks
in the world, the private bank has an
ambitious strategy to expand throughout
Latin America. The compound annual
growth rate of its assets has been 15% for
the past three years.
Already, its bank in Miami has around
3,000 private clients and its bank in
Luxembourg a further 3,000. Some 40%
of its clients are non-Brazilian and come
from other countries in Latin America
(known as Hispanic clients).
João Medeiros, head of international
banking at Itaú Private Bank, says: “Itaú
Private Bank International is unique. It
is the only non-European, non-American
bank with important regional operations.
There is no other bank that originates
from Latin America and has operations
throughout the region.”
The bank’s strategy is three-pronged:
first, to keep its dominant position as the
biggest private bank in its home market
of Brazil; second, to make a big push in
the Mercosur countries where Itaú already
has a franchise; and, third, to increase its
market coverage out of Miami for other
Latin American countries where the retail
bank has no local presence.
Kick-starting expansion
The private bank has seen significant
organic growth during the past few years
but its expansion into Latin America
was kick-started by two important
purchases. In November 2006, Itaú
acquired BankBoston International in
“Itaú Private Bank International is
unique. It is the only non-European,
non-American bank with important
regional operations. There is no
other bank that originates from
Latin America and has operations
throughout the region
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
Miami and BankBoston Trust Company in
Nassau, Bahamas, from Bank of America.
Itaú also acquired BankBoston’s entire
operations in Chile and Uruguay, including
corporate banking, retail banking and
credit cards.
Then, in April 2007, the bank bought the
Latin American private banking business
of ABN Amro. The business operated out
of Miami and Montevideo in Uruguay.
Outside Brazil, the bank’s main markets
are Argentina, Chile, Uruguay and
Paraguay. It has fully-fledged local banks
in each of those countries. However, it
also has a large number of private clients
in Mexico and the Andean countries,
including Colombia, Peru and Ecuador.
Flavio Souza, president and CEO of Banco
Itaú Europa International in Miami and
head of Hispanic markets, says: “The
Mercosur countries represent to us a
natural and great opportunity; Itaú is
a leading bank in affluent segments
in Chile, Uruguay and Paraguay. The
commercial trade flow between Brazil
and the other Mercosur countries is
also a very important aspect. Many
entrepreneurs in the region have used
Itaú’s private bank as a gateway to Brazil.
“The Chilean market, as an example,
offers tremendous opportunities to us.
Itaú has more than 100,000 clients in
the ABC1 segment that can be the source
for a leading local private bank business
in that market. We have developed
a strategic plan to enhance our local
platform and offer a complete spectrum
of wealth management services,
including global portfolio management,
advisory, credit and wealth planning. This
is a strategic project for us because it can
be used as a reference for future projects
in other markets.”
Medeiros adds: “The Chilean investor
is a bit more sophisticated than his or
her counterpart in other countries in the
region. Chileans have a long tradition of
investing abroad because of the relatively
small local economy. They like to invest
in real assets, such as private equity.
They have a more open environment for
investing overseas.”
Flavio Souza, president and CEO of Banco Itaú
Europa International in Miami and head of
Hispanic market
He adds that Argentina represents a very
important offshore market for Itaú. It has
the biggest offshore market after Brazil
and Mexico and it is understood that
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
Argentines hold more than $100 billion of
their wealth offshore.
Despite the limited size of their
economies, Paraguay and Uruguay are
also relevant to Itaú’s plans to become
one of the leading banks in Latin
America. The bank has a significant
presence in the banking systems of both
countries, with a market share of more
than 25% of the affluent segments of
both countries. Today, Itaú is one of the
top three banks in Paraguay in most
market segments. This originates from
Unibanco’s acquisition of Interbanco, one
of Paraguay’s most important banks, in
1996 and Itaú’s merger with Unibanco in
November 2008.
Paraguay is a growing market for the
private bank and the country’s economic
circumstances have improved during
the past few years. “The country has
benefited considerably from the rising
price of commodities, especially soya and
sugar,” says Rafael Rosenthal, sales team
head of Hispanic markets in Miami. “That
has created a big opportunity for our
private bank, which has had a presence
in the country for some time through the
former Interbanco franchise.”
Miami: natural hub for Latin America
Since the acquisition of the BankBoston
and ABN operations in Miami in 2006,
Itaú has invested to position Miami as
the main hub for its expansion in Latin
America. The bank has attracted many
experienced talents from traditional
players in the wealth management
industry that have faced difficult times
in the past few years. Based on recent
performance this decision has proven to
be correct. In 2009 the Miami operation
experienced a 21% growth in assets under
management. And in the first four months
of this year the operation has grown 38%.
Souza adds: “We had inflows of $1.5 billion
of net new assets this year. Some of these
assets were invested with us because
of Itaú’s solid financial position and our
ability to structure tailored solutions, like
escrow accounts”.
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The 2010 Euromoney Guide to Private Banking in Latin America
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Itaú Private Bank has fully adopted the
concept of open architecture. The trading
and execution desk is connected to more
than 50 counterparties. Souza adds:
“We’ve built one of the most competitive
platforms in the industry. We do not
have any bias to execute our transactions
within Itaú affiliates. Many traditional
players in the industry have to execute
their clients’ orders through their own
investment bank trading desks, which
means one additional layer in the process.”
sophisticated advisory and, where
appropriate, we are able to connect them
with our Brazilian clients, as well.
As part of its efforts to support the
expansion of international operations,
Itaú last year became one of the main
sponsors of the Sony Ericsson Open in
Miami. This initiative had a huge impact
on the recognition of the Itaú Private Bank
International brand throughout the region.
Rosenthal adds: “Itaú is keen on Mexico
because it is the biggest Spanish-speaking
market in Latin America. We are making a
big effort to expand our presence in that
market and the bank has made public
its intention of establishing an office in
that country. The value of the Hispanic
business we manage has grown in doubledigit terms during the past two years.”
Miami also concentrates the team that
covers Andean markets and Mexico. The
proximity of these markets to Miami is
one very important aspect. Many wealthy
families have their second home or have
business connections in Florida. Wealthy
families from markets such as Venezuela,
Colombia and Ecuador are constantly
travelling to Miami.
Mexico, the second largest economy
in Latin America, represents the most
challenging but also the main opportunity
for Itaú’s expansion strategy in the region.
“Mexicans are very interested in investing
in Brazil,” adds Souza. “They see Itaú as
the natural gateway into the Brazilian
market. They are demanding detailed,
“The Mexican clients already have ADRs
[American depositary receipts] and
government debt but are looking for
more exclusive investments. In particular,
Mexican and Chilean clients are interested
in alternative-type opportunities in Brazil,
including in local hedge funds and local
private equity investments.”
He says that the growth of Itaú in the
region is more down to the perceived
merits of the bank, especially its solid
financial condition, than any other factor.
The problems that other international
wealth managers have had during the
sub-prime crisis have helped the bank to
consolidate its presence in Latin America
but that has not been the key ingredient
of its growth.
“Our client portfolios have performed very
well from the investments in Brazilian
debt and securities during the past two
years. That has helped to reinforce our
reputation as a leading institution. Brazil
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The 2010 Euromoney Guide to Private Banking in Latin America
In association with Itaú Private Bank
and Itaú have benefited greatly from a
flight to quality.”
in the rest of Latin America.”
Window of opportunity
Another area where Itaú has been
dedicating a lot of attention is to its
wealth planning unit. The fiscal and
regulatory environments are constantly
changing and wealthy families expect that
their private banks will not only keep them
updated but also will help them to identify
solutions to protect their assets. Souza
says: “We live in a world of increasing
transparency and this trend is irreversible.
Clients are seeking efficient tax structures
fully compliant to the tax and succession
laws”.
He adds that the bank has a significant
‘window of opportunity’ to attract
private clients from other Latin American
countries. Many well-known international
wealth managers have had their
reputations tarnished during the financial
crisis but Itaú’s prestige has remained
intact, because of its solid financial
position.
“Brazil and Itaú have benefited
greatly from a flight to quality
Itaú Private Bank International has
fiduciary units in the Caribbean and has
plans to implement a trust unit in New
Zealand.
Medeiros adds that the bank produces its
own global intelligence, which it is able to
share with its private clients.
“Brazil has become a ‘normal’ country
during the past decade,” says Medeiros.
“It has been very successfully managed
economically during that period. The fiscal
situation is under control and the Central
Bank has enjoyed over a decade of full
operational if not legal autonomy.
“The economy is expected to grow
by more than 6% this year. Brazil has
witnessed a new positioning in the global
economy and that helps Itaú to receive a
fair consideration from prospective clients
“Latin America is in much better shape
today than it was 10 years ago,” says
Medeiros. “Most countries have seen
good economic management, some more
than others. There has been a great deal
of wealth creation in Brazil, because of
the high demand for raw materials and
commodities, on top of a vibrant internal
consumer market. Other countries in the
region have had a similar experience. I
think the cycle of ‘boom-bust’ has been
broken. Most countries are much more
stable today and I think we will start to
see the rates of investment rise sharply.”
Souza adds: “The big emerging economies
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The 2010 Euromoney Guide to Private Banking in Latin America
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are attracting considerable inflows. In
many ways, they are now more stable
than the traditional developed markets.
The wealthiest families are now more
inserted into the global economy and
their exposure to Asia has increased
markedly. They like the fact that Brazil has
We are the only player throughout
Latin America whose DNA is
linked to the region. That is very
important for wealthy families, as
they want to protect their wealth
in the long term”
a high level of trade with that region. The
country has enjoyed very strong economic
momentum during the past few years and
they want to be part of that.”
He adds that wealthy families prefer to
stick to one financial institution and that
they do not like to have to change banks
or bankers if a wealth manager decides to
leave the region. This is an advantage for
Itaú because they know that the bank is
very solid and dedicated to Latin America.
Feeling comfortable
“Despite being a new player in this
industry clients feel very comfortable
with us,” says Souza. “Our bank is one
of the top 10 largest in the world, with a
solid financial situation and consistent
track record. Today, we are the only
player throughout Latin America whose
DNA is linked to the region. That is very
important for wealthy families, as they
want to protect their wealth in the long
term, especially when they are planning to
safeguard it for future generations. They
have a clear perception that our bank will
be around for a long time to come. Based
on many concrete experiences they do
not think the same about all international
players in the market.”
Itaú Private Bank International attaches
considerable important to the ‘know your
client’ process before it accepts a new
client. The bank has a thorough set of
procedures in place to ensure that this
happens. “The level of scrutiny is getting
higher and higher around the world,” adds
Souza. “It is part of our culture to be very
strict on the clear identification of our
clients and their source of money - not
only to protect our franchise, but also to
identify opportunities to better serve our
clients.”
Itaú Private Bank International has
expanded strongly in the Latin American
wealth market in recent years. This is
partly because of the problems that
other international wealth managers
have experienced during the past couple
of years. However, it is mainly because
of the growing perception of Brazil as
the region’s economic powerhouse, the
strong performance of Itau’s investments
in Brazilian securities and assets, the
bank’s reputation for financial strength
and its long-term commitment to Latin
America. Brazil is perceived as a success
story throughout Latin America and Itaú is
increasingly seen as the natural entrepôt
into that market.