Banco Comercial Português, SA

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Banco Comercial Português, SA

Praça D. Joao I, 28
4000-295 Porto
Portugal
Telephone: (351) 21-321-1000
Fax: (351) 21-321-1759
Web site:http://www.bcp.pt

Public Company
Incorporated: 1985
Employees: 16,990 (2000)
Total Assets: EUR 62.961 billion (2001)
Stock Exchanges: Lisbon New York
Ticker Symbol: BPC
NAIC: 522110 Commercial Banking; 523920 Portfolio Management; 523120 Securities Brokerage; 523110 Investment Banking and Securities Dealing

Banco Comercial Portugues, SA (BCP) is Portugal’s largest financial institution. In the years since 1985, when it was founded, BCP has risen from a small upstart with a questionable future to the largest and most diverse private bank in Portugal. BCP and its subsidiaries offer a wide variety of services. The bank’s major activities include individual and corporate customer fund-taking, credit granting, custody of securities, treasury services, foreign-exchange transactions, and money-market operations. Through the BCP Group’s subsidiaries, the company is involved in insurance, asset management, investment and pension fund management, medium- and long-term credit, mortgage loans, corporate finance, company valuations, venture capital financing, brokerage and property management. BCP has risen to its success through a host of strategic acquisitions, successful international ventures as Portugal’s growth market slowed, and through the vision of its well-regarded management team. In 2001, Euromoney named BCP the Best Bank in Portugal, and their investment arm, BCP Investimento, was named Portugal’s Best Debt House and Best Equity House.

A Good Time to Start a Bank: 1980s

One year after Portugal’s authorities opened up the country’s banking system to private initiative in 1984, a group of 200 investors founded Banco Comercial de Portuguees. One particularly notable member of the founding team was Americo Ferreira de Amorim. Amorim was one of Portugal’s wealthiest and most important businesspeople at the time. Amorim owned and ran Corticeira Amorim, which controlled 35 percent of the world’s cork market. He also owned and ran multiple other companies in financial services, real estate, and tourism through his investment company, Amorim Investimentos e Particpacoes. Before Amorim founded BCP, he and 20 other investors founded Banco Português de Investimento.

With Amorim’s experience behind them, the founders established and incorporated BCP with an initial share capital of Esc 3.5 billion, and with the knowledge that they had wooed one of the country’s leading bankers, Jardim Goncalves, from his high-level position at Banco Portugues do Atlantico (BPA) to the chairmanship of BCP. Banco Comercial Portugues promised Goncalves the opportunity to develop his own management team free of the usual familial and shareholder obligations that existed in many Portuguese banks. The extremely productive and active first years of BCP’s operation caused the Portuguese banking market to sit up and take notice. From 1986 through 1998, BCP launched a wide variety of banking networks catering to individual retail, small business, private banking, large company, and institutional customers.

In 1987, the company was listed on the Lisbon Stock Exchange and implemented the first of many cross-selling strategies designed to bring BCP lasting success. BCP added the NovaRede network to their offering in 1989, which serviced the needs of middle-income clientele, and simultaneously opened 21 small branches using the latest technology to offer quick over-the-counter banking services. Soon after, BCP’s net assets had grown to Esc 375 billion with Esc 244 billion in customer funds. This growth was partly due to BCP’s strategy of opening bank branches across the country. State banks did not have the capital to expand and open new branches in order to compete with private banks like BCP. Private banks could fund their expansion from retained earnings and equity issues, while state banks did not have that freedom.

In 1990 their recent successes allowed BCP to announce the acquisition of the majority of the equity in Banco CISF, which became BCP’s investment banking arm. After this, BCP charged full-speed ahead founding banks that would meet the diverse needs of their customers. BCP opened subsidiary banks that gave their customers 24-hour, 365-day-a-year access to their accounts in supermarkets, from cellular phones, from their home telephones, and via the Internet.

Multi-Brand Strategy Pays Off

When BCP was founded, Goncalves introduced a banking technique that became BCP’s hallmark: the segmentation of banking services by customer profile. The bank separated its core group of services into six branded segments: individual retail banking, commercial retail banking, private banking, the mass-market branch network, small banking, and telephone banking. After completing an in-depth analysis of each segment, BCP created a full range of products and services to meet all the financial needs that customers using the branded segments would need. The bank then marketed the different banking segments to their customers, each customer fit neatly into one or more of the branded offerings. Care was taken to differentiate between the segments, and BCP was thrilled when the individual brands began to inspire customer loyalty; the bank customers were proud to be a member of whichever banking segment they fit into. BCP’s Namorado de Rosa said that the multi-brand strategy allows BCP to “reach out to customers who might be intimidated by one large brand.” BCP kept their branded segments separate from each other; the services targeted at individuals and those designed for firms were kept physically separate from each other in the bank buildings as well as in their organized offerings. A manifestation of this was that private customers were served on a different floor of the bank building from commercial customers. This banking strategy aimed and succeeded at giving the customer the impression that they were being served personally, rather than by a large international banking institution.

International Expansion

BCP’s philosophy of internationalization had been that the bank would, rather than attempt to move independently into foreign countries, seek out foreign partnerships that enabled them to set up a financial venture with a local face. In 1990, BCP’s first international agreement was developed with Cariplo (Italy). In 1991 alliances with two European insurance groups, Friends Provident and Avero Central Beheer, were established. In 1992, BCP was listed on the New York Stock Exchange. Internationalization continued with the 1993 cooperation agreement with Banco Central Hispanoamericano (BCH), which gave BCP access to the Spanish market. Through this agreement, BCH came to own 20 percent of BCP and gained access to Portugal, however BCP insisted on a statute that allowed BCH to vote with only 10 percent of its shares. In this same deal, BCP purchased a 2 percent stake in BCH and 50 percent of the share capital of the private banking subsidiary of BCH, Banco Banif de Gestion Privada. In 1995, BCP inaugurated Banco International de Macambique (BIM) in Mozambique. In 1998, BCP ventured into Poland with the launch of Millennium BIG Bank SA (Banco Millennium) in a joint venture with BIG Bank Gdanski (BBG).

In 2000, BCP also invested in Greece with the launch of NovaBank, and struck a partnership with Spain’s Banco Sabadell. The year 2000 also brought an agreement between Achmea NV (a Dutch financial services group) and BCP to merge their insurance operations into Eureko NV. This agreement rose out of an alliance of eight European financial services companies and was designed to allow its members to sell insurance independently in their own markets, but to collaborate internationally. Achmea and BCP would own 72.2 percent and 15.1 percent of the new company, while the remaining alliance members would split the remainder.

BCP’s partnership with Sabadell resulted in the launch of ActivoBank in 2001—an Internet bank that offered fund management, stock market trading, and deposit products offered in both Spain and Portugal. BCP also made its way to the United States in 2001, with the opening of four branches in New Jersey.

Acquisitions, Mergers, and Joint Ventures

Acquisition was imperative to BCP’s success, and the company set out acquiring and merging soon after their inception. BCP began its tradition of acquisition with Banco CISF. Banco CISF was acquired by BCP in 1990, and was redesigned to become Banco Comercial Portugues de Investimento (BCP Investimento), BCP’s investment banking arm.

In August 1994, BCP announced their first attempt to acquire Banco Portugues do Atlantico (BPA). BCP offered Esc 132 billion (US $837 million) bid for 40 percent of Banco Portuguê do Atlantico’s (BPA’s)’ equity. At that time, BPA was Portugal’s second biggest bank with assets of Esc 3.4 trillion (US $19 billion). A group of BPA’s shareholders were not happy with the prospect of BCP’s hostile takeover and fought against the bid. Although the Portuguese government had originally intended to remain neutral, in September 1994 they blocked BCP’s bid. Many people were suspicious of the government’s action, believing that the government was influenced into blocking the bid by a group of companies that held a combined stake of almost 29 percent in BPA. Banco Portugues do Atlantico reportedly lent heavily to these companies, and they might have feared that BCP would not look as favorably on their businesses as BPA had.

Company Perspectives:

To contribute to the modernisation and development of the Portuguese financial system and economy through the marketing of innovative, personalised financial products and services conceived to satisfy the overall financial needs and expectations of the various market segments, with very high quality and specialisation standards, playing an active role in the domestic consolidation process and in the strategic cross-border partnership trend involving European institutions, while preserving the autonomy of strategic decision and the national identity and vocation, and at the same time exploiting the business opportunities created by the “New Economy.”

This setback did not slow BCP down, nor did it diminish the bank’s intent to acquire BPA. Less than year later, in March 1995, BCP, in a joint offer with Companhia de Seguros Imperio, acquired BPA. This acquisition allowed BCP to take over BPA’s spot as the second biggest bank in Portugal.

Additional important BCP acquisitions included, in 1999, the acquisition of 30 percent of Achmea Bank’s equity, 50 percent of Interbanco; in 2000, the acquisition of Banco Mello and Imperio, and the extremely important acquisition of Champlimaud’s Banco Pinto & Sotto Mayor (BPSM). Following these acquisitions, Carolos Pertejo of J.P. Morgan estimated that BCP had 29 percent of Portuguese bank loans, controlled 37 percent of mutual fund assets and 36 percent of the life insurance market.

An important aspect of BCP’s acquisition strategy was the successful merging of the banks they acquired into BCP’s business model. BCP’s strategy of merging BPA into BCP was a good example of the company’s practice of approaching each new acquisition as an individual project. With BPA, BCP decided not to change the bank’s name as it had extremely strong brand recognition in Portugal. “The decision has been not to merge the two banks [BCP and BPA] but rather operate them as two different franchises and produce cost synergies,” said Salomon Brothers’ Lecubarri. BCP reduced BPA’s employees by 200 in the first half of 1996, and shifted 400 employees into different areas. The company planned to finish assimilation of BPA by 1997. BCP believed in looking at each acquisition and merger with fresh eyes, and planning the acquisition strategy accordingly.

In 1996, BCP entered into an innovative joint initiative with Jerónimo Martins Group to bring banks to grocery stores. The two companies came together to found expresso!Atlântico—Portugal’s first in-store bank. The bank offered customers the opportunity to access their bank accounts from Jerónimo Martins Group’s large chain of food stores. Another joint venture that BCP participated in was with GE Capital, it was a joint venture that involved operational vehicle renting.

Banks, Beautiful Banks

From its inception in 1985, BCP placed importance on the physical appearance of their banks. The bank has paid special attention to both the architecture that they built, restored, and created and to the refurbishment of some of the banks that they acquired. BCP approached the project of constructing bank and headquarter buildings as an opportunity to demonstrate the company’s character. The bank strove to create buildings that reflected their modernity, conservatism, innovation, prestige, and ecologic-mindedness.

When BCP began refurbishment of their downtown Lisbon headquarters in 1995, they broke ground on an interesting discovery. They found that there was a succession of landfills and underlying structures stretching down as far as the water table. These findings constituted a repository of the many civilizations that had inhabited Lisbon in the past. The bank undertook preservation of these artifacts, and conceived of a way to preserve the artifacts. BCP created a museum at the rear of its headquarters, called the Rua dos Correeiros Archaeological Centre.

The New Millennium: Trouble Coming?

Although advisors continued to believe BCP was a good bet for investors in Portuguese banking, in 2002 analysts were generally advising against any investment in the Portuguese banking sector. Portuguese banks had been weathering the same plummeting brokerage commissions’ problems as global banks were, but they also had their own unique problems to contend with. Gross domestic product (GDP) growth had slowed since mid-2001 and consumer loans had been in a decrease pattern for longer. BCP remained confident throughout this period, and continued to feel secure that the new European unity would work out in their favor rather than to their detriment. The bank’s rapid international expansion in 2000 and 2001 placed them in a strategic position—with solid standing in Greece and Poland. The biggest risk that BCP took, becoming involved in the European Eureko alliance, had turned out to be the bank’s least successful decision. The Eureko performed below BCP’s expectations and failed in a EUR 20 million Internet venture. Perhaps as a result, Joao Ramalho Talone, the director responsible for Eureko, left BCP’s executive board and was not replaced. Following Talone’s departure, three additional executive board members resigned. The BCP executive board shrank to nine members.

Key Dates:

1985:: A group of investors incorporates Banco Comercial Portugués (BCP).
1987:: BCP lists on the Lisbon Stock Exchange.
1990:: BCP acquires a majority equity of Banco CISF.
1992:: BCP lists on the New York Stock Exchange.
1993:: The company reaches a cooperation agreement with Banco Central Hispanoamericano (BCH).
1995:: BCP acquires the majority of Banco Portugues do Atlantico (BPA), making BCP the second largest bank in Portugal.
1996:: The company incorporates ServiBanca.
1998:: The company launches Millennium BIG Bank SA (Banco Millennium) in Poland, in a joint venture with BIG Bank Gdanski (BBG).
1999:: BCP acquires 30 percent of Achmea Bank’s equity and 50 percent of Interbanco.
2000:: BCP acquires Banco Pinto & Sotto Mayor (BPSM), Banco Mellow, and Imperio; forms a strategic partnership with Banco Sabadell; and launches NovaBank in Greece.
2001:: Euromoney names BCP the Best Bank in Portugal, and their investment arm, BCP Investimento, is named Best Debt House and Best Equity House.
2001:: The company partners with Sabadell to launch ActivoBank, an Internet bank, and opens its first branches in the United States in New Jersey.

The resignation of its board members did nothing to hamper BCP’s desire to continue its process of expansion. In February 2002, BCP (along with its main competitor Caixa Geral de Depositos), announced their long-term intention to expand into Spain. BCP acknowledged that it was not yet large enough to plan large-scale activity in Spain, but they were working toward it. In April 2002, BCP reached an agreement with Banco Santander Central Hispono SA for the purchase of Grupo Financiero Bital SA of Mexico. The purchase would expand BCP’s capital base.

BCP’s need to expand to continue international expansion has lapped over into more areas than its retail banking arm. The bank’s Head of Custody Paulo Guia, raised the question of what will happen in the future to BCP’s custody operation. He, in 2001, discussed the fact that if BCP hopes to stay in the custody business, “We cannot remain independent for much longer. BCP cannot go it alone in the Euronext countries. The only way that we can retain the clients that we currently have is to enter into a joint venture or merge with a larger provider.” In this case, rather than work to expand their base independently, BCP will need to look for a new partner. Although the times seem difficult, BCP has weathered tough times in the past and the stated intent to expand its base, seek out strategic partnerships, and acquire additional companies is nothing new to the dynamic bank.