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Banco Bradesco CEO eyes Brazil healthcare M&A, retail banking in Mexico

SAO PAULO, Sept 22 (Reuters) - Brazilian lender Banco Bradesco SA is looking for new acquisitions, especially in healthcare, Chief Executive Octavio Lazari said, following its push into retail banking in Mexico through the purchase of a payments company there.

In an interview at the bank’s Osasco headquarters, Lazari said Bradesco’s insurance unit is looking to invest in hospitals or make acquisitions to compete with rivals offering insurance and healthcare services. Hospital group Rede Dor Sao Luiz SA announced in February the acquisition of insurer Sul America.

Brazil’s second-largest private-sector bank, Bradesco owns one of the largest health insurance operations in the country, with 4 million beneficiaries. Owning hospitals and clinics would help that operation to deal with medical inflation.

Asked about potentially resuming talks to buy UnitedHealth Group Inc’s unit in Brazil, after negotiations fell apart earlier this year, Lazari said it would depend “on what they (UnitedHealth) want to do.”

“Bradesco’s door remains open,” he added.

The stock market’s recent performance has made healthcare deals “easier” by reducing very high multiples, Lazari said.

Rather than relying on M&A alone, Bradesco has also started building its own hospitals, using real estate from its large portfolio of branch buildings.

The first one is a partnership with Hospital Albert Einstein, one of Brazil’s top hospitals. The bank is looking at potential partnerships with other hospital operators such as Sirio Libanes and Beneficencia Portuguesa, Lazari said.

RETAIL BANKING IN MEXICO

Mexico will be the first country where Bradesco aims to operate retail banking outside Brazil, after the acquisition, announced this month, of payments firm Ictineo Plataforma, allowing it to build a digital bank in the country.

Lazari said the Mexican market has a lot of room to grow, with 40% of the population still unbanked.

“They are similar to what the Brazilian market was five or 10 years ago,” he said.

Bradesco has been running a credit card operation in Mexico for 12 years and now has 3 million clients with private label credit cards. That operation is profitable but small, generating 150 million reais ($29 million) in annual net income.

The new digital retail bank in Mexico, which has yet to be named, will start by offering digital accounts to current clients and then expand into payroll-backed loans and mortgages.

The digital banking venture abroad is a dramatic departure from Bradesco’s traditional strength as a brick-and-mortar bank in Brazil.

After closing around 1,500 branches in Brazil over the last three years, Lazari said the current network with 3,500 branches, is adequate.

The lender is now working to reduce the average branch size, while allocating the freed-up real estate to new projects such as hospitals and residential buildings.

Bradesco owns three digital banks in Brazil: Next, with 14 million customers; Digio, with 4 million; and Bitz, with 8 million. Across all its brands, Bradesco is adding customers at a pace of about 4 million new accounts per year, he said.

The key to monetizing digital accounts, which usually do not charge fees, is offering credit and other products, Lazari said, adding that Bradesco’s digital banks are not yet profitable.

$1 = 5.1808 reais Reporting by Tatiana Bautzer; Editing by Brad Haynes and Richard Pullin

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