BankBoston targets rich investors instead of borrowers in Brazil.
ON THE PRESTIGIOUS AVENIda Paulista in Sao Paulo, only a stone's throw from Brazil's Central Bank building, sits BankBoston's latest branch office. Housed in one of the few remaining mansions dating from the coffee boom at the turn of the century, the lush classic structure symbolizes its desired customers: rich people. "We are only going to attend the A-class customer," says Odilon Almeida, the bank's vice president in Sao Paulo.
In a market plagued with sky-high interest rates and slumping growth, BankBoston is betting that the bank is far better off managing rich investors' funds than trying to make money on loans to companies and consumers. Tough to argue with them. Assets under management have jumped 35% last year to $6.1 billion. Profits last year were up 29% at $102 million, making BankBoston the second-most-profitable bank in Brazil.
The bank's elitist strategy blossomed under the guidance of Brazilian native Henrique Meirelles, president and chief operating officer of BankBoston until its recent merger with New England's Fleet Financial Group formed the eighth-largest U.S. bank with $180 billion in assets. Meirelles, now head of the new bank's international division, has said publicly that there will be no change in strategy, explaining why it works: "Our customers come from a small slice of the Brazilian economy, the segment where incomes and assets continue to grow even in difficult times."
The 1% solution. The target market is the 1% of the population that had a minimum monthly income of 4,000 reais, about US$3,500 before the devaluation. Starting in August 1997, the bank earmarked $100 million to attack this segment. Last year, it doubled the number of branch offices to 65 and increased the number of employees by a third to 4,200. With the market identified and the service coming online. BankBoston got lucky.
When the economic fallout from troubles in Asia and Russia hit Brazil last year. BankBoston enjoyed a "flight to quality"--consumers taking their money out of institutions viewed as being unsafe and depositing them with "quality" banks. By the end of the year, the number of account holders at BankBoston in Brazil actually had doubled to 110,000. Those customers now represent 44% of the bank' s revenue, an increase from 31% in 1997. Corporate banking revenue now accounts for less than 40% of revenue; the...