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Latan and Caribbean 100 2002: Foreign acquirers think again

Brazilian banks continue to dominate indigenous banking in Latin America and continue to grow despite the economy’s woes.

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DESPITE THE ADVANCE of foreign ownership across Latin America in the past 10 years - with European and US banks attracted by the substantial growth potential of retail franchises - the Brazilian banking system remains largely concentrated in domestic hands, both public and private.

Moreover, recent consolidation in Brazil has brought about more in-market mergers, driven mainly by the largest private domestic banks - Banco Bradesco, Itaú and Unibanco - than by foreign acquirers. As a result, Brazilian indigenous banks have become even larger conglomerates, retaining their dominance over business segments and the client base.

Brazil's public-sector banks still retain nearly 40% of the system's deposits, despite successful privatizations. Federal banks, having gone through large-scale restructuring of their balance sheets to restore asset quality and capitalization levels in 2001, are now better prepared to grow without the burden of poorly performing assets and weak capitalization.

The risk of political interests interfering with the banks' strategy, although less pronounced today, still has to be accounted for in their respective credit analysis.

Throughout the region, foreign banks have come to command an important market share of the asset and the deposit base, particularly in Mexico and Argentina, where international banks hold more than 70% of the deposit markets.

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