(Adds details on transaction, background throughout)
By Guillermo Parra-Bernal and Bruno Federowski
SAO PAULO, Oct 8 (Reuters) - 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 firm.
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 on profit.
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