Posts Tagged ‘itau-unibanco’

Positive figures from Redecard will push Brazilian retail bank shares

redecardAs we have discussed in previous articles, Brazil’s retail banking sector has been enjoying a buoyant 2009 so far. This would seem set to continue as payment card processor Redecard posts an 18% jump in financial volumes.

This should be seen as a positive for Itaú Unibanco (NYSE: ITUB), which controls Redecard, as net income for the third quarter rose to BR$333M ($195M), with financial transactions across the payment platform registering BR$ 24.7Bn ($14.52Bn) & more interestingly, the debit card side rising in step by 17% to BR$12.2Bn ($7.13Bn).

Although there is general negativity on global credit card companies, particularly in Western economies, Brazil’s nascent credit sector has benefitted from a wave of bank consolidation over the last 18 months, the strength of the real versus the US dollar & one of the strongest economies to exit the finiancial crisis. Earlier this year, Visa affiliate VisaNet was the star IPO on the BOVESPA, with the launch being hugely oversubscribed by both retail & institutional investors, raising a record of $4.5Bn.

“We think the results were solid and highlight the strength of the credit and debit card markets,” reported Deutsche Bank which keeps a buy rating on Redecard. “While regulation remains a key risk, we think that it is already priced in.”

For Redecard, it is also very much a case of being seen as a Brazilian brand, which seems to be helping it’s positioning against VisaNet, which although no longer owned by Visa, retains the association. Redecard has the benefit of being able to position itself as a multi-brand entity & is more popular with Brazilian retail customers, especially in the growing debit card sector, whilst VisaNet is to some extent still regarded as a premium brand.

So, short term one-up for ITUB & we expect to see shares taking a ride higher over the next few days. VisaNet reports later this week (October 28th), so it will be interesting to see if Bradesco will be able to catch the same sentiment wave.

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Brazil’s Itaú-Unibanco rides wave of banking consolidation

itau-unibanco1Following last years merger between the number four & number two banks in Brazil last November, the newly forged conglomerate, Itaú-Unibanco (NYSE : ITU) is the frontrunner in a race for consolidation in the Brazilian banking market. The result being that Itaú-Unibanco is now 13% larger than Banco do Brasil and 58% than the other two main rivals, Bradesco (NYSE : BBD) & Spain’s Santander (NYSE : STD). At current prices, Itaú-Unibanco’s combined assets total $201 billion, while Banco do Brasil holds $178 billion and Bradesco $128 billion, only one billion ahead of Santander.

In the credit card segment, Itaú-Unibanco serves an estimated 30% of all credit cards issued in Brazil, which brings circa 36% of all cc revenues, making them far & away the market leader overnight. Unibanco brought a number of strategic assets with it in the November deal, notably Wealth Management with more than R$32.7 billion in assets under management, 14,356 points of service and 17.5 million customers.

Although there are obvious challenges in merging two large companies such as these, Itaú-Unibanco’s Chairman Pedro Moreira Salles remains bullish on expansion. Company executives are rumoured to be looking for international acquistion targets, Mexico being one of the favoured target countries.

“We want to be a bank that has the skill to operate around the world. We aspire to have a global scale” said Salles.

Sector watchers claim that Brazil’s banking consolidation will continue apace in 2009, the expectation being, in three to five years, five banking giants will control 85 percent of the market, with a balance between one public bank (Banco do Brasil), two private Brazilian banks (Itaú-Unibanco & Bradesco), with two foreign banks (Santander & HSBC).