CADE approves HSBC''s purchase by Bradesco, with restrictions

Brasilia-the Administrative Council for economic Defense (Cade) approved on Wednesday, 8, with restrictions, the purchase of 100% of the share capital of HSBC Brazil by Bradesco.
The antitrust body conditioned the approval to the deal, initially valued at $ 5.2 billion, the conclusion of an agreement on Merger Control (ACC) proposed by two banks and a commitment on the part of the Bradesco not to acquire any other financial institution that acts in Brazil for the next 30 months.
"The ban on new acquisitions by Bradesco for two and a half years is intended to contain the advance of that which will become the third largest bank in Brazil. The measure will provide that smaller banks find a less hostile environment to grow. HSBC, which was the sixth largest in the country, is being sold because you couldn''t have scale in Brazil ", assessed the Adviser Rapporteur of the case, John Paul de Resende.
Bradesco also undertook to forgo the cost of portability in the free credit of natural person in counties where competitive risks were found.
"This would be an incentive for the HSBC clients feel comfortable to look for other financial institutions with better conditions in that product," added Rezende.
Competitive analysis made by the rapporteur''s Office identified the possibility of the operation lead to market power to Bradesco in 106 municipalities, deposit products in sight (new account) and free credit to individuals and corporations.
For this reason, the rapporteur has conditioned approval of business to these "remedies" competition.
"It is undisputed fact that the Brazilian banking market has become increasingly concentrated in recent decades. This concentration has given, in General, from the big banks buying the small, "he added, noting that, with the departure of HSBC, the number of major banks in the country have fallen from ten to five during this period.
Resende reminded also that the General Superintendence of the Cade had already recommended the signing of an ACC with "good practices", including expand information on the site of Bradesco Bank on porting and financial education and includes a module of portability in training of officials.
Under the agreement, the Bank also should consider the quality of service as a criterion for promotion of its employees and provides for a target of 25% reduction in the number of complaints of Bradesco in 131 municipalities.
The Bank Workers Union of Curitiba and region asked Cade put restrictions on the layoff of staff by the institutions.
The organisation fears the possible transfer of the registered office of HSBC, in the State of Paraná, to Osasco (SP), where the headquarters of Bradesco.
In the evaluation of the syndicate, this could result in the loss of 8 1000 jobs, although the banks ensure that there would be a reduction of jobs.
In response to the request of the Bank, Resende evaluated that the application of the Union isn''t configured as a competitive concern. Therefore, it would not fit the antitrust body make such a requirement on banks.
"The maintenance of employment, although it has merit and value, does not qualify as a guarantee of efficiency for the operation. Investment commitments nor guarantee efficiency. Efficiency, in terms of competitive analysis is the cost savings that can be passed on to consumers, "assessed Resende.
At the end of April, the Managing Director and investor relations of Bradesco, Luiz Carlos Angelotti, said in Conference call with analysts and investors that the Bank could complete the acquisition of HSBC Brazil in 15 to 20 days after final approval of antitrust.
From the approval today, the Bradesco must start the negotiation of price to be paid by HSBC, which will, according to the Executive, a "small" set based on the variation of assets of the Bank, in addition to formalities.
The value announced at the closing of the deal was $ 5.2 billion. Already, HSBC''s net worth at the time, was 11.2 billion R$.
At the end of last December, according to the institution''s financial statements, the indicator was at 9.5 billion R$.