What is your assessment of the financial sector in Brazil?

First of all, I don’t think you can speak about the financial sector without speaking about the situation in Brazil in general terms. To be totally frank, I think that today, at the beginning of 2014, there is I think too much pessimism about Brazil. Forgetting that Brazil has resources and 200 million people, but also in absolute numbers, the number of the budget deficit was 3%. Perhaps it was better before, but 3% is a very acceptable number. Public debt to GDP is 60% so being European, I would say that Brazil is totally fitting with the Maastricht treaty criteria (Copenhagen criteria). I think that maybe there is a bit of disappointment because everybody had very strong expectations of growth, etc., but the general tone today seems a bit too pessimistic for me.

If we come to the banks, what we assisted in Brazil over the past five or six years was a concentration – a big merger between Unibanco and Itaú. We also see that the big banks are taking more and more market share so medium-sized domestic banks must be very focused on their niche. There is not much room left for generalist medium-sized banks. There is a strong concentration now. This is for private-owned banks and there is also a big push from the public banks, especially Banco do Brasil, which plays a role in the development of the economy and the like. This is the first factor.

The second factor is that we are a quite tightly-regulated country with tight rules on capital. So the Brazilian Basel II or III – this is the ratio between your loans and your capital – is more stringent than the European or American ratio. So there is a strong regulation and supervision of banks. This means that Brazilian banks went through the 2009 crisis without any issue. There was a kind of overheating on consumer finance two or three years ago but the banks then started to tighten a bit. There was too much competition. Generally speaking, the banks did their homework to bring things back to a normal level of risk. This is behind us now so basically the financial sector in Brazil is safe.

How do you see things going in the next two or three years?

First of all, the Brazilian banks will take advantage of Brazilian growth, whatever it is. We also see for example that there was a very interesting story, which was about BTG. This is an investment bank that started almost from scratch five years ago and that is now really in the leading positions in the LATAM lead tables. They are very clever people and very good professionals and very strong competitors of ours. What we see is that there is an expansion of the banks in Latin America, by acquisitions and by implementing subsidiaries in Chile, Colombia and Mexico. We see that the Brazilian banks want to be leaders in Latin America.

What is the situation with BNP Paribas? How does BNP Paribas compete in this market and what does it bring? Let’s start with corporate investment banking.

Clearly we are a niche player. In terms of absolute numbers, we are far behind the big banks. This is because we are not in retail banking. With this focus, our vision on retail is that it’s too late or it’s too expensive. We don’t have any ambition in that field. We practice many “métiers” as we say in French. First of all, we have the CIB, which is corporate investment banking. This includes not only financing solutions like trade financing and project financing; in 2012 we were the leading bank in project financing in Brazil because we advised the biggest project that happened at that time which was the Guarulhos Airport concession.

We also finance commodities, export financing, and the entire range of acquisition financing. We have the complete range of specialized financing. We have a strong fixed income position including international bonds. Last week, we led along with two other banks the Petrobras mega bond issuance in Europe in Euros but there were others. Maybe one sector we are not present in yet is equity brokerage. I say yet because there are no plans.

We are the tenth domestic asset manager in Brazil. We have a focused wealth management high-network practice. We started three years ago on a very specialized activity in which BNP Paribas was the European leader or the first non-American bank in the industry which is institutional custody. It’s custody of securities for big institutions. We started this two years ago and I would say it’s going okay. We also have a corporate finance team that we started four years ago and is quite successful.

In these segments, what are your growth progression goals?

At the end of the day, we are client-focused so we want to determine what we can bring to our clients. Basically, as you know, BNP Paribas is a global bank and we are in almost 90 countries. We are focused in terms of corporates on, I would say, the first 100 Brazilian companies. Of course, all the subsidiaries are international and multi-national clients. Being a strong bank in Europe and knowing that Europe is the main foreign investor in Brazil, we have a very nice flow of business between the German-headquartered company and its subsidiary here. There are clients who are Swedish, Italian and from all of continental Europe. It’s not exclusive to those clients though; we also serve the U.S. for example.

So we can bring to our multinational clients our Brazilian expertise and we can bring to our Brazilian clients our access to international markets like the Petrobras bond for example. Also, if we see that big Brazilian corporations are expanding outside of Brazil, we can be there. We know them in Brazil so if they are doing things in Asia and Europe, etc., we can bank them in the specific country. This is one part.

The second part is that we also have to bring the best state-of-the-art solutions. We had international institutional investors globally saying that we were assisting them in Europe, the U.S. and Asia and that we should help them in Brazil too. So we implemented this activity at the request of our big institutional clients outside of Brazil. Being a niche actor, you can only bet on your global offer. As a niche actor of a global bank, we can bet on our global franchise and also our expertise to better service our clients here.

Are you not afraid that this trend of fewer companies and industries coming to Brazil will affect your business?

I’m not so sure. We are going to see the figures but I think that when we speak about direct investment, we have industrial and service companies implementing in Brazil and doing acquisitions. Car companies are already establishing and building factories. For example, Mr. Ghosn, Chairman of Renault-Nissan, inaugurated a factory near Rio in December to build engines. When we speak about direct investment going down, we are going to see the figures. I haven’t seen the figures yet for this year. There is also the content of more financial money coming in and out – more volatile. This clearly has been affected by the image and by the quantitative easing story in the U.S. which means people are being encouraged to invest in U.S. stocks instead of Brazilian, etc. But on the real, stable flow, I have seen many companies still asking us to find targets, to identify partners, etc., so I’m not so sure that the flow of people trying to implement themselves in Brazil and take advantage of a market of 200 million people is going down.

What I say to my clients is that first of all, we saw some people identifying targets but finding them very expensive. Why? Because first of all the expectations were very high so the sellers would embed in the prices high expectations. Also, the real was overvalued. Today, I think that people are more reasonable in terms of the value of their companies and they are in absolute terms and dollars, usually cheaper. To be a bit provocative, I say I think it’s time to buy Brazil. The fundamentals are there. I think that the clever people should be a bit contra-cyclical, being reasonable. In my opinion, it’s a good time to move on things. If you want to stay and invest in Brazil and develop in Brazil, I think the timing is not so bad.

What about the other services you provide? Can you tell us more about them?

Our basic franchise under the name of BNP Paribas is what I described to you. We also developed a consumer finance arm which is called Cetelem, which is based on a B to B to C, business to business to customer, for example for big retailers. For example, Cetelem is a leader in e-commerce in Brazil and also a more traditional Brazilian type of business which is payroll advances, or what we call “crédito consignado”.

We also have a presence in the insurance market through our brand Cardif. Cardif is not well-known to the wider public because Cardif is also a B to B story. Many banks or financial companies use Cardif to insure their loans to their customers, including life insurance and unemployment insurance. It’s a kind of white labeling.

There is also another sector of activity which is warranty extension. For example, if I buy a television in Magazine Luiza – we have a partnership with Magazine Luiza – the manufacturer provides a one-year warranty and the customer can extend the warranty for a premium. We are also working with very big retailers. The brand doesn’t appear to the customer though; it is white labeling.

Lastly, four years ago we also started a fleet rental company named Arval which is going well. When we started in this market, it was typically a kind of a financial lease, operational lease. Many actors were between those two areas. The operational leasing focus is very specific and you need specific know-how. Thanks to this know-how, I think we brought to the market state-of-the-art practices and it is going well.

If we see the story of this bank from the BNP Paribas group in Brazil, we basically started in 1996. Why? Because up to that time, the financial sector was almost locked to foreign investment. Today the group employs more than 2,000 people. The story is kind of a green field. We started to grow and grow. We didn’t panic in 2002. Other people did but I think that in Brazil, the people who stick to it need to steady their nerves in difficult times and do their job properly. This is not just in the financial sector. There are still a lot of opportunities.

If we look at your different lines of products and services, what are the major challenges that you are facing in the development of your business?

It’s having the right people. We have the know-how, we have the network and we are in a niche business. I think that the main asset we must have is good people.

Do you think that what we will see on the TV in June during the World Cup is going to bring these kind of people from abroad or are you talking about Brazilian people?

Basically, we have very few expats. We import people from London, Paris or New York for example if we want to start a new activity, but we are a Brazilian bank. I hope that there will be less excitement on television in July this year or “good” excitement, because what we saw on television past July made some people perhaps a bit afraid. I think people were frightened in excess but now the World Cup will help. Will the World Cup bring any sort of difference?

The stadiums are constructed and the airports are in progress, so maybe it will bring more visibility and more people visiting Brazil and being attracted by the country. With infrastructure, it’s the same story as with the Olympic Games. You don’t build a hotel in Rio for the Olympic Games. You build a hotel if you think that there is a need to construct hotels. It can accelerate some needed investments but normally you don’t build things just for one event in a country like Brazil. Maybe it has accelerated the airport story.

How do you see the development of BNP Paribas over the next few years? Which segment are you going to push? What do you want BNP Paribas to achieve?

Something I didn’t mention is that Sao Paulo is also our headquarters for Latin. I am the Head of the company for Brazil but I am also the Head of Latin, Latin meaning from Patagonia to Rio to the frontier of Texas – all of Latin America. In fact we have a development plan, 2013 to 2016, to push our businesses in the region and of course in Brazil which is our core and where about 60% of our numbers are, which is to some extent a reflection of the GDPs.

All the activities have kind of an internal growth story – hiring people, getting more clients, etc. There is no revolution but steady growth, step by step, which we have been doing for 15 or 17 years. Where we will push more I would say is trade finance or what is related to trade, and also structured fixed income which is more structure products in the fixed income area. Everybody grows and our plan is to grow a bit faster in those areas.

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