Itau Unibanco Holding SA, Latin America’s largest bank by market value, agreed to buy Citigroup Inc. (C)’s Credicard unit for 2.77 billion reais ($1.37 billion), gaining an additional 10 percent share of Brazil’s card market.
Itau will add about 4.8 million accounts with the acquisition of Credicard, a company it helped create, according to a filing yesterday. Sao Paulo-based Itau also will acquire Credicard’s consumer-finance business. The sale is expected to result in a gain of $300 million, or 10 cents a share, for Citigroup, the New York-based bank said in a statement.
“We see the price paid as reasonable, particularly given the potential for synergy gains,” BES Securities do Brasil SA analysts including Gustavo Schroden wrote in a note to clients today. “We reiterate our view that cards are a core component of the bank’s future strategy.”
Itau paid 10.5 billion reais last year to acquire payment processor Redecard SA to cut costs. Citigroup, the world’s biggest credit-card lender, is exiting or scaling down consumer businesses in some emerging markets to boost returns.
The deal, subject to approval by Brazilian regulators, includes 96 Credicard stores and $3.26 billion in consumer-loan balances as of Dec. 31, according to Citigroup. The transaction excludes some card portfolios such as corporate and American Airlines cards, the U.S. bank said.
To grow in Brazil, Itau must address the challenges that the nation’s consumers face in “gaining access to banking services,” Chief Executive Officer Roberto Setubal, 58, said in a statement. “The credit card is one of the main instruments for this goal.”
“This transaction demonstrates how we are finding ways to optimize our businesses and focus on specific segments in the emerging markets, consistent with our global strategy,” Francisco Aristeguieta, CEO of Citi Latin America, said in the statement.
Credicard was founded by Itau, Citigroup and Uniao de Bancos Brasileiros SA, known as Unibanco, in the early 1970s, according to Credicard’s website. In 1996, the three lenders created Redecard as a spinoff of Credicard. Itau and Citigroup bought Unibanco’s stake in the credit-card issuer in 2004 for 1.54 billion reais. A year later, Itau and Citigroup split Credicard’s accounts and assets. Itau bought Unibanco in 2009 for about 27 billion reais.
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