CEO of Banco ABC Brasil (ABCB4): “We by no means did M&A, however the second has modified”
With a history marked by organic growth, the institution is now evaluating acquisitions that can accelerate the company’s development
At Banco ABC Brasil (ABCB4) since its creation, Sergio Lulia has lived with all the turmoil of the global financial system over the last 30 years. In an interview with the program “Between Reis and CEOs”, presented by Tiago Reis, founder and CEO of Suno Research, the current CEO of the institution tells how the company remained solid during that time and sought opportunities to grow.
Created in 1989, ABC made a public offering of shares on the stock exchange in 2007. Before the IPO, the institution already had a strong presence in the service of large companies.
“We made an IPO because we saw an opportunity to grow in the market that we know, the potential to increase market share, of participation in the financial life of the clients”, says Lulia. “But the capital was small. So we found ourselves in the situation of competing with the banks, which we could do more business with the customer, but we didn’t do it due to its size”, she adds.
When ABC bank carried out its IPO, the company was left with R$ 1.05 billion in equity. Today, it is around R$ 5 billion. The bank at the time of the IPO had BRL 6 billion in assets, currently it has approximately BRL 50 billion. “So it is a bank that has had a very expressive growth”, highlights the CEO.
Management is a member of the bank
Banco ABC Brasil is controlled by Bank ABC (Arab Bank Corporation), based in Bahrain, which holds 60% of the shares – of the remainder, 34% are listed on the stock exchange and 6% belong to the partners.
Ten years before the stock offering, the Arabs acquired the entirety of the bank, ending the partnership with the Roberto Marinho group since the beginning of its establishment in the country, in 1989. At that time, it also sold 18% of the capital to nine executives – including Sergio lulia.
Lulia started at ABC as a credit analyst, went to the commercial area, became the bank’s treasurer, went through the international area, acted as director of investor relations and vice president of products, until taking over at the beginning of last year the position of CEO. “I went through several different jobs within the same organization”, he jokes.
“I have several challenges to take the bank to another level of size, of products, of the market in which we operate”, he says. Another goal of the CEO is to make the transition from the original team that has been with the bank for about 30 years with the younger ones. Currently, the bank has 25 partners.
opportunities with fintechs
Sergio Lulia says that the secret to growing solidly is not doing what you don’t know how to do. “In life, it’s hard enough to do 2, 3 things well done. Those banks that put capital in and started throwing everything around, sooner or later got bumped. It’s not to close yourself off to opportunities. But this discipline of going where we have the right to win is an obsession of ours,” he says.
The history of Banco ABC has always been marked by organic growth. “We have never done M&A [fusão e aquisição]. But at the present time, the issue has changed”, says Lulia. In the last 3 years, the executive explains that the company has focused on bringing the quality of service to large companies to the medium and small companies segment.
“And then there may be specific M&A opportunities, whether fintechs or small companies that are capable of accelerating this development process being carried out at the bank”, he reports. Within the company, the project is called programmatic M&A. “This is a series of acquisitions that, as a whole, can transform the institution”, he emphasizes.
Lulia sees the fintechs more as complementary to what Banco ABC offers to customers than direct competitors. “At fintechs have been bringing solutions, products and experiences to the corporate customer that can help us. We have made some partnerships with them, even for the bank’s internal processes”, he says. He cites the example of the onbording of customers developed by fintechalready offered by the bank.
The institution serves around 4,000 companies throughout the country, including large corporations to the so-called middle market. The company’s credit portfolio today is around R$40 billion.
In the service line, the bank operates with cash management, investment advice, M&A and IPO, as well as bank guarantees. Service revenues represent around 20% of the business – 80% are related to the credit area.
Learning from global crises
More recently, the bank has been working on helping its customers with suppliers, customers and employees. This focus emerged in the pandemic. He cites that ABC’s customers were healthy, but problems in the production line indicated that their suppliers were not doing so well. “If I help this supplier, I will help this customer”, says Lulia. “These are products that we are developing”, she highlights.
CEO Sergio Lulia, in this long time in the financial system, has seen several global crises. “You have to be humble. You don’t know where the crisis comes from. No one could predict the pandemic. In 2008, few people predicted the crisis,” he recalls. Because of this, the executive emphasizes the importance of having a well-dispersed portfolio, both for clients and sectors. “You have to have a very strong cash policy. Banco ABC Brasil is a bank that has a funding longer than your assets,” he adds.
Regarding the dividend policy, the CEO highlights that Banco ABC’s activities are profitable enough to pay good dividends and to invest in what is necessary for the bank’s growth.