October 26, 2018 / 4:27 PM / 2 months ago

UPDATE 2-At helm of Brazil's Cielo, Caffarelli to have new challenges

(Adds analysts’ comments, shares)

By Carolina Mandl and Paula Laier

SAO PAULO, Oct 26 (Reuters) - Brazilian card processor Cielo SA confirmed Friday that Banco do Brasil SA’s Paulo Caffarelli will become its chief executive on Nov. 5, raising questions over whether a veteran banker could shake up a company that has been struggling to fight startups.

Caffarelli, who thus far had been chief executive of Banco do Brasil, resigned from that post earlier on Friday.

“The glass-half-empty argument here is that Caffarelli is just more of the same for Cielo,” BTG Pactual analyst Eduardo Rossman said in a note. “Someone with a banking, not a payments/tech background.”

Although analysts praised how Caffarelli had improved capital and profitability ratios during his tenure at the state-controlled lender, they said he would have a different mission to accomplish at Cielo, where he takes the reins on Nov. 5.

“At Cielo, his big challenge will be to regain competitiveness in the payments sector, in which competition is getting fiercer,” XP Investimentos analyst Andre Martins said in a note to clients.

Rivals such as PagSeguro Digital Ltd and StoneCo Ltd have deep pockets after highly successful initial public offerings in the United States this year.

Conversely, Cielo’s market capitalization has been cut by half this year.

RESULTS

On Tuesday, when the company will report its third-quarter results, analysts will be eager to get more information on Caffarelli’s strategy.

Goldman Sachs analysts expects Cielo to report higher costs, as the company has launched new products to fight competitors. Third-quarter net income should fall 18.4 percent from the same period a year earlier.

Shares in Cielo were almost in line with the benchmark Bovespa stock index in morning trading following the announcement, up 0.5 percent.

Marcelo Labuto will take the helm at Banco do Brasil, an appointment given to him by Brazil’s President Michel Temer, according to the filing.

The move is the first in a string of senior executive changes at Brazil’s major state enterprises, where management shake-ups usually follow presidential elections such as the one concluding on Sunday.

Brazil’s far-right presidential frontrunner Jair Bolsonaro plans to replace the CEOs of several state-owned companies if he wins the Oct. 28 election, the head of his party said on Tuesday.

Reporting by Carolina Mandl; Editing by Bernadette Baum

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