The Competitive Structure and Strategic Positioning of the Bank Industry in the Face of Major Environmental Disturbances: A Study of Brazilian Banks

Galilea, Gisele Walczak; Eid, William

doi:10.15728/bbr.2017.14.4.1

Acessibilidade / Reportar erro

Brasil

BBR. Brazilian Business Review

Español English

Brasil

Español English

sumário « anterior atual seguinte »

Sumário

Articles • BBR, Braz. Bus. Rev. 14 (4) • Jul-Aug 2017 • https://doi.org/10.15728/bbr.2017.14.4.1 copy

The Competitive Structure and Strategic Positioning of the Bank Industry in the Face of Major Environmental Disturbances: A Study of Brazilian Banks

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

This work looks into the dynamics of the competitive structure and strategic positioning of Brazilian banks. Over the eighteen years covered by the study, we saw periods of strategic instability in this industry and differing structures of strategic groups, with regard to not only their number, but also their composition. Our study therefore provides empirical evidence that we will hardly find periods of full strategic stability. These findings denote that, at some moment, there is a change in the strategic positioning of these firms and provides insight with regard to the competitive patterns of an industry over the period.

Keywords:
Brazilian bank strategy; Strategic groups; Industrial organization theory; MCLUST

VARIÁVEL	DESCRIPTION
DI.A	Interbank investments and Cash Equivalents / Total Assets.
TVM.A	Securities (TVM) and Derivative Financial Instruments / Total Assets.
CRED.A	Total Credit and Commercial Lease Transactions / Total Assets.
DEP.P	Total Deposits / Total Liabilities.
EMPR.P	Loan and Transfer Liabilities and Funds from the Acceptance and Issuance of Securities / Total Liabilities.
DI.R	Income from Interbank Investments and Cash Equivalents / Total Income.
TVM.R	Income from Securities and Derivative Financial Instruments / Total Income.
SERV.R	Income from the Provision of Services / Total Income.
CRED.R	Income from Credit and Commercial Lease Transactions / Total Income.

Year Pairs Compared	Sample Size n=	M Box	F	Probability	T²	F	Probability
1994-1995	533	182.632	3.986	0.000	0.266	15.468	0.000
	453	176.499	3.841	0.000	0.272	13.495	0.000
	400	261.674	5.681	0.000	0.281	12.597	0.000
	346	238.054	5.155	0.000	0.318	12.824	0.000
1995-1996	524	196.742	4.293	0.000	0.044	2.524	0.008
	445	179.471	3.902	0.000	0.039	1.851	0.058
	393	136.113	2.948	0.000	0.051	2.078	0.031
	341	161.971	3.494	0.000	0.058	2.031	0.036
1996-1997	504	107.398	2.342	0.000	0.061	3.370	0.001
	428	72.940	1.584	0.008	0.073	3.340	0.001
	378	126.913	2.751	0.000	0.079	3.280	0.001
	328	87.832	1.895	0.000	0.076	2.700	0.005
1997-1998	478	50.736	1.105	0.291	0.024	1.223	0.278
	406	90.045	1.955	0.000	0.029	1.288	0.241
	359	110.265	2.383	0.000	0.030	1.141	0.333
	311	73.058	1.573	0.008	0.031	1.034	0.413
1998-1999	453	67.310	1.464	0.023	0.065	3.213	0.001
	385	70.514	1.527	0.013	0.055	2.242	0.019
	340	41.630	0.899	0.665	0.090	3.223	0.001
	294	48.950	1.054	0.374	0.062	2.055	0.033
1999-2000	434	177.672	3.862	0.000	0.015	0.713	0.697
	369	175.321	3.796	0.000	0.019	0.743	0.670
	326	142.223	3.068	0.000	0.013	0.436	0.915
	282	224.330	4.822	0.000	0.030	0.943	0.488
2000-2001	417	188.419	4.092	0.000	0.017	0.791	0.625
	354	304.868	6.596	0.000	0.030	1.184	0.304
	313	172.118	3.709	0.000	0.037	1.241	0.269
	271	42.102	0.900	0.662	0.060	1.636	0.106
2001-2002	397	42.931	0.931	0.604	0.040	1.714	0.084
	337	102.148	2.208	0.000	0.057	2.125	0.027
	298	66.298	1.425	0.032	0.450	1.407	0.184
	258	78.184	1.674	0.003	0.033	0.938	0.493
2002-2003	384	43.191	0.936	0.595	0.028	1.145	0.330
	326	72.446	1.563	0.009	0.031	1.082	0.376
	288	59.280	1.273	0.103	0.046	1.397	0.189
	250	77.817	1.663	0.003	0.045	1.200	0.296
2003-2004	378	93.879	2.034	0.000	0.029	1.176	0.309
	321	102.510	2.211	0.000	0.036	1.236	0.272
	284	191.399	4.113	0.000	0.055	1.705	0.088
	246	103.269	2.202	0.000	0.072	1.814	0.067
2004-2005	372	55.285	1.197	0.171	0.009	0.369	0.949
	316	71.810	1.549	0.011	0.014	0.486	0.883
	279	80.696	1.728	0.002	0.030	0.834	0.585
	242	76.471	1.629	0.005	0.017	0.417	0.925
2005-2006	363	15.073	0.326	1.000	0.018	0.720	0.690
	309	24.226	0.522	0.997	0.038	1.253	0.262
	272	74.965	1.601	0.006	0.062	1.606	0.114
	236	52.771	1.124	0.262	0.074	1.820	0.066
2006-2007	356	32.368	0.700	0.936	0.026	1.007	0.434
	303	43.887	0.945	0.578	0.029	0.951	0.481
	267	66.131	1.416	0.034	0.052	1.462	0.162
	231	91.062	1.937	0.000	0.066	1.562	0.128
2007-2008	356	38.503	0.833	0.780	0.030	1.142	0.332
	303	48.520	1.044	0.392	0.040	1.263	0.257
	267	51.151	1.097	0.303	0.037	1.090	0.370
	231	81.343	1.730	0.002	0.039	0.923	0.506
2008-2009	357	41.514	0.898	0.667	0.071	2.720	0.004
	303	45.854	0.988	0.495	0.081	2.728	0.005
	268	73.321	1.569	0.009	0.081	2.252	0.019
	232	61.349	1.305	0.082	0.089	2.135	0.028
2009-2010	356	43.850	0.948	0.571	0.041	1.564	0.125
	303	56.260	1.208	0.159	0.061	1.864	0.057
	267	62.827	1.344	0.062	0.053	1.423	0.179
	231	97.610	2.081	0.000	0.092	2.292	0.018
2010-2011	357	28.610	0.619	0.979	0.016	0.621	0.779
	303	74.133	1.595	0.007	0.029	0.919	0.509
	268	85.274	1.825	0.001	0.050	1.384	0.196
	232	67.151	1.424	0.032	0.045	1.003	0.439

Date	Environmental Disturbances
1994	Implementation of Plano Real (Real Plan) and process of price stabilization: revenues deriving from inflation fell and banks started to earn income by increasing credit and charging fees for banking services. Brazil’s adoption of Basel Accords and demand for a minimum capital to be kept by banks in relation to the risk of their active operations.
1995	Restrictive monetary and credit policy and increase in the insolvency level: rise in the reserve requirement ratio, introduction of other means of control over credit creation and increase in the basic interest rates in order to reduce liquidity in the system. The crisis of two big banks – Econômico and Nacional – became the trigger for a systemic crisis which resulted in a process of financial deregulation, openness to foreign capital linked to the acquisition of banks in trouble and the institution of Proer with the aim of ensuring liquidity and solvency in the system.
1996	Privatization of state banks: by means of Proes, the state government financed the restructuring of state banks. Out of the 35 institutions that existed back then, 10 became extinct, 6 were privatized, 7 became federal banks for posterior privatization and 5 were restructured.
1997 to 1999	External crises due to contagion of Russian and Asiatic crises: banks adjusted their equity structure by increasing the participation in the asset composition of investments in currency-linked government bonds and overnight rate. This change provided a currency hedge against the currency devaluation in 1999
2000	The dot-com bubble: a speculative bubble during which there was a rapid rise in equity markets fueled by investments in internet-based companies.
2001	Adaptation of public banks: due to the establishment of Proef, public national financial institutions became capitalized as well as subject to the same discipline (regulation) to which private banks must comply, thus they would become more ‘transparent’; The world trade center terrorist attack: The effects arising from this attack were initial shock causing global stock markets to drop sharply.
2002 and 2003	Turbulence in the Latin American financial market and global risk aversion: downturn in the expansion of foreign banks in Brazil. Some foreign banks (such as Sudameris do Brasil and BBV Banco) that could not create sufficient scale to compete in the retail sector sold their assets in the country.
2004 and 2005	Perspective of stabilization of internal prices and exchange rates: there was a new expansive cycle in credit focused especially on financing for households. Big retail banks invested in the acquisition/creation of investment, financing and credit societies and entered into partnerships with retail chains. Small-sized and medium-sized conglomerates started to sign agreements with municipal, state and federal public entities and with privately held companies with the purpose of providing payroll-linked loans.
2008 and 2009	Subprime crisis: the external crisis constricted Brazilian banks and firms’ access to external lines of credit and also affected the capital and foreign exchange markets in the country. The government and the Central Bank tried to minimize the impact of such crisis in the Brazilian financial sector by means of a series of measures among which were the reduction of the reserve requirement. However, banks lost value due to the confidence crisis that troubled worldwide financial markets.
2011	Crisis in the Eurozone: Brazilian subsidiaries of European banks started to present the need for capitalization given the exclusion of the international market for fundraising.

	Years
	1994	1995	1996	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008	2009	2010	2011
Number of groups	6	7	8	6	5	6	4	6	9	3	4	9	9	5	3	8	9	5
Number of new groups	0	2	3	0	0	1	0	2	4	0	0	3	3	0	0	2	3	0
Number of groups that reappeared	0	0	0	0	0	0	0	0	0	0	1	2	0	0	0	3	0	0
Number of groups that disappeared	0	1	2	2	1	0	2	0	1	6	0	0	3	4	2	0	2	4
Net change in number of groups	0	1	1	-2	-1	1	-2	2	3	-6	1	5	0	-4	-2	5	1	-4
Number of groups that persisted	0	5	5	6	5	5	4	4	5	3	3	4	6	5	3	3	6	5

Period	Strategic Group	Main Strategic Characteristics
Stable strategic groups with a lesser frequency of disappearance
1994 – 2011	Retail Banks	Although they do not show any kind of evident specialization that affects their investments, in general, they are banks with a hybrid activity profile, both with regard to credit and treasury transactions. Their raising of capital is mainly by means of deposits presented, and therefore has a high leverage.
1994 – 2011	Interbank Operating Banks	With regard to their investments, they are specialized in interbank transactions, and their main revenues subdivided in interbank transactions and the provision of services. The main source of funds of these banks is their Own Capital, and they therefore are banks with a low leverage.
1994 – 2007 and 2009 – 2011	Treasury Banks	These banks have significant investments and revenues in securities and financial derivatives instruments. Therefore, like interbank transaction banks, their raising of capital is predominantly in Own Capital, and thus are also banks with a low leverage.
1994 – 2002 and 2004 – 2011	Credit Banks	These are banks specialized in credit transactions, and therefore have significant investments and revenues in credits. They are high leverage banks when compared to other banks, and their raising of capital in mainly derived from deposits.
Stable strategic groups with a greater frequency of disappearance
1994 – 1999, 2001 – 2002, 2005 – 2007 and 2009 – 2011	Transfer Banks	Like credit banks, these banks are specialized in credit transactions, although they are different from credit banks with regard to the origin of resources, once they do not derive their raising of capital from significant deposits, and their principal source of funds is in their obligation accounts due to loans and transfers (an account mainly made up by loans from the BNDES (Brazilian Development Bank) system. These are funds distributing banks that have neither the size nor the funds to maintain a branch structure.
2005 – 2006 and 2009 – 2010	Business Banks	These are low leverage banks with high service revenues, and therefore show no preponderance in their asset accounts. These banks can adopt a strategy of interbank investment (DI) and in treasury, as an alternative to seasonal conditions or low demand for their services for the placement and issuance of private securities.

	Years
	94-95	95-96	96-97	97-98	98-99	99-00	00-01	01-02	02-03	03-04	04-05	05-06	06-07	07-08	08-09	09-10	10-11
Mobility Rate	0.523	0.538	0.683	0.460	0.642	0.695	0.736	0.647	0.745	0.466	0.694	0.625	0.556	0.455	0.669	0.584	0.664

Fucape Business School Av. Fernando Ferrari, 1358, Boa Vista, 29075-505, Vitória, Espírito Santo, Brasil, (27) 4009-4423 - Vitória - ES - Brazil
E-mail: bbronline@bbronline.com.br

Acompanhe os números deste periódico no seu leitor de RSS

[1] † FGV/EAESP. E-mail: gwsilva@yahoo.com.br