The tables are starting to turn in the Brazilian banking market – for the first time foreign-owned banks have become acquisition targets for locals Itaú and Bradesco, valued at more than $60 billion each, which now dwarf the purchasing power of several of the international banks in the aftermath of the sub-prime crisis.
Fuelling this shift in banking power is the rumoured sale of Citi’s Brazilian retail franchise for about $20 billion. Despite the US bank’s excellent positioning in the market with the coming credit boom, Citi needs capital after vast sub-prime write-downs – in the second quarter alone the US bank recorded a $2.2 billion net loss. In turn, the local banks want to grow and not let the new Santander Real bank out of their sights. Bradesco, Itaú and Votorantim are the top-three banks in the Citi bidding process for the retail bank. It is understood that if a sale goes through, the investment and corporate banking side of Citi would not be involved. It is believed that Roberto Setubal, chief executive of Itaú, has already made several trips to New York to discuss potential acquisitions – one banker even questioned whether Banamex, Citi’s Mexican bank, had been mentioned in these meetings.