CADE Approves Bradesco’s HSBC Brazil Acquisition with Restricticions

Brazilian anti-trust council (CADE) has approved the acquisition of HSBC Brazil by Bradesco with restrictions.

One immediate consequence of the of the restrictions imposed by CADE is that Bradesco is definitely out of the dispute to acquire Citi in brazil, since no new acquisition will be allowed to the bank for 30 months. On top of that, the bank has to lower the portability costs for HSBC customers that do not want to come under Bradesco.

With the acquisition, Bradesco gets closer to the largest private bank in Brazil (Itaú Unibanco). HSBC has around 2 to 3% of the banking system market share and now Bradesco should reach around 17%.

The EPS should have neutral impact for the first year, since the bank does not plan on issuing new stocks to finance the acquisition and the multiples of the acquisition are in line with Bradesco’s itself. The acquiring bank’s expectation is that the transaction starts to generate value a year after its closure.