The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Opinion

Brazil’s central bank draws a line

Restricting Itaú’s purchase of XP is good for competition.

The Brazil central bank’s decision to prevent Itaú from taking a majority of the voting shares of online stockbroker XP Holding Investimentos sets an important precedent.

According to the terms of the staggered transaction, Itaú acquired a 49% stake (30% of voting shares) of XP for R$5.7 billion ($1.5 billion), plus a R$600 million capital increase. The central bank has allowed the next phase of the deal – to come in 2020 – when Itaú will then buy a further 12.5%, creating a 62.4% stake (40% of voting shares), at 19-times price/earnings.

However, the deal’s next timetabled steps – with Itaú purchasing a further 12.5% in 2022, reaching a 74.9% stake (49.9% of voting shares), as well as options allowing for Itaú’s 100% control, either through a 2024 XP put option or a call for Itaú in 2033 – will not be allowed.

The banking system in Brazil is one of the most consolidated in the world – certainly for a big country. The top five largest banks hold around 85% of all assets. The sale of HSBC’s and Citi’s retail businesses to Bradesco and Itaú respectively is symptomatic of this process.

'Lack of competition'

However, under the leadership of governor Ilan Goldfajn, the central bank has since been vocal about the need to target the high so-called ‘spread bancario’ in the country.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree