Northern Portugal is the cradle of the nation’s entrepreneurial spirit. Business people in the region consider themselves to be the real wheeler-dealers of the Portuguese economy, running mainly small- to mediumsize businesses, and having a certain air of contempt for their counterparts in Lisbon and further south. According to the northern Portuguese, Lisbonites are mere employees of multinationals who spend their time on politics and parties while the real deals are done in the North.
Of course, in common with most other capital cities, Lisbon is where the power and money gravitates; like the multinationals, banks have a strong presence there. However, the Portuguese have a saying that banks are born in Oporto and die in Lisbon, where deal-making skills become blunted and attention to detail becomes lax. For this reason, Banco Portugues de Investimento keeps its headquarters in Oporto.
BPI is an exclusive merchant bank set up in 1981 by Artur Santos Silva; Senhor Silva subsequently set up or acquired a string of subsidiary banks between Oporto andLisbon. Two of these, Banco de Fomento e Exterior and Banco Fonsecas & Burnay, have head offices in Lisbon, while a third, Banco Borges & Irmao, remained in Oporto. Borges & Irmao was focused toward Northern Portugal, which is where the bulk of its branches were, and Fonsecas & Burnay was focused in the south. Later these banks were subsumed into the overall brand of Banco BPI, but since Allianz Bank (a German bank) bought part of the bank, BPI has also traded as Allianz Portugal.
Bank managers have been briefed to develop consumer lending niches such as credit cards and car purchase loans, segments where BPI claims it has developed key products. The business in the North has the added bonus of using its retail activities to scout for corporate finance – so many of its retail customers are business people running small and medium enterprises. Typically, banking groups in Portugal divide their markets into three main segments; small and medium enterprises, universal banking, and large corporations. BPI believe that the delivery of tailor-made services to specific segments is the key to success in domestic banking.
Banking executives are painfully aware that there is a lot of work to be done in restructuring the industries of Northern Portugal – they talk in terms of identifying products and standardizing them, of joint marketing projects, and of pooling companies together for research and testing of projects. Aiding management buy-outs and merger and acquisition deals are seen as ways of ensuring continuity in businesses, and banks are looking toward cross-border transactions with companies in Northern Spain as a way of consolidating businesses. So far progress has been slow – obviously the economic problems faced by Portugal have called a halt to business expansions, but also there have been few large enterprises emerging from the spate of mergers and acquisitions. Most firms are still engaged in traditional industries such as leather production, agriculture, and textiles, all of which face stiff competition from lower-cost producers in other countries.
Meanwhile, BPI has developed a strong position in Africa: the former Portuguese colonies of Angola and Mozambique are among the economic powerhouses of Southern Africa, and BPI has a stake in their growth through shareholdings in local banks there. This has helped cushion the bank from the 2008 world financial crisis: Mozambique is among the world’s fastest-growing economies, with burgeoning chemical and manufacturing industries as well as traditional agriculture and mining, and Angola has great mineral wealth (including diamonds) which will eventually catapult the country into becoming one of the wealthiest in Southern Africa. BPI is well-placed to take advantage of this, once the current political troubles are over, and in November 2010 the bank signed an agreement with the Bank of China under which BPI will assist China in creating inward investment by Chinese companies in Portugal and Portuguese Africa. The two banks will also cooperate on cross-border trade settlements, funding of major projects, and day-to-day banking issues such as letters of credit, documentary collections, and capital management.
Discussion Questions

1. How does BPI appear to have segmented its market?
2. Why should an investment bank look to have a foothold in the consumer market?
3. What do you think are the drivers behind Bank of China’s interest in BPI?
4. How might the company segment the African market?
5. Which segments should BPI avoid?
6. What could an effective positioning strategy be for BPI?