Friday, November 21, 2008

Brazilian bank deals The Brazilian banking business has seen two large acquisitions over the last few weeks.Banco do Brasil, a state-owned bank, announced a deal to buy majority share in Nossa Caixa. The deal is for around $2.25 billion. The new bank will be #2 in Brazil. Three weeks ago, an even much larger deal, worth $17.7 billion, was announced. Brazilian banks Banco Itaú, said it would merge with (actually acquire) rival Unibanco. The two banks are headquartered in Sao Paulo. The new bank will be the largest headquartered in the Southern Hemisphere. Unibanco was reportedly weak due to credit derivatives. The latest deal is seen as an effort for Banco do Brasil to regain its #1 position. n September, Banco do Brasil announced it would buy two smaller banks, Banco do Estado de Santa Caterina and Banco do Estado do Piau. Further deals are predicted in a not very consolidated banking market. A Bloomberg News article ("Brazil Bank Mergers May Pick Up, Raymond James Says", 11/21/08) quotes an analysts who notes that: "Business opportunities are huge and the consolidation level is relatively low… The five largest Brazilian banks account for 65 percent of the Brazilian banking system, compared with 86 percent in Peru, 79 percent in Mexico and 75 percent in Chile." The article posits that Brazil’s #3, Bradesco, is rumored to be on the lookout to make a buy. While cash is short as in other countries, the valuations of the midsize banks in particularly are spectacularly depressed. 5:33:49 PM

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