Good morning! We’re covering today why big banks are losing battle for asset management. The U.S. upholding a ban on Brazilian beef. Governors fight privatization on sanitation services. (This newsletter is for platinum subscribers only. Become one now!)
The red ocean of Brazilian banks
The Big 5 of Brazil’s banking industry—Itaú, Bradesco, Banco do Brasil, Caixa, and Santander—are losing out badly to independent brokers in the battle for asset management, according to a report by JPMorgan. Between 2013 and 2017, the Big 5 got 85 percent of new investments in funds. Over the past two years, the trend has drastically changed: with the Big 5 getting only 12 percent.
Banks are not only losing the battle for new customers. Their asset management market share was 65 percent in 2016. It is now at 58 percent.
Why it matters. Administration fees are banks’ bread and butter. Fees on private equity make up 22 percent of Banco do Brasil’s revenues from bank fares. That rate drops to 13 percent for Itaú, 12 percent for Bradesco, and 6 percent for Santander.
How to create a red-ocean scenario. Traditional banks’ portfolios are dominated by fixed income (80 percent). Lower benchmark interest rates, however, make...