Brazil’s state-owned Banco do Brasil and privately-owned Banco Bradesco have signed a memorandum of understanding with Portugal’s Banco Espirito Santo (BES) to expand business in Africa.
One possible way that this may be done is through the Brazilian banks’ acquisition of a participation of BES existing holdings in Africa.
While BES already has a significant branch network in Angola and Cape Verde and a presence in a number of other African states, this memorandum will pave the way for the banks to increase their African presence by opening new branches and possibly acquiring additional financial institutions.
The announcement comes at a time of expansion for Brazilian banks, with many larger banks releasing H1 figures that show credit expansion above 10% and record-breaking profits.
To fund the Brazilian banks’ expansion, Banco Bradesco has issued a US$1bn bond on the international market while Banco do Brasil raised R9.76bn (US$5.54bn) in an equity offer.
Other examples of the banks’ acquisition strategy is Banco do Brasil’s purchase of a controlling stake in Argentina’s Banco Patagoinia and the due diligence that the bank is putting into an unnamed mid-sized acquisition target in the US.
Banco Bradesco has recently announced the acquisition of Mexican bank IBI Mexico.
Carlos Suarez, a banking analyst at IHS Global Insight, comments in his report on the memorandum: “This alliance will be mutually beneficial for the Brazilian and Portuguese banks. Whereas the Brazilian banks have the capital to continue growing, the Portuguese bank has experience in the African market.”
He adds: “In addition, the African economies are now more stable, their growth potential is significant and would allow the Brazilian banks to continue to diversify their business.”
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