| Headline: Mergers cut risks Source: Euromoney Date: September 2001 Author: Celina Vansetti The largest banks in Latin America are in its largest economies, Mexico, Brazil and Argentina. Consolidation has created large conglomerates through in-market mergers and acquisition of local franchises by international powerhouses. By Celina Vansetti, data from Moody’s Investors Service Consolidation, which has been most active in the three largest Latin economies, has helped reduce systemic risk because of massive capitalization and improvement in asset quality. Brazilian banking has experienced a fast growth of foreign participation over the past five years. Today, foreign institutions control about 24% of total assets – 45% if public banks are excluded – against 8% in 1996. Despite advances by global players, however, the large domestic Brazilian banks still command strong market shares in virtually all business areas of the financial market. Their size and broad business scope allow for diversified loan portfolios and broad revenue bases. Critical mass in terms of clients and sales points makes cross-selling successful. But heightened competition in Brazil, and the need for future capital to support long-term growth and to defend market position, may compel the largest domestic banks to enter into partnerships or associations. |