(Adds details on transaction, background throughout)
By Guillermo Parra-Bernal and Bruno Federowski
SAO PAULO Oct 8 Itaú Unibanco Holding SA agreed
on Saturday to pay 710 million reais ($220 million) for the
retail banking assets of Citigroup Inc in Brazil, further
cementing the leadership of Latin America's No. 1 bank by market
value among wealthy clients in the country.
In a securities filing, Itaú said the deal
included 100 percent of Banco Citibank SA's retail banking and
insurance assets, and Citigroup's stakes in automated teller
machine operator TecBan Tecnologia Bancaria SA and Cia
Brasileira de Securitização SA, a consumer structured finance
The transaction requires regulatory approval, the filing
said. According to the filing, the transaction will also involve
the restructuring of some unnamed Banco Citibank units that will
be eventually spun off and integrated into Itaú's platform.
Citigroup struggled in Brazil as local lenders gobbled up
market share over the past decade and now control 90 percent of
the country's banking assets. For lenders like Itaú, tapping
wealthy retail banking clients is key as they seek to increase
the share of fee-related income and money management activities
Two people with knowledge of the deal told Reuters recently
that Itaú could pay as much as $300 million for the money-losing
unit. The people said Itaú trumped Banco Santander Brasil SA
in the race for Banco Citibank, whose parent is also
in the process of exiting Argentina and Colombia.
Press representatives for Itaú, Santander Brasil and
Citigroup could not be immediately reached for comment.
Citigroup had previously announced that it will maintain a
corporate and investment banking unit in the country.
Citigroup struggled in Brazil as Itaú and large local rivals
gobbled up market share over the past decade - currently, six
banks control 90 percent of the country's banking assets. For
Itaú, tapping wealthy retail banking clients is key to enhancing
the share of fee-related income on profit.
According to the filing, the acquisition of Banco Citibank
and the 5.64 percent and 3.6 percent stakes in TecBan and
Cibrasec, respectively, will not impact financial results this
year. The deal allows Itaú to increase assets to 1.404 trillion
reais, making it Brazil's second-largest lender.
Minimum capital regulatory ratio readings at Itaú will fall
by 0.4 percentage points, the filing said.
Banco Citibank has about 71 branches across some of Brazil's
largest cities, 315,000 clients and 35 billion reais in deposits
and assets under management.
The U.S. bank, built with a series of acquisitions dating
back to the 1980s, has been trying to slim down since the
financial crisis to be as profitable as its rivals.
Citigroup Chief Executive Officer Michael Corbat counted at
least 21 markets with exceptionally low returns on assets and
substandard operating efficiency as candidates for
restructuring. Citigroup has had to resort to aggressive cost
controls as near-zero interest rates, a slump in oil prices and
slowing global growth have hurt business.
($1 = 3.2210 reais)
(Additional reporting by Tatiana Bautzer in São Paulo; Editing
by Mark Heinrich)