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Riding roughshod 

30 January 2014 By Antony Currie

Brazil’s banking bigwigs are sambaing their way north. Itaú Unibanco on Wednesday bought a controlling stake in Chile’s CorpBanca. Investment bank BTG Pactual, which acquired a Chilean broker in 2012, announced it will open operations in Mexico. But judging by the reception to Itaú’s sally into Chile, the Brazilians may need to tone down their bravura.

Diversification makes sense for both firms, considering the wobbly nature of the Brazilian economy. The global retreat from emerging markets smacked Brazilian financial assets disproportionately over the past two weeks. And Itaú shares have lost more than a third of their value in the past two years – and Pactual’s just shy of 20 percent.

Mexico, Chile and Colombia, where Itaú and CorpBanca are merging their operations as part of the tie-up, have held up better than the rest of Latin America. Chile and Colombia largely steered clear of the financial intervention that afflicted the likes of Argentina and Venezuela in recent years. Meantime, Mexico’s new young president, Enrique Peña Nieto, has charmed global investors with promises of fiscal and energy reforms.

But succeeding in new markets usually requires making friends, not creating enemies, as Itaú’s treatment of Chilean investors may do. The bank struck a deal to buy just over half the shares owned by its target’s current majority owner, Corp Group, at a premium. That leaves Itaú with just over a third of the bank. Minority investors, meanwhile, have been left out of the deal – and don’t get a vote in the change of ownership.

CorpBanca’s stock dropped as much as 14 percent as the deal was unveiled on Wednesday, before recovering somewhat on Thursday. True, a larger group covering both Colombia and Chile with the backing of Brazil’s strongest financial institution could be a much more powerful force. But Itaú and others that decide to expand their horizons across the Latin continent may want to consider avoiding putting noses out of joint to start with.

 

 

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